Sanchetna ria

December 31, 2008 Rapid Institutional Assessment of Sanchetna Financial Services Pvt. Ltd. by Soumya Harsh Pandey Amit Kumar Garg

ACKNOWLEDGEMENT We thank all the staff members of Samridhi for their co-operation and support provided to the MicroSave team during the Rapid Institutional Assessment (RIA) exercise.

[object Object],[object Object],[object Object],Rapid Institutional Assessment (RIA) is designed as a “quick and dirty” dip-stick to make a preliminary assessment of an institution’s capability and promise, as well as where it needs additional inputs/assistance. Rapid Institutional Assessment results in Rapid Institutional Assessment framework ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],RAPID INSTITUTIONAL ASSESSMENT

INTRODUCTION TO THE ORGANISATION Chief functionary Mr. Lokesh Kumar Singh (Managing Partner) Mission “ We provide client-focused, highly responsive and cost effective financial services and business development expertise in a time bound and socially conscious manner to increase the productive capacity of the Indian poor ’ Vision “ We will help alleviate poverty in UP and other regions in underserved north India, by enhancing the productive capacity of both our clients and employees and being the provider of choice by upholding the highest standards of service and delivering value at every level ” Values Integrity – in every action Stewardship – for better accountability Logical Approach – towards better solutions Freedom of Expression – the right to disagree, and represent one’s beliefs Dignity of Labor – for better work environment and camaraderie Legal status (Reg. No., Date of incorporation) NBFC 14.00025, December 1, 1995 (NBFC ‘Magauri Securities Pvt. Ltd.) was purchased and MF operations started from Oct, 08 FCRA/80 G Reg. NA Change in legal status NA Methodology Grameen Area of operation Barabanki (UP)

BOARD AND GOVERNANCE Observation Yes/No Board composition suits microfinance Yes Established system of board rotation No Board meets atleast 4 times a year Yes Board has atleast 2 or 50% independent directors Yes Head of the organisation reports and is accountable to the board Yes Person with appropriate authority is heading the microfinance programme Yes MFI is not violating any laws of the land No <Others> NA Comments ,[object Object],[object Object],[object Object]

BUSINESS PLAN Parametersears 2008-09 2009-10 2010-11 Number of States 1 1 1 Number of Districts 1 3 8 Number of Branches 1 9 52 Number of Clients 800 6,400 62,000 Portfolio Outstanding (‘000) 60,000 529,000 5,564,000 Disbursement (‘000) 80,000 828,000 8,843,000 Analysis of assumptions ,[object Object],[object Object],[object Object],[object Object]

MANAGEMENT AND SYSTEMS Observation Yes/No Clear organisational and reporting structure exists Yes Roles and responsibilities commensurate with authority Yes Senior management team in place Yes SMT is staffed with people having good understanding of the target market Yes CEO/CFO/ FM understand financial management Yes Loan documents exists Yes Organisational policies are documented Yes Operations Manual followed Yes Comments ,[object Object],[object Object],[object Object],[object Object]

MANAGEMENT AND SYSTEMS Observation Yes/No Operations Manual is updated to reflect changes in the policy Not complete Process Maps exist No Internal Control System exists No Internal control followed No MIS has integration with the finance No MIS generates portfolio report Yes MIS is used at the branches Yes MIS with integration of the Branch level data exists No <Other> Comments ,[object Object],[object Object],[object Object],[object Object],[object Object]

HUMAN RESOURCE MANAGEMENT Observation Yes/No Job responsibilities exits for all positions Yes Appropriate staff exist for positions and responsibilities Yes Service rules exists for staff Yes Recruitment procedure in place Yes Staff rules with regards to service conditions exist Yes Policy for HR development exists Yes Clear staff remuneration/incentive schemes exist Yes Remuneration/incentive schemes implemented in a fair manner Yes Staff appraisal and promotion systems exists Yes Comments ,[object Object],[object Object],[object Object],[object Object],[object Object]

FINANCIAL MANAGEMENT Observation Yes/No Accounting entries have supporting documents Yes Accounting treatment is properly done Yes ,[object Object],[object Object],[object Object],[object Object],[object Object],Yes Yes Yes Yes Internal audit systems exist NA Internal audit systems appropriate NA Internal Audit is independent NA Statutory external audits have been done for all the years NA Comments ,[object Object]

