Instructions: Deemed To Be University
Instructions: Deemed To Be University
Instructions: Deemed To Be University
Deemed to be University
Instructions
Prof.Saravanakrishnan V
● Nature of organization
● Nature if industry in which organization operates.
● External environment that is effecting organization
● Problems being faced by management
● Identification of communication strategies.
● Any relevant strategy that can be added.
● Control and out-of-control situations.
Introduction - MFI
Introduction - MFI
Rise of SKS
● SKS Microfinance expanded its operations rapidly and in course of
time, it won several awards for its achievements.
● Most of the money it received in the form of awards was also
reinvested to fund the expansion of its operations.
● SKS used a lot of advanced technological enhancements like the use
of smart cards to monitor the loans of borrowers.
● It made huge investments in acquiring modern technology in the
microfinance sector and thereby reducing transaction costs.
● The use of the latest technology helped in the automation of a number
of business processes and lowering of operating costs for the
Company.
● SKS developed its own fully automated and user friendly
Management Information System (MIS) called SKS MAPS
(Monitoring, Accounts, Portfolio, and Smart Cards) to monitor its
business process.
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Rise of SKS
● Recognizing the efforts of SKS, Friends of Women’s World Banking
India gave it first loan of Rs.5,00,000 to SKS in 2002.
● Later in 2004, SKS got its first partnership loan from ICICI for Rs.
200 million.
● Later, Vikram had arrived at the idea of converting SKS into a for-
profit ' . Organization to fuel its growth.
● Toward that end, he founded a private company called SKS
Microfinance Pvt Ltd. and five for-profit Mutual Benefit Trusts
(MBTs). The objective was to enhance the social and economic
welfare of the company and MBTs' members.
• Vikram raised US$ 500000 through donations
via MBTs and invested the amount in SKS
Microfinance Ltd. to become its sole owner.
SKS Rise
SKS Crisis
Reason
● Embraced the for-profit model, but preached mission statements like
empowering the poor and eradication of poverty which did not work
with for-profit model.
● When the company went for IPO, people looked at the numbers,
portfolio size, ESOPs (employees stock options) and the salary levels.
● They were all relevant for a for-profit mainstream operation but the
claim of eradicating poverty did not align with that.
● At the sector level in 2009 and 2010, SKS faced very severe
competition. There were 400 – 600 companies who were getting
funds in either equity nor debt.
● There was intense competition but no price war. All the competitors
were charging 31-32%. Because of it process dilution became the
selling proposition. The customers also moved from one competitor to
other thereby forcing the company to dilute them.
Changes
● Other than reframing their strategies, the Andhra Pradesh crisis made
MFIs rethink about other business operations related to disbursement
and recovery of loans.
● SKS too implemented a number of steps to protect the interests of its
borrowers. It set up an external ombudsman to deal with all the
complaints of its borrowers and set up a toll-free helpline in 8 Indian
languages to help its borrowers.
● SKS also started a customer grievance cell to deal with the problems
of customers
● The annual report 2011-12 states that SKS Microfinance took some
proactive steps by adopting a three-pronged strategy to revitalize its
operations.
Conclusion
● After posting profits in the third quarter of FY13 after seven straight
quarters of losses, country's lone listed micro-lender SKS
Microfinance hopes to continue the momentum and is expecting a
profit of around Rs 60 crore in the next fiscal.
Controversies on MFI
Y.H. Malegam?
● Yezdi Hirji Malegam is an Indian chartered accountant who was the
president of Institute of Chartered Accountants of India from 1979 to
1980.
● He was the chairman of National Advisory Committee on Accounting
Standards.
● Since 27 November 2000, he has been a board member of Reserve
Bank of India and holds a position as a trustee of The Willingdon
Sports Club.
● He is also engaged in various other fields of business and finance. He
has been a director of the Indian Central Bank's board for 17 years
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Objectives
● (a) To review the definition of microfinance and micro finance
institutions (MFIs) for the purpose of regulating non-banking financial
corporations (NBFCs) undertaking microfinance by the RBI;
● (b) To delineate objectives and scope of regulation of NBFCs
undertaking microfinance by the RBI;
● (c) To examine the prevalent practices of MFIs in regard to interest rates,
lending and recovery practices to identify trends that impinge on
borrowers’ interests.
● (d) To examine and make appropriate recommendations in regard to
applicability of money lending legislation of the States and other
relevant laws to NBFCs/MFIs.
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Key Recommendations
● # 1. Classification of NBFC-MFI
● The Sub-Committee recommends that a NBFC-MFI may be defined
as “A company (other than a company licensed under Section 8 of the
Companies Act, 2013) which provides financial services pre-
dominantly to low-income borrowers with loans of small amounts, for
short-terms, on unsecured basis, mainly for income-generating
activities, with repayment schedules which are more frequent than
those normally stipulated by commercial banks and which further
conforms to the regulations specified in that behalf”.
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● MFIs should have a proper Code of Conduct and proper systems for
recruitment, training and supervision of field staff to ensure the
prevention of coercive methods of recovery.
○ the loan is without collateral;
○ the aggregate amount of loans given for income generation purposes is not less
than 75% of the total loans given by the MFIs;
○ the loan is repayable by weekly, fortnightly or monthly installments at the
choice of the borrower.
● The RBIs should have the responsibility for off-site and on-site
supervision of MFIs.
● The RBI should have the power to remove from office the CEO
and/or a director in the event of persistent violation of the regulations.
● Financial illiteracy
● Low Outreach ● Loan Default
● Lack of information ● Low Education Level
● Inability to generate funds ● Language Barrier
● Heavy dependence on banks & FIs ● Late Payments
● Weak governance ● High Transaction Cost
● Interest Rate ● Lack of access to Funding
● Regional Imbalances ● Loan Collection Method
● Negligence of Urban Poor ● Unregulated Microfinance
● Client Retention Institutions
● Lack of Insurance Services
● GOI launched
○ Small Farmers Development Scheme (SFDS) 1974-75,
○ Twenty Point Program (TPP) 1975,
○ National Rural Development Program (NRDP) 1980
○ Integrated Rural Development Program (IRDP) 1980
○ Rural Landless Employment Guarantee Program (RLEGP) 1983
○ Jawhar Rozgar Yojna (JRY) 1989
1 Poverty Eradication
2 Power to People
3 Support to Farmers
4 Labour Welfare
5 Food Security
11 Women Welfare
12 Child Welfare
13 Youth Development
14 Improvement of Slums
16 Social Security
17 Rural Roads
20 IT enabled e-Governance
Thank You