CRISIL MFI Grading

mfR5

Weaker Sections Development Society-Institute of Innovative

Technology Transfer and Environment (WSDS Initiate)

Date Assigned October 13, 2014

1

©20

13

CR

ISIL

Lim

ite

d. A

ll R

igh

ts R

ese

rved

DISCLAIMER

CRISIL's microfinance institution (MFI) Grading reflects CRISIL’s current opinion on the ability of an

MFI to conduct its operations in a scalable and sustainable manner. In the case of NGO-MFIs and

entities with multiple businesses, CRISIL’s MFI Gradings apply only to their microfinance programmes.

The MFI Grading is a one-time exercise and the Grading will not be kept under surveillance. This

grading is valid for a period of one year from the date of assignment. However, CRISIL reserves the

right to suspend, withdraw, or revise the MFI grading at any time, on the basis of any new information

or unavailability of information or any other circumstances brought to CRISIL’s notice, which CRISIL

believes may have an impact on the grading. CRISIL recommends that the user of the Grading seeks a

review of the Grading if the graded institution/microfinance programme experiences significant

changes/events during this period which could impact the graded institution/its grading.

CRISIL MFI Gradings are based on the information provided by the Institution, or obtained by CRISIL

from sources it considers reliable. CRISIL does not guarantee the completeness or accuracy of the

information on which the MFI Grading is based. CRISIL MFI Grading is not a recommendation to

purchase, sell or hold any financial instrument issued by the graded MFI, or to make loans and

donations / grants to the institution. The MFI Grading does not constitute an audit of the graded MFI by

CRISIL.

The MFI Grading Report and the information contained therein are the intellectual property of CRISIL.

The MFI Grading Report should not be reproduced or distributed or communicated directly or indirectly

in any form to any other person or published or copied in whole or in part, for any purpose or by any

means without the prior written permission of CRISIL. The MFI Grading should not be used for

mobilising deposits/savings/thrift/insurance funds/other funds (including equity) from their

members/clients or general public and should not be used in its external communications, promotional

materials or member/client passbooks. CRISIL is not responsible for any errors and especially states

that it has no financial liability, whatsoever, to the subscribers/ users/transmitters/distributors of its MFI

Gradings. For the latest information on any outstanding CRISIL MFI Gradings, please contact CRISIL

RATING DESK at CRISILratingdesk@crisil.com or at (+91-22)-3342 3047/3064.

CRISIL House, Central Avenue, Hiranandani Business Park Powai, Mumbai 400 076 Phone: + 91 22 3342 3000 Fax: + 91 22 3342 3001 Email: crisilsmeratings@crisil.com www.crisil.com

2

©2

01

4 C

RIS

IL L

imite

d.

All

Rig

hts

Re

se

rve

d

CRISIL MFI Grading

MICROFINANCEINSTITUTION (MFI) GRADING

MFI GRADING HISTORY

mfR1 CRISIL’s microfinance institution (MFI) Grading is a current opinion

on the ability of an MFI to conduct its operations in a scalable and

sustainable manner. The MFI Grading is assigned on an eight-point

scale, with ‘mfR1’ being the highest, and ‘mfR8’ the lowest. The MFI

Grading is a measure of the overall performance of an MFI on a

broad range of parameters under CRISIL’s MICROS framework. It

includes a traditional creditworthiness analysis using the CRAMEL

approach, modified to be applicable to the microfinance sector. The

acronym MICROS stands for Management, Institutional

arrangement, Capital adequacy and asset quality, Resources and

asset-liability management, Operational effectiveness, and

Scalability and sustainability.

MFI Grading scale: mfR1 - highest; mfR8 – lowest

mfR2

mfR3

mfR4

mfR5

mfR6

mfR7

mfR8

MFI Grading Assigned on

mfR5 July 24, 2013

3

©20

13

CR

ISIL

Lim

ite

d. A

ll R

igh

ts R

ese

rved

FACT SHEET

Name of the MFI Weaker Sections Development Society-Institute of Innovative Technology

Transfer and Environment (WSDS Initiate)

Incorporated 2007 (microfinance programme commenced in the same year)

Legal Status Society (registered under Societies Registration Act, 1860)

Business Lending to self-help groups (SHGs) and joint-liability groups (JLGs)

