Pillars of Sa-Dhan’s work
- Sector Representation & Policy Advocacy
- Sector Building Initiatives
- Capacity Building
1 Sector Representation: Sa-Dhan’s Engagement with Policy Makers and Regulators in India and Policy Advocacy
Sa-Dhan as an association has mandate to engage with policy makers and regulators to provide a favorable policy environment for the promotion and growth of microfinance and financial inclusion in India. The views of member institutions are placed before the policy making bodies from time to time by Sa-Dhan. It also develops white papers on various issues for the policy makers based on inputs of the members.
Sa-Dhan regularly leads delegations to a variety of policy makers and policy making bodies, while doing so, usually some of our active members as part of these delegations, which gives them a scope to contribute to the discussions directly and build up the linkages.
Also, it has taken initiatives to support the SHG-movement in India mainly initiated by its member NGOs like MYRADA, PRADAN etc. Some of the policy works that Sa-Dhan has persuaded are mentioned below:
1.1 Microfinance Bill: Sa-Dhan played a crucial role while drafting the Microfinance (Development and Regulation) Bill 2007 & 2012 in association of Ministry of Finance. The Bill was intended to bring homogeneity in the microfinance sector. The Bill was presented to fifteen Lok Sabha which was further referred to Standing Committee on Finance of Parliament.
1.2 Improving liquidity & resource mobilization:
Liquidity problem is prevalent in the microfinance sector in India since the Andhra Pradesh crisis. Sa-Dhan’s continuous engagement with the RBI and bankers is opening up the liquidity flow into the industry steadily. Sa-Dhan engaged with the MoF to set a separate equity fund for small microfinance institutions. As a result the government has set an IMEF of INR 100 cr which was later increased to Rs 300 Crs. Sa-Dhan has advocated extensively with RBI to allow MFIs to raise fund through External Commercial Borrowing. As a consequence RBI allowed MFIs to raise ECB up to USD 10 million. Moreover, Sa-Dhan has successfully advocated for allocating a dedicated fund for SHGs in previous Budgets and put efforts for the establishment of Women Bank.
In addition, Sa-Dhan organizes multi-stakeholder interfaces nationally and at state and zonal levels to bring together the members and other agencies including investors and financiers including, banks, bulk lenders and other lenders. Sa-Dhan had also organized special events called “bankers-members workshops “to understand the issues related to the availability of the funds for the sector and procedures to access. Sa-Dhan is often approached by national and international donor communities to provide them with information on the right kind of institutions for investment. Sa-Dhan shares the information on its members with such agencies so that select the institutions for their financial support and technical assistance.
1.3 Regulatory framework & Compliance
Sa-Dhan has been directly involved in framing new sectoral regulations for the MFI sector post the legislation introduced by AP Government restricting the operations of MFIs. We have interacted with the Malegam committee of the RBI whose recommendations subsequently translated in to the monetary policy of the Government. Later on we have helped in making the case to create a separate category of NBFC-MFIs to distinguish this unique operating model while also bringing relaxation in the interest rate margins and streamlining taxation norms for the Not- for- Profit MFIs. We had also made representations for allowing the NBFC-MFIs to operate as Banking Correspondents. Aside from the monetary policies we have also been engaged on the pre Budget sectoral representations.
1.4 Credit Information Bureau (CIB)
Sa-Dhan has been involved in the setting up of the successful MFI Credit Bureaus which have streamlined identification of clients and helped to lower indebtedness. We are also now working to set up an Inclusive Credit Bureau that includes individual SHGs data, as the SHG-Bank Linkage Programme comprises over 100 Mn clients and contributes to over 45,000 Crs of Loan Portfolio.
1.5 Annual National Conference and regional interfaces
Sa-Dhan organizes an annual national conference on microfinance and poverty which is important for networking platform for its members. This has been the benchmark forum for a diverse set of over 1000 panelists and participants to share and learn from each other. The conference also focuses on SHGs and their role in financial inclusion, poverty reduction and women empowerment. The participants come from different section like community leaders, SHG-Federation leaders, law makers, regulators, financial Institutions, government, bankers and academicians.
2 Sector Building Initiatives and Self Regulation
2.1 Self Regulatory Organisation (SRO) as recognized by the Reserve Bank of India:
The Reserve Bank of India has recognized Sa-Dhan as a SRO for NBFC-MFIs. The primary roles and responsibilities entrusted to Sa-Dhan includes: formulating and administering a Code of Conduct recognized by the Bank, having a grievance and dispute redressal mechanism for the clients of NBFC-MFIs, responsibility of ensuring borrower protection and education, monitoring compliance by NBFC-MFIs with the regulatory framework put in place by the Reserve Bank, surveillance of the microfinance sector, training and awareness programmes for the members, Self Help Groups, etc. and submission of its financials, including Annual Report, to the Reserve Bank. With NGO-MFIs and SHPIs also being members of Sa-Dhan, this SRO is especially suitable for MFIs working through SHG model. Further the membership fees of Sa-Dhan are nominal as compared with the other SRO. Experience shows that banks seek similar kind of compliance to different parameters from NGO-MFIs also. So membership of Sa-Dhan will provide an edge to these institutions to access bank funding
Sa-Dhan has been engaged in the following sector building initiatives since its inception.
