SHARE at a Glance as on 31 July 2010

   Total States 19   

   Total Branches 1117   
   Total Members ('000) 3,152   
   Amount Outstanding (INR Crore) 2,287   
   Total Staff 6,467   

SHARE Microfin Limited (SHARE) is a regulated Non-Banking

Financial Company (NBFC) providing financial and support services
to the marginalised sections in society, particularly to poor rural and
urban women across India. Through its income generating loans
and business development services, SHARE reaches out to help
these women build productive microenterprises, thereby contributing
to the development of sustainable communities.

Microfinance has emerged as a key tool to reduce poverty and

promote social development. India is estimated to have about 400
million poor people, i.e., one-third of the world's poor. However,
microfinance picked up momentum in India only after the economic
liberalization in the 1990s. The success of microfinance
organizations like SHARE Microfin Limited (SML) resulted in the
greater participation of the commercial banks in the microfinance
sector.

Established as a non-profit society in 1989 by Udaia Kumar, SHARE

transformed itself into a public limited company SHARE Microfin
Limited (SML) in 1999.

With an outstanding loan portfolio of USD 37.3 million (as on

February 28, 2005), SML was the largest microfinance organization
in India in terms of size of the loan portfolio. The organization had
around 0.4 million members who had availed of microfinance
services. As on March 31, 2004, women members owned over
98.4% of the equity of the company, making it a truly community-
owned organization. 

The case details the challenges the organization had to face during
the initial growth years with regard to customer acceptance, fund
mobilization, government regulation, and operational issues. It also
discusses the operational model of SML, which was an adapted
version of the Grameen model. SML sustained its growth
momentum over the years, through innovative fund mobilization
efforts using partnership models with private sector banks and
structured deals like securitization. The organization also planned to
source cheaper funds through bond issues and external commercial
borrowings. The success of SML attracted funding from venture
capitalists. 

The case includes video clips of the field operations and interviews
with members/ non-members to help sensitize the learner to the
impact of microfinance on the lives of the poor. Interviews with
SML's senior management and field executives give an insight into
the challenges faced by microfinance entities. 

This case will help the learner to

• Understand the nature of the challenges faced by microfinance
institutions in India, especially during the growth phase. 

• Appreciate the innovative methods used by microfinance

institutions such as SML to access capital from banks and financial
institutions.

• Evaluate the pros and cons of the operating model followed by

SML.

• Gain awareness of the impact of microfinance as a poverty

reduction tool.
 BACKGROUND

SHARE, one of the largest microfinance institutions in india, started its operations for the poor in 1989 as a not-for-profit society. It was the
first microfinance institution (MFI) in India to obtain a Non Banking Financial Company (Non Deposit) licence.

SHARE has adopted a for-profit approach to create social returns by channelling funds from development institutions and commercial banks
as collateral-free loans to Joint Liability Groups (JLGs). JLGs are central to the Grameen lending methodology that SHARE has replicated.

Our Vision

To improve the quality of life of the poor by providing access to financial and support services and to be a viable financial institution
developing sustainable communities.

Our Mission

To mobilise resources in order to provide financial and support services to the poor, particularly women, for viable productive income-
generating enterprises enabling them to reduce their poverty.

Objectives

•   To provide financial services predominantly for poor women.

•   To create self employment opportunities for the underprivileged.

•   To train the rural poor in simple skills and enable them to utilise all available resources and contribute to employment      and income
generation.

OPERATIONAL & FINANCIAL INFORMATION

 Key Indicators March-07    March-08    March-09    March-10

No. of States   5    10    16    18

No. of Branches   312    462    766    990

No. of Staff   2,363    3,022    4,259    5,408

No. of Centres   31,797    37,283    57,775    87,236

No. of JLGs   213,404    252,410    364,730    550,063

No. of Members ('000)   1,083    1,289    1,868    2,807

Amount Disbursed (Cumulative) INR in Crore 2,202    3,249    5,314    8,945

USD in Mn 479    706    1,155    1,945

Loan Portfolio INR in Crore 400    609    1,217    2,208

USD in Mn 87    132    265    480

Repayment Rate % 97.3%    98.5%    99.6%    99.9%

Total Capital ( Tier - I + Tier- II ) INR in Crore 37    119    178    392

USD in Mn 8    26    39    85

Total Assets INR in Crore 301    666    1,246    2,595

USD in Mn 65    145    271    564

Operational Self Sufficiency % 108%    106%    126%    128%

Cost per unit of money lent INR 0.06    0.05    0.04    0.03
1 USD = 46 INR  
OUTREACH

SHARE currently serves more than 3.15 million members across 19 Indian states - Andhra Pradesh, Chhattisgarh, Delhi, Karnataka,
Maharashtra, Madhya Pradesh, Uttar Pradesh, Rajasthan, Bihar, Uttarakhand, Gujarat, Haryana, Himachal Pradesh, Tamil Nadu, West
Bengal, Jharkhand, Orissa ,Kerala and Assam. SHARE caters to the needs of poor rural women through its 6,467 staff members spread
across 1117 branches (as on 31 July 2010). The total outstanding portfolio is more than Rs 2,287 crore (USD 497.15 million).