MD and CEO Mr. Lamkhomang Kipgen

Contact person and

office details

Mr. Lamkhomang Kipgen, MD and CEO

WSDS Initiate

Gollut Gens, New Lambulane

Imphal East – 795 001, Manipur

Tel: +91 385 2442 730

E-mail: lam_mang2001@yahoo.com, wsds_imp@rediffmail.com

Website: www.wsdsinitiate.org

Lenders

� Ananya Finance for Inclusive Growth Private Limited

� Ashwarya Trading Private Limited

� Friends of Women's World Banking (FWWB)

� Kiva International

� Kashi Vishwanatha Vidya Samasthe

� North Eastern Development Finance Corporation Limited (NEDFi)

Statutory auditors Kunjabi and Company, Chartered Accountants

4

©2

01

4 C

RIS

IL L

imite

d.

All

Rig

hts

Re

se

rve

d

CRISIL MFI Grading

MFI SNAPSHOT AND PRODUCT PROFILE

As on/For the period ended June 30, 2014 March 31, 2014 March 31, 2013

Borrower base 7,346 7,513 2,913

Employees 33 (18 credit

facilitators)

33 (18 credit

facilitators)

21 (10 credit

facilitators)

Branches 8 8 7

Loans outstanding Rs.56.70 million Rs.79.03 million Rs.33.21 million

Loans disbursed Rs.7.06 million Rs.102.88 million Rs.43.35 million

Loan product Loan size Interest (%) Tenure

(months)

SHG loan for women Rs.5,000–Rs.15,000 20.00 12

JLG loan for women Rs.10,000–Rs.15,000 20.00 12

Education loan

Primary Rs.10,000–Rs.15,000 20.00 12

Professional Rs.1,50,000 24.00 24

Energy loan Solar home lighting 45 W

Rs.12,173–Rs.21,904 26.00 12

Solar home lighting 75 W 24

Notes:

� The professional loan bears a flat interest rate and repayments include a six-month

moratorium. Interest is charged on a reducing-balance basis for all other loans.

Repayment is weekly and monthly. The MFI also charges a processing fee of 1.00 per

cent of the loan amount.

� The MFI offers credit insurance services (to borrowers and spouse) through its tie-ups

with ICICI Prudential Life Insurance, Birla Sunlife Insurance, and Bajaj Allianz Life

Insurance. Credit insurance fee is 1.00 per cent of the loan amount.

5

©20

13

CR

ISIL

Lim

ite

d. A

ll R

igh

ts R

ese

rved

SOCIAL AND TRANSPARENCY INDICATORS

As on March 31, 2014

Average loan outstanding/per capita GNI (2013 figure, based on current prices) 15.00%

Women staff/total staff 45.00%

Women borrowers/total borrowers 100.00%

Interest rate on reducing basis (includes processing fee charged by the MFI) 21.00%

Are interest rates (on declining basis) communicated to clients in writing? Yes

Are processing charges communicated to clients in writing? Yes

Does the MFI provide an official receipt to clients after repayment collections? Yes

Is access to loan of other MFIs a parameter to select/screen clients? No

Is access to loan of other MFIs/residual income a factor in appraising the client’s

repayment capacity? Yes

Does the MFI appraise the client's income/poverty/asset level and use this data to other

target low-income clients? Yes

Does the MFI capture and analyse reasons for client drop-out rate? Yes

Are clients provided head office contact details as part of the grievance redressal

mechanism? Yes

Source: CRISIL Centre for Economic Research (CCER) computations based on Central Statistical

Organisation (CSO) data

All details are as provided by the MFI and not verified by CRISIL

#Details are as provided by the MFI and not verified by CRISIL

6

©2

01

4 C

RIS

IL L

imite

d.

All

Rig

hts

Re

se

rve

d

CRISIL MFI Grading

ORGANISATION STRUCTURE

GOVERNING BOARD

Name Profile

Mr. Lamkhomang

Kipgen

The CEO and founder member of WSDS has a BSc degree from Delhi

University and over two decades of microfinance and development

experience.

Mr. Tongkhothang

Kipgen

The MFI’s chairman has a BSc degree in agriculture, with over three decades

of development experience through the Government of Manipur’s Horticulture

and Soil Conservation Department.

