CHAPTER 1: INRODUCTION TO BHARAT FINANCIAL INCLUSION

LTD.

Bharat Financial Inclusion Limited (formerly known as SKS Microfinance Limited) BFIL is a
non-banking finance company (NBFC), regulated by the Reserve Bank of India. It was founded
in 1997 by Vikram Akula, who served as its executive chair until November 2011. The
company's mission is to provide financial services to the poor under the premise that providing
financial services to poor borrowers helps to alleviate poverty. In 2013, the company operated
across 17 Indian states.

SKS Microfinance offers life assurance and a variety of financial loans Income Generation
Loans; Mid-Term Loans; Long Term Loans; Loans for purchase of products like cook-stoves,
solar lights, water purifiers, mobile phones, bicycles and sewing machines; and loans secured on
gold jewellery. The company lists some of the social benefits of its financial product and service
offerings as "providing self-employed women financial assistance to support their business
enterprises, such as raising livestock, running local retail shops called kirana stores, providing
tailoring and other assorted trade and services."

SKS Microfinance follows the Joint Liability Group (JLG) model. The methodology involves
lending to individual women, using five member groups as the ultimate guarantor for each
member. Through group lending, situations of adverse selection and moral hazard due
to asymmetric information are better managed. "Social collateral" replaces
asset collateral (which is lacking in the poorer segments of society). Such a system works
because India is still a highly community-centric society. The concept of honour and respect
within society is deeply rooted in Indian culture and willful default invites condescending
glances, humiliation and even ostracism. In Nov 2015,SKS Microfinance Ltd has cut interest
rates by one percentage point to 19.75% on the loans it offers to low-income women borrowers,
making it the sole Indian microlender to offer loans at a rate below 20%.The move came after
Reserve Bank of India (RBI) decided to double the borrower limit for microfinance loans for less
than 24 months.Lower interest rates can attract more borrowers in an increasingly competitive
market. Microfinance companies, which had started lending at around 28-34% in 2010, are now
able to charge lower interest rates because of newer avenues to raise funds at lower cost and their
ability to operate more efficiently than before.SKS is the first company to charge sub-20%
interest rates on the core income generating loans, the company claimed in a statement on
Friday. This is the fourth time SKS has reduced interest rates since October 2014.