CLIENT STORIES

Mallishwari

 Mallishwari hails from Nandigama village of Krishna district in Andhra Pradesh. She was born into a large poor family
and her parents were not able to send her to school. At the age of fifteen, Mallishwari was married off to Nagayya of
Nakakallu village. Even after marriage, her financial condition failed to improve. In course of time, they had two children
– a boy and a girl. 

Mallishwari always dreamt of providing education to the children. To improve the family’s income, they wanted to start a
small business of their own but lacked the necessary capital. It was around that time, Mallishwari was introduced to
SHARE. She joined SHARE and took a loan of Rs 2000 to

set up a petty shop selling snacks. 

That was ten years ago. Today they own a house, possess one acre of land and run their own business. They lead a comfortable life and are in a
position to provide good education to their children. Mallishwari and her husband are grateful to SHARE for helping them transform their lives.

Chandragiri Lingamma

 Chandragiri Lingamma was the second child of Jangaiah and Lakshmamma of Samsthana Narayanapuram village in
Nalgonda district of Andhra Pradesh. She spent her childhood in poverty helping her father both in agriculture and in
chappal making, their family’s tradition.

She was married off at the age of fourteen to Yadagiri, a cobbler. The couple was soon blessed with five children, two
boys and three girls. They could afford to send only their younger son to school. The elder son became a helping hand
to his father. Chandragiri got her two elder daughters   married off using the little earnings   she got from her son and
husband.  One day her

husband died all of a sudden and she found it very difficult to make both ends meet. Around that time she happened to hear about SHARE. After six
months of her husband’s death, Chandragiri took her first loan from SHARE to start a small footwear shop.  She has been with SHARE for the last six
years and today   she employs four workers to help her in the business.

She has so far recommended 62 clients to SHARE to help them improve their lives. At present she owns property worth Rs.1.75 lakh and is planning
to expand the footwear shop into a showroom. Chandragiri is grateful to SHARE for saving her family and keeping her free from financial constraints.

Bathula Vijaya

 Bathula Vijaya was born in Macharla town of Guntur district, Andhra Pradesh. Her parents were daily labourers. In spite
of their meagre income, they managed to educate her till Intermediate. Then they married her off to Yasudaya of
Chilakaluripeta, a daily labourer at the age of 18. 

Soon after, they were blessed with two sons. Since their financial position was not stable, they had to continue to stay in
a small hut. It was around that time Yasudaya began to sell pickles to augment their earnings. They were also trying to
get a loan to invest in the pickle business. On being told about SHARE, Bathula attended one of its meetings conducted
at Chilakaluripeta. She 

enrolled herself as a member. She took Rs 6,000 as her first loan and invested the amount in the pickle business. Soon, their business started to
flourish.

Unfortunately while they were in the fourth year of their relationship with SHARE, Yasudaya met with an accident. Out of the earnings from the
business, Bathula managed to pay the hospital charges and also the loan installments without any difficulty. Today Bathula has her house renovated;
she is able to send her children to an English medium school; and she has diversified her business to sell spices along with pickles. She is grateful to
SHARE for helping her become financially comfortable.

METHODOLOGY

SHARE’s business model generates greater economic benefits by way of supporting the development of micro-entrepreneurs and their
communities in a complex economic situation, while at the same time fostering a responsible financial culture.

Client Focus and Client Understanding are the key words that define SHARE’s approach towards microfinance. SHARE’s continued efforts to
improve organisational efficiency have yielded rich dividends raising its efficiency level and promoting transparent systems and processes,
ultimately helping SHARE emerge as a premier microfinance institution in the country.

SHARE has stood by its commitment to working towards poverty alleviation with responsive systems. The approach has paid off and today
SHARE has a platform that would allow it to launch a more ambitious campaign to reach out and serve many more poor women in the
country and outside. The top ratings provided by rating agencies reflect SHARE’s strong performance. 

For-profit Approach for Social Returns

SHARE has adopted a for-profit approach to create social returns by channelling funds from development institutions and commercial banks
as collateral-free loans to Joint Liability Groups (JLGs).