Mrs. Rose Mangshi

Kipgen

Over three decades of experience as senior lecturer through GP Women’s

College, Imphal; active board member with WSDS for the past four years

Mrs. Lhingjaneng

Gangte

PadmaShri awardee with over two decades of welfare experience and a

former member of Manipur State Commission for Women. Has been an

active board member at WSDS for the past four years

Mrs. Helam Haokip Over decade of development experience; active board member for the past

five years.

Mr. Tuime Lolly Over two decades of development experience; active board member for the

past five years.

Mr. O Somorendro

Meitei

MBA and MA (Anthropology) with 15 years of microfinance experience in

Northeast India through NEDFi; active board member for the past year.

SENIOR MANAGEMENT

Designation Name Qualifications Microfinance experience

COO Mr. Seikhothang Haokip MA (Pol. Sc.) 7 years

HR Manager Mr. Gemson Shimray Awungshi BA 8 years (insurance sector)

Finance Manager Mr. Phanjoubam Inaocha Singh BCom 12 years

Head-Cluster Mr. Letminthang Kipgen BA 9 years

Assistant-Kiva Coordinator

Ms. Veizaneng Hangshing BBA (Marketing)

3 years

Assistant-MIS Ms. Konthoujam Ronita Devi BA (Sociology) 4 years

7

©20

13

CR

ISIL

Lim

ite

d. A

ll R

igh

ts R

ese

rved

MFI GRADING RATIONALE

CRISIL’s MFI grading on WSDS Initiate reflects the following strengths:

� Experienced board and senior management

� Above-average asset quality

� Adequate earnings profile

The listed grading strengths are offset by its:

� Small net worth and scale of operations

� Modest resource profile

� Scope of improvement in cash management and systems and processes

� Geographic concentration of managed assets

PROFILE & LENDING MODEL

WSDS Initiate is an Imphal-based NGO-MFI that enables women entrepreneurs to

undertake small income-generation ventures, such as agriculture-related activities,

greengroceries, and tailoring and embroidery shops. It follows the SHG and JLG models of

lending, and operates through eight branches across six districts of Manipur and two districts

of Mizoram. As on March 31, 2014, WSDS had loans outstanding of Rs.79.03 million to

7,513 borrowers. It also offers training and livelihood services and undertakes

developmental projects in financial inclusion, education, health awareness, and water and

sanitation.

The MFI forms and trains JLGs and SHGs and provides livelihood support through

microfinance loans. On selection of an operational area, the branch head (BH) organises a

general meeting, in which targeted members are introduced to the organisation and its

microfinance programme. Interested women from the same locality are formed into groups

of 10–15 members. Three-day training is held on the group concept, programme policy, loan

product, and repayment details, following which the credit facilitators (CFs) conduct group

recognition test (GRT). The groups then submit the resolution, request and decision letters,

identification proof, and loan applications with details on family income and expenditure. The

CFs verifies the documentation and forwards the loan applications to the head office (HO) to

identify instances of multiple lending. Sanctioned loans are disbursed at the branches.

8

©2

01

4 C

RIS

IL L

imite

d.

All

Rig

hts

Re

se

rve

d

CRISIL MFI Grading

MANAGEMENT

Adequate microfinance experience

� WSDS Initiate has seven years of microfinance and development

experience in remote districts of Manipur and Mizoram. This is

expected to enable the MFI to expand to new areas, while

maintaining its portfolio quality.

� The NGO-MFI also receives consulting and technical assistance

from a Washington-based non-profit organisation called the Vittana

Foundation for its education loan program.

Loan monitoring yet to be strengthened

� WSDS has a loan monitoring software in place at the HO to

generate daily reports, such as demand and collection sheets and

portfolio at risk (PAR) statements. However, only three of eight

branches have access to the software and the remaining five

branches depend on manual documentation, which are further

submitted and updated in the software at HO level. CRISIL believes

that manual process poses the risk of data inaccuracy and low

productivity. CRISIL considers timely computerisation and data

migration to be critical for portfolio tracking.

Adequate credit appraisal process

� The NGO-MFI has a decentralised credit appraisal process where

the branch head sanctions the loans after due diligence, including

verification of the applicant’s household income and expenses. The

field staff conducts household surveys to ascertain the

creditworthiness of potential clients and also complete the requisite

know-your-customer (KYC) documentation.

� WSDS has also tied-up with the High Mark credit information bureau

to prevent multiple lending and access the repayment history of

potential clients. CRISIL believes that the credit appraisal process is

adequate for its current scale of operations.

