IFMR Capital recently concluded a Rs. 339 million multi-originator microloan securitisation with three Indian microfinance institutions (MFIs). IFMR Capital Mosec II, the SPV, issued two tranches of securities backed by 36,972 microloans that were originated by Sahayata Fintrade, Satin Creditcare, and Asirvad Microfinance. One of India’s largest mutual funds subscribed to the senior P1+(so) rated tranche and IFMR Capital invested in the subordinated piece.
Click here for the official Press Release.
In the current financial year, IFMR Capital aims to structure many more such transactions that build on its track record of bringing efficient and reliable access to debt capital markets for high quality institutions impacting low-income households.
Watch this space for an inside scoop about the people behind the transaction and their experiences from it!
The vertical take-off of the mobile services industry in India in the past few years has been aided by an aggressive pricing strategy adopted by both handset manufacturers and mobile service providers alike. Significantly, this growth has also enabled rural India to get on the connectivity bandwagon like never before. Today, in many rural parts of the country mobile phone service is an integral part of daily life and is more accessible than electricity, road networks and clean drinking water.
Despite growth in the rural user base, the majority use of the mobile network in many parts of India has continued to be voice based phone calls with minimal data exchange. Data itself is mainly restricted to urban and semi urban areas with text messages (or Short Messaging Service (SMS)) making up a large part of the communication.
Even so, SMS, despite its simplicity remains an efficient but underutilized tool in information dissemination. With the recent spurt in competitive pricing of mobile services including SMS service, and the continued delays in the rollout of next generation data services (3G) – SMS has once again emerged as an extremely effective channel for the delivery of relevant personalized content. Additionally, an ever decreasing cost per SMS has only further bolstered usage.
In India, the challenge to make use of this powerful medium in an effective way gets amplified when taken in the context of rural India where content and language have to be in sync with the needs of the rural mobile user. To leverage this powerful medium, IFMR Rural Finance has deployed an SMS platform (pictured left) that has localization, interactivity and flexibility intrinsic to its functioning. Built with existing hardware, and open-source technologies, the platform is cost-effective, easy to operate and can be rapidly customized to meet the requirements of the end user.
When Sahastradhara KGFS started exploring ways to enhance service delivery they agreed that well informed field staff were an important part of the solution. Comprehensive class room training was already the norm – additional training (given the difficult terrain and accessibility challenges) involved long travel times and was going to be expensive. What the staff needed was a shorter ‘refresher’ flash-card like format. They realized that the SMS platform was a perfect fit.
Under project “Gyan Vardhan” the platform has been launched as a creative supplemental training tool to meet the need for formal information dissemination in between regular class-room training sessions. Designed like a ‘Quiz’, the system offers a fun way for Wealth Managers (WMs) to learn about the latest in products and processes through an SMS based question and answer format using text messages delivered in Hindi.
The quiz is devised to be interactive, with randomized unique questions sent out to each user. Respondents are updated on their score on a regular basis and also get to track the performance of their peers through periodic ranking reports. This instills both a sense of achievement among the WMs and further affirms a commitment to regular participation.
SKGFS – WM Daily update system
This launch marks an important first step for Sahastradhara in its use of mobile telephony to reach out to and better serve customers in the remote rural areas in which it operates. Project “Gyan Vardhan” would keep WMs in the field abreast of the latest product features and processes in a dynamic way, empowering them to give an informed opinion about services when interacting with customers.
Still in its early days, the platform has the potential to be used in other creative ways and deployed across groups. Please write in with suggestions on how this platform can be further built upon and improved. Please drop a comment below.
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Anupama Joshi and Advait Behara contributed to this post.
A great deal of what an organization is and stands for, is represented by its people. In that context the induction experience, perhaps the gateway, which every employee passes through, is crucial in tuning an employee’s mindset in sync with the organizational culture and its way of doing things. At IFMR Trust, it has been our endeavor to strike that perfect balance in creating that sync using both theory and practical exposure.
The first phase of the 2010 induction started with 25 inductees, some of them from various institutes like IIMs, IRMA, MDI, and XIMB etc, who had joined us in different teams. The 12-day induction was divided into four phases involving Classroom orientation, Market Study, Field visit and a course on Financial Engineering For Low Income Household (FELIH).