FINANCIAL MANAGEMENT Observation Yes/No Organisation has diversified source of fund No Portfolio report match with the accounting reports NA Organisation has never missed payment to funders NA There is no difference between the Head office and the Branch accounts No Bank reconciliation is regularly done Yes Others Comments ,[object Object]

MICROFINANCE CHARACTERISTICS Observation Yes/No Organisation has a defined credit policy NA PAR is calculated properly NA Ageing Analysis of the portfolio done correctly NA Comments ,[object Object],[object Object],Product features General Top-up Loan Size Up-to Rs. 12,000 Rs. 4,000 – Rs. 6,000 Loan Term 50 weeks 50 weeks Repayment frequency Weekly Weekly Client Profile 100% women clients in rural areas, who are engaged in any economic activities i.e. loan is given for only income generation purposes. Top-up loan is provided to existing loan clients on top of existing loan after 16 th weeks. Pricing -Interest Rate -Processing fee -Membership fee 29.25% (RBM 1 ) 1.5% of the loan amount Rs. 120 (one time fee collected as training fee) 29.25% (RBM) 1.5% of the loan amount NA

MICROFINANCE CHARACTERISTICS Observation Yes/No PAR is reported in organisational reports NA Does the policy provide guidelines for delinquency management No Does the policy provide for provisioning in case of bad debts No Portfolio reports are regularly generated Yes Portfolio report match with the audited financial statements NA Necessary loan documentation is done Yes Staff are aware of credit, delinquency and write-off policies NA Others Comments ,[object Object],[object Object]

MICROFINANCE PROGRAMME PERFORMANCE Parameters December 31, 2008 Number of groups 47 Number of members 235 Number of loan clients 155 Portfolio outstanding Rs.1, 390,000 Cumulative disbursement Rs. 1,468,000 # of days taken from group formation to loan disbursement 10-14 days Comments ,[object Object],[object Object],[object Object],[object Object]

MICROFINANCE PROGRAMME PERFORMANCE Profitability 2008-09 2009-10 2010-11 OSS 22.8% 88.0% 144.0% FSS 21.8% 71.4% 127.0% ROA -35.0% -4.0% 7.0% Efficiency Cost per client 2,728 1,060 431 Clients/Loan Officer 133 160 250 Loan O/S per Loan Officer (in Rs. Lakh) 10 13 24 Operating Cost Ratio 44% 21% 9% Operating Expense Ratio 80% 27% 10% Other ratios PAR > 30 days NA 0.2% 0.2% Debt /Equity 8% 140% 440% Fixed Assets/ Total Assets 7% 10% 7% O/s Portfolio/Total Assets 94% 69% 93% Liquid Ratio 8.33 8.33 0.83(1) Comments ,[object Object],[object Object],[object Object],[object Object]

SWOT MATRIX ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

STRENGTH Experienced senior management Team Robust IT system in the form of an integrated MIS for a start-up MFI Clear and well defined HR policy Infusion of own equity shows commitment from promoters (who are also part of core management team) Process innovation Clarity and good understanding of vision among all staff Transparency is maintained at all levels Planning to offer various value added and livelihood support services (LDS) through partnership model with other institutions in near future Shared ownership in the form of ESOPs ( Ownership 2.5 times at par) Description of strengths ,[object Object],[object Object],[object Object],[object Object],[object Object]

WEAKNESSES Limited resources Micro managing Start up organisation; therefore, yet to institutionalise the standard processes Attracting/Holding on to the staff till the time we become established players Refine the processes for growth Description of weaknesses ,[object Object],[object Object],[object Object],[object Object]

OPPORTUNITIES Huge Potential Market Scope of introducing livelihood related services Financial crunch is helping organisation to be cost conscious and effective IT systems Description of opportunities ,[object Object],[object Object],[object Object]

THREATS Financial crisis Poor law & order situation in UP Increasing competition Poor banking infrastructure Political instability Description of Threats ,[object Object],[object Object],[object Object],[object Object]

ORGANISATION FITS ADDITONAL CRITERIA TO BE SELECTED AS ‘AAFI’ PARTNER SFSPL can be taken as AAFI partner for technical support. Parameters Yes/No Organisation has positive net equity Yes Does not have access to other ongoing technical assistance support No Agree to attend workshops at selected MFIs from previous rounds Yes Agree to set up microfinance operations under a more regulated form (section 25/NBFC) Already NBFC Agree to return any savings mobilised to the clients of microfinance NA Ensure organisations can meet their funding liabilities through its loan portfolio Yes CEO/Head of the organisation is committed to microfinance and is willing to commit time Yes

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