Inadequate internal audit (IA) function

� The NGO-MFI has dedicated one IA personnel to verify loan

applications, demand and collection sheets, and other documents at

the branches and HO on a monthly basis. Findings are shared with

9

©20

13

CR

ISIL

Lim

ite

d. A

ll R

igh

ts R

ese

rved

the BMs but there have been instances of delayed audits due to

shortage of manpower. CRISIL believes IA to be crucial for internal

control through formalised capture of operational deviations and

follow-ups for adherence.

Cash management system remains to be strengthened

� The branches have high cash balances due to the practice of making

deposits the day after collections. The MFI has not availed cash-in-

transit and cash-in-safe insurance, and reconciliation is undertaken

only monthly, which increases the risk of theft/misappropriation and

ineffective cash utilisation. CRISIL believes same-day deposits and

daily reconciliations to be necessary for strong for strong cash

management.

Social impact and limited competition

� The micro-credit and credit-plus services offered by WSDS have

helped create financial literacy and empowerment in areas with

limited access to formal financial services. As it operates are in

remote areas of Manipur and Mizoram that have poor infrastructure

and connectivity, it faces limited competition from other MFIs in its

operational areas.

INSTITUTIONAL ARRANGEMENT

Experienced board and senior management

� WSDS has a seven-member board with over a decade of experience in

microfinance, social development, and banking and financial services

(BFS). This brings in a high degree of operational expertise and is likely to

be beneficial for the NGO-MFI over the long-term.

� The senior management comprises professionals with experience in

microfinance and social development sector, and the NGO-MFI has scope

to benefit from experience of the founder director, Mr. Lamkhomang Kipgen

for decision-making in funding and relationship management. However,

CRISIL believes that the organisation can benefit significantly through the

induction of core microfinance professionals.

10

©2

01

4 C

RIS

IL L

imite

d.

All

Rig

hts

Re

se

rve

d

CRISIL MFI Grading

CAPITAL ADEQUACY AND ASSET QUALITY

Small net worth � Although the MFI’s corpus improved to Rs.2.35 million in 2013-14 from

Rs.1.63 million in 2012-13 due to additions to reserves and surplus, it remains

small as compared to the other CRISIL-rated MFIs. In the same period, capital

adequacy ratio (CAR) declined to 2.86 per cent from 4.61 per cent, and the

debt-to-equity ratio increased from 24.05 times to 36.93 times due to increase

in asset size without adequate increase in corpus.

� CRISIL believes that the current capitalisation limits asset growth and it also

expects gearing to deteriorate further with the planned growth in portfolio and

borrowings. Moreover, the MFI’s status as a society restricts its ability to

mobilise equity and it has to rely on internal accruals and capital grants.

Above-average asset quality

� Though the MFI is operating in sparsely populated area, it maintained above-

average asset quality with an on-time repayment rate of 99.82 per cent and

portfolio at risk greater than 90 days (PAR>90 days) of 0.05 per cent as on

March 31, 2014. CRISIL believes that the organisation’s ability to extend

repeat loans and meet credit demands on time will be an important grading

factor.

Portfolio continues to be concentrated in one district of Manipur

� The Imphal and Senapati districts of Manipur together accounted 65.74 per

cent of the MFI’s overall loan portfolio as on June 30, 2014. This makes it

vulnerable to operational risks, as any adverse credit event in these locations

could affect capitalisation.

� CRISIL expects operations to remain concentrated over the midterm as the

MFI plans to set up two new branches in Manipur. Its ability to maintain

acceptable delinquency while also pursuing growth remains a key grading

sensitivity factor.

11

©20

13

CR

ISIL

Lim

ite

d. A

ll R

igh

ts R

ese

rved

RESOURCES AND ASSET LIABILITY MANAGEMENT

Moderate resource profile and financial flexibility

� The NGO-MFI had outstanding borrowings of Rs.73.83 million from

five lenders as on July 31, 2014, out of which NEDFi accounted for

around 53.79 per cent (Rs.39.71 million). CRISIL expects an

improvement in the MFI’s resource profile as it received sanction of

Rs.96.10 million in 2013-14 and of Rs.44.00 million in 2014-15. It

also expects Rs.20.00 million from SIDBI by December 31, 2014.

