SKS Microfinance

RITIKA CHITNISROHIT BOHRAMEETA BHAGTANIANOOP YADAVNIKHIL AJWANIDEVISHA SAHAY

INVESTMENT BANKING

SKS MICROFINANCE

MICROFINANCE ???

Microfinance serves as the last-mile bridge to the low-income population excluded from the traditional financial services system.providing working capitalinfusing credit to smooth cash flowsmitigate irregularity in accessing food, clothing, shelter,

or education; andcushioning the economic impact of shocks such as illness,

theft, or natural disasters.

Microfinance in India- An overview

the MFIs in India reported a client base of 22.6 million with an outstanding portfolio of more than $2 billion

Over the past five years, the sector has delivered a CAGR of 86%

Indian Microfinance in the Global Context

Has the highest growth since 2002one of the most socially conscious, commercially

viable, and financially sustainable. According to a MIX market study, India has one of

the lowest average loan sizes of around $150 seek to genuinely foster financial inclusion among the poor and alleviate povertyMFIs in other countries such as Brazil and

Mexico have higher profit margins, but they offer significantly larger loans with interest rates typically between 40-65%.

Target of Microfinance

Rich – Income above Rs. 1000000Middle class- Income between Rs. 1000000 and Rs. 200000Aspirers- Income between Rs. 90000 and Rs.1000000Deprives- Income below Rs. 90000

Microfinance in India: A crises at the bottom of the pyramid

genesis of the crisis lies with the actions taken by the government of the southern state of Andhra Pradesh in October 2010, when it passed legislation effectively shutting down all private sector microfinance institutions (“MFIs”) operating in the state.

In the first half of FY2011, MFIs in Andhra Pradesh disbursed Rs 5,000 crore ($1.13 billion) to borrowers; in the second half of FY2011,these same MFIs could only disburse Rs 8.5 crore ($1.9 million

ANDHRA PRADESH – ANALYSIS OF THE AP ACT

Shutting down all private sector microfinance operations in the state.

Does not apply to AP’s government-backed microfinance business.

Government claimed to be protecting the poor number of equity.

Originally aims to protect the government’s own microfinance programs which had been losing market share to the more efficient and better run MFIs.

Large write-offs for public and private sector banks in India.MFIs must now register at the district level and require prior

approval from the respective District Authorities to disburse any loan.

Millions of poor across 18 states will lose access to finance.Indian private Sector MFIs will ultimately fail.The financial inclusion agenda will suffer. Indian private and public sector banks will suffer substantial

lossesThousands of people employed in the microfinance sector will

lose their jobs.

The Malegam Committee Recommendations

The RBI is responsible for regulating non-banking financial companies (“NBFCs”).

Loan limits.A cap on interest rates and margins.Provisioning norms.Increased capital requirement.

SKS MICROFINANCE

Largest Microfinance company.First Listed Microfinance company.Situated in 19 States.Focus on women clients.Weekly repayment system.borrower base of 73 lakh (7.3 million) at the

end of 2010-11.

Some Financial updates

CLIENT OUTREACH

DISTRIBUTION NETWORK

JOINT LIABILITY GROUP MODEL

Village Selection

Projection Meeting

Mini Projection Meeting

Group Formation

Compulsory Group Training

Centre meetings

CURRENT BUSINESS STRATEGY

SWOT ANALYSIS

STRENGHTS• Market leadership• Expertise in

microfinance and ability to adapt to the changing regulatory environment

• Well-capitalized balance sheet, low leverage and emphasis on asset and liability management

WEAKNESS•Problem of recovering loan amount from borrowers•Misutilisation of funds granted.•Manipulation of accounts by employees.•Concentration only on southern part of India.

SWOT ANALYSIS

OPPORTUNITIES

• To capture unexplored areas of the country.

THREATHS

•Tough competition from competitors.•Changes in the regulatory environment of the country.

SUGGESTED ADDITIONS TO THE CURRENT STRATEGY

Considering individual clients along with JLGEnsure strict policies incase of repayment terms for both

individual and group clientsFocus on Gold Loans in existing branchesRestructuring the existing management Centralization of dataMaintaining TransparencyConsidering lending in Urban and semiurban areas