Sa-Dhan Newsletter Volume 5 Issue 1
Operational Costs of Delivering MicroFinance
Microfinance programme: Operational highlights
Client savings
Outstanding
Loan portfolio
Cumulative loans
Average loan size
borrowings of MFI
of MFI
disbursed by MFI
from MFI to borrowers
Rs3.20 crore
Rs20.94 crore
Rs23.22 crore
Rs63.89 crore
Rs7,500
Key efficiency related ratios
Portfolio at risk
Cumulative
Yield on portfolio
Other income to
Financial cost ratio
(>=60 days)
repayment rate
average portfolio
0.12%
99.9%
27.1%
5.8%
10.9%
Operating
Return on average
Operational Self
Financial Self Sufficiency
Expense ratio
total assets
Sufficiency
6.4%
11.6%
181%
163%
Notes
1.
All figures are estimated for the organisation's microfinance programme as on 30 September 2003.
2.
The members of MFI X comprise 52,935 women in a total of 1,997 centres and 5,344 groups. The number of active borrowers
is 50,254 while the number of loan accounts is 56,600.
At the branch level, the branch managers (BMs) are
Background of the Organisation
supported by a maximum of six staff. BMs are assisted
by Assistant Branch Managers (ABMs) for day-to-day
MFI X was registered in 1992 as a society. MFI X was
promoted with the intention of undertaking rural development
branch level activities. Credit Officers (COs) in each branch
are responsible for managing the field operations of the
activities. However, it remained relatively dormant, doing
branch. The COs also manage the task of a cashier at
small project work intermittently in its initial years, as its
the branch office the task is undertaken in rotation by
promoter was an employee of another NGO.
the COs in each branch. At the head office, apart from
The real impetus to MFI X was provided, in 1997, by a
the director, other staff includes personnel for accounts,
human resource management and training, internal audit
chance meeting of its promoter with a ragpicker in the
(recently recruited) and two Area Managers (who are
nearby town.
Seeing the ragpicker's poverty-stricken
responsible for field monitoring of operations). MFI X's
situation, through discussions with her, she realised the
utility of credit as a development intervention. She and
MF programme managed from its head office now has
nearly 53,000 members spread over 5,350 groups in 18
her associates provided some credit to the ragpicker and
branches.
soon word spread amongst other ragpickers in the town
about the availability of such credit.
In order to meet its requirements for onlending, the MFI
has raised funds from a number of sources. Though most
MFI X started building up its MF programme from early
of these sources provide funds at commercial rates, it has
1998 and, while it also undertook work in areas such as
also managed to raise substantial funds from subsidised
health, its primary focus is MF. Initial funds for the MF
sources. Some of the main sources of funds are SIDBI,
activity came from promoters and collections of earnings
FWWB, ICICI Bank, Cordaid, UTI Bank, IOB, GTB, HDFC
from door-to-door newspaper collection. Subsequently,
Bank, Misereor and C-GAP.
MFI X raised loans from other lending institutions.
The flow of funds for on-lending is depicted in the following
diagram.
MFI X was able to increase its outreach to rural areas and
promote self-help groups (SHGs) in villages. After around
Loan funds flow
one year of operations, some problems of delinquency
surfaced and a brief period of slowdown occurred. These
prompted reconsideration of operations within MFI X.
Lenders
Around this time, using a staff person who had prior
experience in working with a leading Grameen methodology
@11.6% (weighted average cost)
MF organisation, MFI X established a branch using the
Grameen model. This served to enhance MFI X's outreach
MFI X
and credit absorption capacity rapidly. Over time, MFI X
has brought together features from both the SHG and the
@15%p.a. (flat)+1% fee
Grameen methodologies based on its own experience. The
organisation is now working through 18 branches (8 rural
Borrowers50,254 active borrowers52,935 members
and 10 urban).
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