� The MFI raised low cost borrowings from Kashi Vishwanatha Vidya

Samasthe at a processing fee of 5.00 per cent, while KIVA

International sanctioned a three-year, interest-free loan of Rs.1.10

million per month. Thus, the MFI’s weighted average cost of

borrowings was low at 6.12 per cent as on July 31, 2014. CRISIL

expects the cost of borrowings to remain moderate as MFI plans to

raise borrowings in the near term to fund portfolio growth.

OPERATIONAL EFFECTIVENESS

Small scale of operations with improving productivity

� Although the Society’s loan portfolio improved to Rs.79.03 million in

2013-14 from Rs.33.21 million in 2012-13, it remains small as compared

to other mid-sized MFIs. In the same period however, following increase

in asset size, the NGO-MFI’s field productivity indicators improved as

follows:

o Loans outstanding per credit facilitator increased to Rs.4.39 million

from Rs.3.32 million

o Loans outstanding per branch increased to Rs.9.88 million from

Rs.4.74 million

o Borrowers per credit facilitator increased to 417 from 291 and

borrowers per branch increased to 939 from 416

Adequate earning profile

� The NGO-MFI has an adequate operating efficiency as:

o Operational self-sufficiency (OSS) improved to 107.03 per cent as on

March 31, 2014 from 102.17 per cent as on March 31, 2013

o Operating expense ratio increased to 8.73 per cent from 6.04 per cent

12

©2

01

4 C

RIS

IL L

imite

d.

All

Rig

hts

Re

se

rve

d

CRISIL MFI Grading

in the same period due to increase in number of branches and

employees

� WSDS made a profit of Rs.0.73 million in 2013-14, which increased

from Rs.0.12 million for 2012-13 mainly on account of increase in asset

size. CRISIL expects the NGO-MFI’s earning profile to remain adequate

in the midterm due to increase in operating expense, even though OSS

is expected to remain over 100 per cent.

SCALABILITY AND SUSTAINABILITY

� WSDS has a profitable seven-year track record in microfinance and

development in its area of operations. The experience of the board

and senior management has enabled it to maintain above-average

asset quality.

� WSDS’s sustainability would depend on its ability to strengthen its

MIS and implement loan monitoring software at all its branches for

real time monitoring and control, capitalisation levels, fundraising

capacity, and earning profile.

� Further, CRISIL expects that NGO-MFI’s ability to diversify to new

geographies while maintaining good asset quality and further

optimising productivity—to remain a key grading factor.

13

©20

13

CR

ISIL

Lim

ite

d. A

ll R

igh

ts R

ese

rved

BUSINESS INDICATORS

21.64

33.21

79.03

2,857

2,913

7,513

0

2,000

4,000

6,000

8,000

0.00

20.00

40.00

60.00

80.00

100.00

Mar-12 Mar-13 Mar-14

Rs. m

illio

n

Business Growth

Loan outstanding (in Rs. million)

6

7

4

5

6

0

2

4

6

8

Mar-12 Mar-13 Mar-14

No.

Business Outreach

Branches Districts covered

1.68 1.63

2.35

17.64

24.05

36.93

0

10

20

30

40

0.00

0.50

1.00

1.50

2.00

2.50

Mar-12 Mar-13 Mar-14

Rs. m

illion

Tim

es

Capitalisation level

Networth (in Rs. million) Debt/net worth (in times)

50%

16%

9%

14%

8%

3%District-wise concentration of loan portfolio as on March 31,

2014

Senapati

Imphal East

Churachandpu

Bishnupur

Aizawal

Kolasib

114291

417

1,208

416

939

0.87

3.32 4.39

0.00

1.00

2.00

3.00

4.00

5.00

0

200

400

600

800

1,000

1,200

1,400

Mar-12 Mar-13 Mar-14

Rs.m

illio

n

No

.

Productivity indicators

Borrowers/ credit officer (in no.)Borrowers/branch (in no.)Loan outstanding/credit officer (in Rs. million)

3%

54%

9%

26%

8%

Borrowing profile as on July 31, 2014

Ananya Financefor InclusiveGrowth PrivateLimitedNEDFi

FWWB

Kiva International

14

©2

01

4 C

RIS

IL L

imite

d.