SHARE's Model

JLGs are central to the lending methodology that SHARE has replicated. In this methodology the group lending technique is used to extend
loans to women members who have formed themselves into groups of five each, with the general criteria that they have to be of the same
age group, of the same area, and known to one another. Family members or relatives cannot be part of the same group. Members of each
group receive seven days of training on various aspects of the operating model, during which they learn their own signature to have an
identity for themselves. Eight groups come together at a ‘centre’ for weekly meetings. The members assume the responsibility of approving
loans and disbursement, and ensuring repayment.

The loans have to be repaid in 50 weekly instalments. There is no collateral to back these loans and repayment is ensured using social/peer
pressure, as the group is responsible for collecting the loans. To ensure that the loan is utilised only for the intended purpose, the money is
given in a staggered manner to the group members and subject to satisfactory assessment by the field credit officers.

Transparent Operations                                                                                                                                                                   

The loans have to be repaid in 50 weekly instalments. There is no collateral to back these loans and repayment is ensured using social/peer
pressure, as the group is responsible for collecting the loans. SHARE’s members learn about the company’s loan delivery method through a
public orientation meeting that briefs them on loan disbursements and related procedures. After forming groups of their choice and agreeing
on the income generating activity they would like to pursue, SHARE assists its members by equipping them with basic business development
skills such as pricing, marketing and quality management. Field staff members facilitate weekly group meetings, in which members
undertake the responsibility of approving loans and repayments. Members go through additional social development programmes that cover
topics ranging from children’s education to health, nutrition and sanitation.  

Effectively Reaching the Poorest

A study by the International Food Policy Research Institute (IFPRI) has revealed that SHARE targets the bottom most segment of the poor.
About 85 per cent of its members belong to this segment, indicating SHARE’s effectiveness in identifying the poorest of the poor.

Further studies conducted show that 76 per cent of SHARE’s members have experienced significant poverty reduction, leading to greater
control over income, assets and expenditure.

PRODUCTS

Loan Products

Since inception, SHARE has nurtured a vision to provide financial services to people in the low-income segment. SHARE supports productive
projects, which allow its clients to increase their incomes and generate well-being for their families and communities. SHARE believes in innovation as
a tool to offer customised products and services to address the needs of its clients.

SHARE offers two kinds of loan products - group loans and individual loans. Group loans are used by women, SHARE’s main clients, for income
 generating activities. Other kinds of group loans offered by SHARE are special loans and education loans. For individual loans, SHARE targets small
and medium enterprises, regardless of the client’s gender. SHARE has created this secured product to build deeper relationships with group-lending
clients who want to grow their businesses, and at the same time expand the client base by reaching out to new clients. In addition, SHARE lends
unsecured personal loans to salaried employees in semi-urban and urban areas.   

 
Types of Loan term /
Loan products Purpose Loan size Rate of interest
loans Duration

General Loans Group Income Generation 50 Weeks Rs.6,000/- to 25,000/- 23.60% to 28.13% (effective)

12.50% to 15.00% (flat)

Special Loans Group Income Generation 50 Weeks Rs.2,000/- to 20,000/- 23.60% to 28.13% (effective)

12.50% to 15.00% (flat)

Education Loans Group School / College fee 50 Weeks Rs.3,000/- to   5,000/- 23.60% to 28.13% (effective)

12.50% to 15.00% (flat)

Micro Enterprise Loans Individual Developing Business 3-24 months Rs.20,000/- to 3,00,000/- 24.91% (effective)

          14.00% (flat)

Personal Loans Individual Personal needs 6-24 months Rs.9,000/- to 99,000/- 24.91% (effective)

          14.00% (flat)

SERVICES

SHARE’s long association with the poor has enabled it to truly understand the market and develop suitable products. SHARE offers value-
added products and services in addition to credit products to transform the lives of the poor.

• Credit Life Insurance: SHARE provides all its borrowers credit life insurance on the entire loan amount for a  tenure    equivalent to the
payback period.

• Health Insurance: SHARE is one of the first few MFIs to enter into a Memorandum of Understanding with ‘MicroEnsure’    to offer Health
Insurance services to its clients. The product provides in-patient care to the borrower, spouse and    children on a floating basis.

•  Money Remittance Service: SHARE offers money transfer service in partnership with the UAE Exchange and Money    Gram, facilitating
transfer of funds even in remote locations.

Social Development 

In order to enhance the quality of life of its clients, employees, and their families, SHARE participates in a range of social initiatives, fostering
the development of the communities in which SHARE operates. SHARE organises various programmes and workshops for its clients. Such
programmes build awareness on various aspects of social development such as children’s education, health, nutrition, non-formal education,
adult literacy and sanitation. SHARE conducts training programmes for its staff on teaching and motivational skills so that they can provide
services to the clients in a more effective manner.