2.2 Promoting transparency in the Sector
In an effort to address the demand for information on microfinance sector along with improving transparency in the sector, Sa-Dhan, since 2004 has taken up the task of collecting data from microfinance institutions and presenting it in the form of consolidated Bharat Microfinance Report by capturing the financial performance of CDFIs against the industry standards set by Sa-Dhan. It also includes the underlying trends, issues and challenges faced by the sector.
Sa-Dhan’s work in the area of data collection and publication of reports have been well appreciated by the Ministry of Finance, RBI and other Banks. The data and information produced in the reports is very useful for all the stakeholders in understanding the sector and the performance of the MFIs.
Sa-Dhan has collaborated with the institute of Chartered Accountants of India (ICAI) in developing accounting standards & disclosure guidelines to MFIs. We have also published a useful handbook for compliance with RBI guidelines which was widely disseminated through workshops and training programmes aimed at our MFI members. Sa-Dhan is also the first organization to compile and produce India’s first MFI directory which is extremely useful to policy makers and regulators
2.3 Industry Standards and Benchmarking
Sa-Dhan has been engaged in developing the accounting and operational standards microfinance sector (2003-05) with wide consultations of (members, policy makers, bankers). The six primary standards developed were: Operating Self Sufficiency, Financial Self Sufficiency, Operating Cost, Total Cost, Current Repayment rate and Average Borrower per client officer.
Sa-Dhan has also been actively involved in establishing SHG and SHG Federations gradation and rating tools and in capacity building to impart best practices to the Self Help Promoting Institutions.
2.4 Voluntary Mutual Code of Conduct for its Member Institutions
In January, 2007, Sa-Dhan issued a voluntary mutual code of conduct applicable to all the categories of member microfinance institutions. The same has been incorporated by the RBI in its report on “Trend & Progress of Banking in India 2007-08.” This further formed the base for the Unified Code of Conduct adopted by Sa-Dhan and MFIN members in 2012.
2.5 Industry Code and Ensuring Compliances
Sa-Dhan has been very active in raising the concerns on the field and clients and has been facilitating the Industry Code focusing on client centric approaches. Sa-Dhan has developed a COCA Validation Tool to assess the compliance level of MFIs and developed MFI specific compliance reports. Such reports were shared to an Ethical and Grievance Redressal Committee for their perusal and appropriate action.
2.6 Social Performance Reporting
Going a step further, Sa-Dhan has also engaged itself in collecting social performance data along with the financials to ascertain the social relevance of the sector. We suggest measures taken by MFIs to address the social issues, contribution made by the MFIs out of their balance sheet for supporting social cause. The aim is to creating an atmosphere to focus on social aspects.
2.7 Action Research and Publications of Sa-Dhan
In order to engage with the Financial Inclusion agenda, creating and having clear understanding of the issues and challenges, Sa-Dhan is continuously engaged in the research (field level, policy, practices). These research and studies makes an important contribution in creating awareness in the players within the sector and in public in general. There are approximately 50 notable publications from Sa-Dhan in the areas of microfinance, financial inclusion, SHG issues etc.
3.0 Capacity Building
Sa-Dhan’s capacity building initiatives have been largely two folds; firstly technical inputs to members, non-members & practitioners and secondly perspective building for the institutions engaged in ensuring financial inclusion such as banks, policy makers, government bodies.
During the last few years, Sa-Dhan has intensified its training and capacity building in the area of regulatory and code of conduct compliance. This includes client protection principles and social performance initiatives. Client protection principles included important principles such as prevention of over-indebtedness, transparency, responsible pricing, appropriate collections practices, ethical staff behavior, mechanisms for complaint resolution, and privacy of client data.
Sa-Dhan brings together best trainers to train the member institutions on the issues, apart from in-house specialists. Most of these capacity building programmes are at a minimal cost for Member institutions. The list of training and courses Sa-Dhan has offered at various point of time is mentioned below.
- Compliance to RBI regulation
- Code of Conduct compliance and assessment process
- Governance and Risk Management
- Curriculum for front line staff of MFIs: now with IIBF
- Delinquency Management
- Perspective Building Program
- Microfinance Education Program
- Livelihood Education Program
- Financial & Operational Standards & Ratios
- Financial Literacy & Client Education
- Financial Management & Analysis
Thought Leadership to other countries
Sa-Dhan has been involved at international level to share the experiences of India to other low income countries and also bring back best practices for further improvement of community development finance institutions in India. The contribution of Sa-Dhan in knowledge management and capacity building areas has been widely acknowledged and that has resulted into Sa-Dhan getting elected as board member in the SEEP Network. The SEEP Network is a global network of 130 international practitioner organizations dedicated to combating poverty through promoting inclusive markets and financial systems in different countries. Furthermore, Sa-Dhan has been closely associated with African micro-finance networks to hold workshops