All

Rig

hts

Re

se

rve

d

CRISIL MFI Grading

FINANCIAL INDICATORS

Income and Expenditure Statement Rs. million

For the year ended March 31, 2016 2015 2014 2013 2012

MFI’s Projections Audited Audited Audited

Fund based income 448.35 17.70 11.14 5.08 10.17

Interest and finance charges 174.68 8.45 5.56 3.23 5.14

Gross spread 273.67 9.25 5.58 1.85 5.03

Fee based income - - 1.03 0.43 0.42

Total income 448.35 17.70 12.17 5.51 10.59

Gross surplus 273.67 9.25 6.61 2.28 5.45

Personnel expenses - 3.11 2.71 1.15 3.28

Administrative expenses 159.47 1.86 2.78 0.83 1.81

Total expenses 159.47 4.97 5.49 1.97 5.09

Provision for loan loss 4.38 1.39 0.11 0.01 0.04

Other provisions - - - - -

Total provisions 4.38 1.39 0.11 0.01 0.04

Depreciation 6.90 0.30 0.21 0.18 0.24

Profit/loss before tax 102.91 2.59 0.80 0.12 0.07

Tax 33.96 0.71 0.07 - 0.02

Profit/loss before revenue grants 68.95 1.88 0.73 0.12 0.05

Grants and donations - - - - 0.09*

Net surplus 68.95 1.88 0.73 0.12 0.14

*Donation for administrative expenses

15

©20

13

CR

ISIL

Lim

ite

d. A

ll R

igh

ts R

ese

rved

Balance Sheet Rs. million

As on March 31, 2016 2015 2014 2013 2012

MFI’s Projections Audited Audited Audited

Liabilities

Corpus 457.40 2.56 2.35 1.63 1.68

Borrowings 1401.39 92.60 86.95 39.17 29.72

Provision for loan loss 35.59 - 0.25 0.15 0.13

Other liabilities and provisions 6.94 12.41 0.39 0.41 0.47

Total current liabilities 42.53 12.41 0.63 0.56 0.60

Total liabilities 1901.31 107.57 89.94 41.36 32.00

Assets

Loans and advances 1779.42 106.48 79.03 33.21 21.79

Investments - - 7.00 4.20

Cash and bank balances 2.45 0.35 0.70 1.78 3.78

Total funds deployed 1781.87 106.84 86.73 39.20 26.13

Other current assets & advances 114.53 - 2.14 1.06 4.74

Net fixed assets 4.91 0.73 1.07 1.10 1.13

Total assets 1901.31 107.57 89.94 41.36 32.00

16

©2

01

4 C

RIS

IL L

imite

d.

All

Rig

hts

Re

se

rve

d

CRISIL MFI Grading

Key Financial Ratios in per cent

For the period ended March 31, 2016 2015 2014 2013 2012

Yield MFI’s Projections Audited Audited Audited

Fund based yield 47.48 18.29 17.70 14.85 26.11

Portfolio Yield 47.55 17.06 18.87 17.63 29.48

Fee based income/Avg. funds deployed

- - 1.64 1.33 1.19

Total income/Avg. funds deployed 47.48 18.29 19.34 16.17 27.30

Cost of funds

Interest paid/Avg. funds deployed 18.50 8.73 8.83 9.90 14.50

Interest paid/Avg. borrowings 23.38 9.41 8.82 9.39 13.14

Interest spread

Spreads on lending 28.98 9.56 8.86 4.95 13.14

Overheads

Operating expense ratio 16.89 5.14 8.73 6.04 14.37

Personnel expense ratio - 3.22 4.30 3.51 9.27

Administrative expense ratio 16.89 1.92 4.42 2.53 5.10

Profitability

Net surplus/Avg. net worth 29.98 70.43 36.43 7.08 8.88

Net profit/Avg. funds deployed 7.30 1.94 1.15 0.36 0.40

Operational self sufficiency 129.79 117.13 107.03 102.17 100.69

Asset quality

Provisioning/Avg. loan outstanding 0.46 1.50 0.20 0.04 0.13

Capitalisation

Total debt/net worth (times) 3.06 36.11 36.93 24.05 17.64

Capital adequacy 24.09 2.39 2.86 4.61 6.09

17

©20

13

CR

ISIL

Lim

ite

d. A

ll R

igh

ts R

ese

rved

ANNEXURES

1.1 Outreach Summary .......................................................................................................... 18

1.2 Productivity and Efficiency Indicators ............................................................................. 18

1.4 Asset Quality ................................................................................................................... 19

1.5 District –wise Loan Outstanding ...................................................................................... 19

18

©2

01

4 C

RIS

IL L

imite

d.

