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ON
Submitted to:
Submitted by:
Dr. Anubha Gupta Rahul
Ojha
PGDFS
FT-FS-09-
104
CONTENT
1. Microfinance
2. Introduction about Spandana Sphoorty Financial Ltd (SSFL).
3. Bankers to Spandana.
5. Performance of SSFL.
Ratings
CRISIL, one of the most trusted mainstream rating agencies has assigned
a long team ratings of ‘A-/Positive and Short term rating of /P1’ (best in
the industry) to our debt and bank facilities. The ratings reflect Spandana’s
strong market position in microfinance, sound asset quality, healthy
earnings profile, and adequate capitalization. These ratings indicate the
degree of safety regarding timely payment of financial obligations which
affirms our long term growth prospects.
Genesis
An urge to pursue a strong idea - Startup team of Spandana
used to work for a Non-Government Organisation (NGO) in
planning, implementation and monitoring of development projects
that were funded predominantly by Grants. These activities had
reasonably good impact, however, the team was keen to develop
a sustainable community development model focused at low-
income community – which is financially viable, non-grant based
and scalable.
An opportunity in sight - One such demonstration came out of a
soft loan spandana gave to a poor push cart rented woman.
Spandana team realised such requirements had a potential to
scale up to a gigantic proportions. Exploring options of viability
spandana team evaluated global models in microfinance and
evaluated models that would work in localized geography.
The birth of Spandana - Spandana team gathered some money,
a few likeminded friends and family members who also bought
their idea and loads and loads of courage. Spandana team started
operating under their own NGO in 1998 and called it Spandana.
Spandana stands for Responsiveness, and in this context,
responsiveness to the needs of low-income clients
The courage of conviction - In the initial roll out, getting funding
from banks was challenging as the model had to be tested and
validated locally. Spandana continued alternative developmental
programmes like Healthcare, Nutrition, Sanitation etc.
Challenging the conventional - As the operations picked up,
Spandana questioned the logic of every conventional method,
therefore addressing the bottlenecks and building efficiencies –
which at that time all seemed like common sense.
Break-even surprise - As the financials of the first formal year of
operations were compiled, Spandana team was surprised that
they had achieved break-even. This was not by design but by
default since the efficiencies was becoming a culture for
Spandana to build on.
Initial Growth - In the first two years (1998-2000), around the turn
of the century, Spandana crossed its first milestone of Rs.1 crore
(10 million) disbursement and about 2,000 clients. Funds were
difficult to raise. Bankers were wary of this client segment since
the state directed credit given by Bankers had dismal repayment
rates. It took months of demonstrated repayment performance and
conviction of Spandana team, initial support of FWWB and
support of friends to lead to trickling-in of loan funds.
Achieving critical mass - By the year 2002, Spandana reached
out to about 15,000 clients. Around the same time, Bankers
started looking at MFIs as a reliable and Bankable entity. Rating
agencies like M-CRIL and CRISIL and many sector resource
organizations also played a critical role in critiquing and therefore
helping in institutionalization of the whole microfinance sector.
The fillip from Bankers - The performance of Spandana gave
confidence to Bankers to increase their exposure levels. FWWB
with its loans and capacity building support, SIDBI through its
IFAD supported Foundation for Microcredit and ICICI Bank with its
partnership model helped Spandana grow rapidly. Between 2001
to 2004, Spandana grew by over 250% compounded annual
growth rate. By end of 2004, Spandana had reached out to over 1
lakh (0.1 mn) clients and a Gross Loan Portfolio of over Rs.5.5
mn.
Transformation into NBFC - With scale, it became increasingly
clear that it is prudent to transform into a regulated entity and the
most suitable model available under the Indian regulatory
environment is Non-Banking Finance Company (NBFC).
Spandana transformed itself into an NBFC and started originated
new loans under the NBFC structure.
BANKERS TO SPANDANA
Products & Services
Credit Products
Loan products confirm to the convenience of clients in processing
and loan servicing. All the terms of loan are disclosed to the
clients to maintain transparency, no hidden charges in the name
of value added services and compliance with statutory
requirements.
PERFORMANCE
CRISIL MFI Grading:
Credit Rating Information Services of India
Limited (CRISIL) has also been rating
Spandana since the last few years. CRISIL is
one of the best reliable opinions on risk.
CRISIL has accorded Spandana with the
highest rating grade of mfR1 – with this;
Spandana becomes the first MFI to achieve this
feat.
Year 01 02 03 04 05 06 07 08 09 10
M-CRIL rating* α α α+ α+
CRISIL MFI mfR mfR mfR1
grading** 2 2