Micro-Finance Program
Update May 15, 2010: READ received a loan of approx. $240,00 from the State Bank of India, and on April 27, distributed it to 68 women self-help groups to help a total of 732 women can start small enterprises (average loan is $330).
The history of the Micro-Finance programs:
As explained here, READ is very interested in promoting sustainable development of underprivileged and marginalized families and communities. To achieve this goal, READ has been empowering marginalized and vulnerable rural women by organizing them into Self-Help Groups (SHG). These SHG started internal savings and micro-credit activities. The development of these self-help group was accredited and supported by the Tamilnadu Corporation for the Development of Women Ltd., (TNCDW) and the Council for Advancement of People`s Action and Rural Technology (CAPART) which provided training tools and financial support.
Because the amount of money that SHG members of a newly formed group can save each month is very small, it became very clear early on that there was a need for additional external funding to increase the amount of money that would be available for micro-loans.
For the first 5 groups that READ has formed, READ was soon able to mobilize a revolving fund from the DWCRA (Development of Women and Children in Rural Areas) agency, for a total amount of 600 US dollars per group.
In 2005, the Micro-Finance activities were expande thanks to grant support from the Alliance for Youth Achievement (AYA) Inc., USA. Twenty women were provided with a micro-loan each of Rs. 5000 value (~ 100 US dollars); this was continued and expanded to another 50 women through the subsequent grants from AYA. In addition, READ’s sister organization Sahaya International gave Rs. 225,000 for a revolving loan program to construct toilets for women SHG members.
The success and creditworthiness of READ was appreciated by HDFC Bank which came forward to contribute Rs. 34,351,000 since the year 2007. During February-March 2008, an additional Rs. 5,000,000 was secured from NDFS for micro-loans. It achieved 99% prompt repayment so far and the remaining 1% constitutes delayed repayment and not total default.
The following statistics illustrate the Micro-Finance activity undertaken by READ:
MFI: summary of status up to March 31, 2008:
Source |
Period from |
Amount received and disbursed to clients in Rs. |
Number of lender/ active clients |
Number of SHG with lending clients |
Amount repaid till date to the source banks/lenders |
Balance outstanding with clients (Rs.) |
HDFC Bank (loan) |
July 2007 to March 2008 |
34,351,000 |
3384 |
188 |
8,078,556 |
26,272,444 |
NDFS (loan) |
February 2008 to March 2008 |
5,000,000 |
401 |
28 |
172,700 |
4,827,300 |
READ (Loan) |
2005-2008 |
837,000 |
125 |
32 |
471,420 |
365,580 |
Total |
|
Rs 40,188,000 |
3910 |
248 |
8,722,676 |
31,465,324 |
MFI : Summary for April 2008 to March 09
Source |
Number of lender/active clients |
Number of SHG with lending clients |
Financial Assistance (FA) amount |
Opening Balance |
Total |
Repayment |
OSB |
READ |
144 |
6 |
1,984,500 |
|
|
680,840 |
1,303,660 |
HDFC |
1282 |
83 |
14,430,000 |
28,439,140 |
26,044,924 |
5,151,786 |
19,185,936 |
NDFS |
985 |
63 |
10,000,000 |
4,833,333 |
14,833,333 |
4,666,662 |
10,166,671 |
Total |
2411 |
152 |
26,414,500 |
33,272,473 |
40,878,257 |
10,499,288 |
30,656,267 |
Loan sanction procedures:
The SHG members have previously already received awareness training on micro-financing. To avail a loan, they need to follow the following set of procedures:
Loan request letter will be given from the members –> SHG –> credit officer –> Branch manager –> Head office.
The branch manager list the groups for grading and only submits the eligible self help group forms to the Head office. After verification the forms are given to the loan committee.
The loan committee sanctions the loan amount to the group according to the performance of the group.
The loan agreement contains the information about the loan repayment schedule, interest rate; the form will be signed by the president, secretary and treasurer of the group.
Please note that the loans are given to the groups (who then disburse them to their applicant members) instead of directly giving loans to the individual members. This assures better oversight and high repayment rates due to the peer group structure of the program.
The group identity card, individual loan forms and individual identity card will be recorded. Know Your Customer (KYC) norms will be followed.
Loan statistics:
| Average loan size | Rs.10,000 to 20,000 (approx. $200-$400) |
| Target for active loan borrowers | 500 SHG within next six months |
| Loan repayment period | 12 – 24 months (by monthly installments) |
| Rate of interest charged | 18% |
| Penalty for repayment default | Penalty amount is charged for the unpaid amount default period as agreed during the time of lending |
| Loan goals: |
|
| Current activities for the loan used by the SHG members: |
|
A self-help group processes cashew nuts as income-generating activity.
Future plans:
To provide micro finance to all women members in SHGs
To improve the women livelihood condition
To encourage all women to send their girl child to schools
To start a rural women bank (i.e., a bank licensed by the Reserve Bank of India)
To cover all women in social security(insurance)
To start women pension scheme.
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Contact Us
1926 Sakthi Vinayagar Street Vilandai, Andimadam 621-801.
+91-4331-242583.
+91-94431-47164.
readselvam@gmail.com.