All

Rig

hts

Re

se

rve

d

CRISIL MFI Grading

1.1 Outreach Summary

As on/For the period ended Unit June-14 Mar-14 Mar-13 Mar-12

Members No. 17,000 16,814 14,934 14,147

Borrowers No. 7,346 7,513 2,913 2,857

Groups No. 2,295 2,264 1,784 1,691

Branches No. 8 8 7 6

Districts No. 6 6 5 4

Women borrowers % 100.00 100.00 100.00 100.00

Disbursements Rs. mn 7.06 102.88 43.35 49.65

Loan outstanding Rs. mn 56.70 79.03 33.21 21.64

1.2 Productivity and Efficiency Indicators

As on/For the period ended Unit June-14 Mar-14 Mar-13 Mar-12

Total employees No. 33 33 21 36

Credit facilitator No. 18 18 10 25

Women employees No. 15 14 8 11

Borrowers/branches No. 918 939 416 476

Loan outstanding/branch Rs. mn 7.09 9.88 4.74 3.61

Borrowers/credit officer No. 408 417 291 114

Loan outstanding/credit officer Rs. mn 3.15 4.39 3.32 0.87

Average loan o/s per borrower Rs. 7,719 10,519 11,401 7,575

19

©20

13

CR

ISIL

Lim

ite

d. A

ll R

igh

ts R

ese

rved

1.4 Borrowing Profile

Lenders Interest (%) Loan o/s

(Rs. million)

Ananya Finance for Inclusive Growth Private Limited 16.00 2.22

North Eastern Development Finance Corporation Limited (NEDFi)

8.00 39.71

Friends of Women's World Banking (FWWB) 14.50 6.78

Kiva International* - 18.99

Kashi Vishwanatha Vidya Samasthe** - 6.13

Total 73.83

1.5 Asset Quality

Mar-14 Mar-13 Mar-12

Total outstanding balance associated with loans that are

Amt % of PAR Amt % of PAR Amt % of PAR

Portfolio being current 78.89 99.82 32.96 99.24 21.48 99.23

Late (at least one payment) - - - - - -

1-30 days 0.07 0.09 0.02 0.07 0.06 0.28

31-90 days 0.03 0.04 0.04 0.13 0.08 0.35

91-120 days - - 0.04 0.13 0.03 0.15

121-365 days 0.01 0.02 0.14 0.43 - -

1 year or more 0.03 0.03 - -

-

Total portfolio 79.03 100.00 33.21 100.00 21.64 100.00

Portfolio at risk > 30 days 0.08 0.69 0.50

Portfolio at risk > 90 days 0.05 0.56 0.15

Portfolio at risk > 365 days 0.04 - -

20

©2

01

4 C

RIS

IL L

imite

d.

All

Rig

hts

Re

se

rve

d

CRISIL MFI Grading

Microfinance in India and recent developments

Microfinance in India and recent developments

Over 120 million households in India currently face financial exclusion. Over the past decade, the

microfinance sector has played a key role in bringing basic financial services to the economically

underprivileged, enabling them to raise their income level and improve living standards through

small-scale credit, savings, and other basic financial products. Since its emergence in the 1980s,

India’s microfinance sector has grown tremendously in terms of both size and financial maturity,

reaching out around 2.75 crore people across India, with a portfolio outstanding around Rs. 280

billion (NBFC-MFIs) as on March 31, 2014.

Channels of microfinance

There are two major delivery channels for microfinance in India—self-help groups (SHGs) and

microfinance institutions (MFIs). SHGs typically have 10–20 members of the same locality who meet

weekly or monthly to contribute a set savings amount, which is then lent to other members. SHGs

are promoted by various non-governmental organisations (NGOs) and the apex agricultural credit

bank, National Bank for Agriculture and Rural Development (NABARD), under its SHG-bank linkage

program. MFIs on the other hand mainly deliver their services via the Grameen model, (developed by

Grameen Bank, Bangladesh) or the ASA model, developed by ASA, a leading Bangladesh-based

NGO-MFI. However, the target clientele for both channels—SHGs and MFIs—are those without

access to banking services or who depend on informal sources such as friends and money lenders

for their credit requirements.