FAIR PRACTICES

SHARE has committed itself to adopting and implementing fair practices in all activities and transactions with its members while providing
microfinance loans as per the guidelines of the Reserve Bank of India (RBI).

Social Development Loan Proposals and Processing

In the first step, every member who intends to access credit from the Company has to complete the compulsory group training programme and Group
Recognition Test. This programme is conducted by the Field Credit Assistant (FCA) or a designated staff member, authorised by SHARE. 
Primary data are collected in a prescribed format from borrower/ member to comply with the KYC (Know Your Customer) norms.

FCA should verify the loan application and provide the following information: 

•   Date of application
•   Borrower identification particulars
•   Loan product details
•   Loan amount
•   Need for loan
•   Applicable interest rates
•   Term of the loan
•   Repayment particulars
•   Acceptance by the borrower’s family member / the relevant JLG members 

The expected date of loan disbursement should be mentioned on the loan application form and it should be intimated to the borrower / member.

Loan appraisal and Terms & Conditions

FCA or designated staff of the Company should convey to the borrower/ member the amount of loan sanctioned along with the terms and conditions,
including the annualised rate of interest and method of repayment of the loan.

Disbursement procedure of loans

Authorised staff members of SHARE should verify the loan application along with all securities, sureties and approvals, which is applicable as per the
policy of the company.

•   Demand promissory note

•   Surety or guarantee
•   Centre’s/Group’s acceptance
•   Family members’ acceptance 
•   Acceptance of the terms and conditions by the borrower/member for rate of interest, processing charges if any and      repayment terms.
Documentation for hypothecation or charge creation or any security or surety/guarantee
•   The acceptance letter
•   Letter of confirmation of deposit of security documents

The Company keeps all the documents in the safe custody at the respective premises.

Loan passbook has to be given to every borrower/ member for each loan. The loan passbook contains the repayment schedule, effective interest rate
and other processing charges etc.

The Company gives prior notice of any change in the interest rate and other charges to the borrower / member.
The Company takes a decision whether to recall / accelerate the payment or performance under the loan agreement / promissory note as agreed with
the borrower/ member under intimation.

General

The Company does not interfere in the affairs of the borrower except for the purposes provided in the terms and conditions of the loan agreement
unless the new information, not earlier disclosed by the borrower has come to the notice of the Company.

If there is any specific request from the borrower for transfer of borrower account, the consent or otherwise i.e. objection of the Company if any will be
conveyed within 21 days from the date of receipt of request. Such transfer shall be as per transparent contractual terms in consonance with law.
The Company will not resort to undue harassment i.e. persistently bothering the borrowers at odd hours, use of muscle power for recovery of loans.

Grievance Redressal Mechanism

The Company has laid down a grievance redressal mechanism within the organisation to resolve any disputes arising in this regard. The Board of
Directors periodically reviews the compliances of the Fair Practices Code and functioning of the grievances redressal mechanism at various levels of
management.

Review of the compliance of the Fair Practice Code

The Chairman and Managing Director of SHARE Microfin Limited will review the compliance of the Fair Practices Code and functioning of the
grievances redressal mechanism every quarter. A report on the compliance of the Fair Practices Code and the functioning of the grievance redressal
mechanism will be placed before the Board of Directors of the Company once a year.

 
Letter submitted to RBI
IMPACT ASSESSMENT

Target Study by IFPRI

International Food Policy Research Institute (IFPRI), Washington, USA, supported by CGAP, has undertaken a study on “Assessing the
Poverty Level of MFI Clients”. According to the survey, SHARE targeted the bottom most segment of the poor, enrolling about 85 per cent of
the clients from them. This has proved that the tool used by SHARE is effective in targeting the poorest of the poor.

Impact Study by IDS

The Impact assessment studies conducted by the Institute of Development Studies (IDS) in the United Kingdom in association with three
Universities in the UK - Bath, Sheffield and Sussex has indicated that three out of four (76.8 per cent) of SHARE’s clients have experienced
significant reduction in poverty over the past four years, and half of them are no longer poor. Women are able to solve their social problems;
and with increased opportunities coming their way, they are eager to look for better prospects in life.

Micro credit and Women Empowerment Study by UNDP

A study conducted by the United Nations Development Program (UNDP) on ‘Microcredit and Women Empowerment through SHARE’ has
come out with the following observations:

•  There is a sign of significant poverty reduction and it has been found that women have better control over income, assets and expenditure.

•  Women have started to break social barriers by interacting with other people in society, using their collective strength to address village
issues more openly and boldly even before bureaucrats.

•  Significant decrease in child labour has been noticed and the importance of education both boys and girls is felt.

CURRENT LENDERS