Priority-sector lending status

The Government of India requires banks to invest a percentage of their portfolio in specific sectors,

at a concessional rate of interest to boost economic development in the country. The RBI has laid

down a number of qualification criteria for NBFC-MFI to receive priority-sector status. For instance,

income-generating activities need to account for at least 75 per cent of its loan portfolio, and

qualifying assets must account for 85 per cent of the total assets (excluding cash, balances with

banks and financial institutions, government securities and money market instruments).

Regulatory Environment

After Andhra Pradesh crisis, the Reserve Bank of India (RBI) appointed the Malegam Committee in

October 2010 to identify MFI challenges and suggest remedial action. The RBI has broadly accepted

the Committee’s recommendations toward promoting fair competition, protecting client interests, and

21

©20

13

CR

ISIL

Lim

ite

d. A

ll R

igh

ts R

ese

rved

improving pricing transparency with regard to MFIs operating as non-banking financial institutions

(NBFCs), as these falls under RBI authority. The Microfinance Institutions (Development and

Regulation) Bill, 2012 is awaiting parliamentary approval by the national. It proposes RBI as the sole

regulator of MFIs.

a. Credit Bureaus - The first microfinance credit bureaus in India, High Mark and Equifax, were

set up in 2011 to help MFIs address credit risks by assessing the repayment capacity of

potential borrowers. Equifax also collects client data from MFIs. According to High Mark and

Micro Finance Institutions Network (MFIN), more than 120 MFIs, accounting for

approximately 90 per cent of all such institutions in the country, have enrolled in credit

bureaus.

b. Pricing of Credit – Recently RBI has removed the 26% interest rate cap on loans given by

microfinance companies and linked the interest rate to the cost of funds. The microfinance

institutions (MFIs) should arrive at the lending rate by calculating their cost of funds plus a

maximum 10% margin for systemic NBFC-MFIs and 12% for small NBFC-MFIs.

c. Self-regulating organization (SRO) - In November 2013, the RBI announced the criteria for

SRO for microfinance industry to ensure effective monitoring of the functioning of NBFC-

MFIs, their compliance with the regulations and code of conduct and in the best interest of the

customers of the NBFC-MFIs. While membership to the SRO is not mandatory, NBFC-MFIs

are encouraged to voluntarily become members of at least one SRO. As a result June 2014

RBI formally recognised Microfinance India Network (MFIN) as the SRO.

22

©2

01

4 C

RIS

IL L

imite

d.

All

Rig

hts

Re

se

rve

d

CRISIL MFI Grading

This page is intentionally left blank

About CRISIL Limited CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are India's leading ratings agency. We are also the foremost provider of high-end research to the world's largest banks and leading corporations.

About CRISIL Ratings CRISIL Ratings is India's leading rating agency. We pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we have a leadership position. We have rated over 52,000 entities, by far the largest number in India. We are a full-service rating agency. We rate the entire range of debt instruments: bank loans, certificates of deposit, commercial paper, non-convertible debentures, bank hybrid capital instruments, asset-backed securities, mortgage-backed securities, perpetual bonds, and partial guarantees. CRISIL sets the standards in every aspect of the credit rating business. We have instituted several innovations in India including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We pioneered a globally unique and affordable rating service for Small and Medium Enterprises (SMEs).This has significantly expanded the market for ratings and is improving SMEs' access to affordable finance. We have an active outreach programme with issuers, investors and regulators to maintain a high level of transparency regarding our rating criteria and to disseminate our analytical insights and knowledge.

CRISIL Privacy Notice

CRISIL respects your privacy. We use your contact information, such as your name, address, and email id, to fulfill your request and service your account and to provide you with additional information from CRISIL and other parts of The McGraw-Hill Companies, Inc. you may find of interest.

For further information, or to let us know your preferences with respect to receiving marketing materials, please visit www.crisil.com/privacy. You can view McGraw-Hill's Customer Privacy Policy at http://wwaaw.mcgrawhill.com/site/tools/privacy/privacy_english. Last updated: April 30, 2012

CRISIL House, Central Avenue, Hiranandani Business Park Powai, Mumbai 400 076 Phone: +91 22 3342 3000 Fax: +91 22 3342 3001 Email: crisilsmeratings@crisil.com www.crisil.com