Classroom Orientation:
The induction kicked off with Bindu taking a session on the mission of IFMR Trust and how that translates into the work that we do everyday. Later the inductees were divided into different groups and engaged in a discussion on our Mission and guiding principles.
Murali of Accounts team takes a session
Subsequently, the inductees were exposed to the functioning’s of IFMR Rural Finance, IFMR Capital, IFMR Ventures, and IFMR Mezzanine by the respective heads of different verticals. From the research centers, CMF’s Justin Oliver, CDF’s Jessica Wallack and CIRM’s Rupalee also briefed the inductees about their research centers.
Market Study:
Following the three days of classroom orientation, it was time to hit the road, albeit, very early in the morning. As part of an exercise to understand the nuances of the market operations in Koyambedu, the famous wholesale fruit and vegetable market of the city, the inductees reached there at 2:00 AM. One of our earlier joinees, Jayshree Venkatesan had captured her Koyambedu visit experience vividly here.
The buzzing Koyambedu market
A few observations from the visit this time around:
- The kind of fruits handled depends on the season and availability
- On an average a wholesaler sells around 500-1000 kg to the retailers.
- The lot size given to the retailer is a minimum of 50 kg.
- Average profit: 2000 – 10000 per day
- Money is largely lent on trust with no collateral
Financing options observed at Koyambedu:
- Money borrowed on daily basis from local moneylender at very high rates.
- Goods were taken on credit from wholesaler and repayment was made next day after sale of goods.
- Loans were taken against LIC policy, which was used as a collateral to finance their large and long-term plans.
Asha Krishnakumar, part of the inductees, felt that “While an open-ended, unplanned and undefined visit was interesting, it would have, however, been more useful had the timings been synchronized with the processes and operations there.”
Field Visit to Pudhuaaru KGFS:
After the Koyambedu sojourn, the inductees ventured into a 4-day exhaustive field visit to Pudhuaaru KGFS, with an objective to get an hands-on experience of the operations being carried out at the remote rural branches. More importantly it was an effort to make the inductees understand and appreciate the challenges our customers go through in their day-to-day lives. The inductees were divided into different groups, with each group assigned a branch.
Arhcana Rajeshwar, who was part of the inductees pointed out “During the session we were given pieces of information and everyone was just absorbing it, Thanjavur visit gave us an opportunity to tie the ends and see exactly how the fabric of our sector looks in totality”.
The visit included inductees meeting with the customers through center meetings, observing transactions at the branch for different products, and getting details of various products and related repayments of the clients. The curtain to the field visit was drawn by the inductees visiting the Head office in Thanjavur and taking part in a briefing and discussion session by Gurunath and Chandrachuran at the Head Office.
FELIH:
The induction wrapped with a 2-day session on Financial Engineering for Low Income Households (Felih), which was taken by Bindu, Amit and Shilpa. Shilpa from InnerWorlds had covered the Felih training aspects of the Induction in a post yesterday.
Overall the induction provided a brief window into the different aspects of our work and how that translates into impact at the ground level, which the new inductees certainly will carry forward. All through we couldn’t have been more inspired by the work of our Wealth Managers on the field and the remarkable resilience that our customers displayed in their day-to-day lives. Do share with us your best induction experience and what makes it so in the comments below.
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Amit Sharda of Human Capital Team contributed to this post.
The Financial Engineering for Low Income Households (FELIH) course, conducted on the 30th of April and the 1st of May for the newly joined Trusters, was the last task of the 2-week long induction exercise. Intended to familiarize the participants with fundamental concepts and tools of finance, the session began with a brief introduction to the core functions of finance, current approaches to delivery of financial services and the conceptual issues in financial inclusion.
Over the two days Bindu Ananth, Amit Shah and Shilpa Sathe elaborated on these topics with a focus on their applications to low-income households, keeping in mind the varied background of participants and the limited time available.
- Amit Shah of IFMR Rural finance takes a session
- Shipa Sathe of InnerWorlds, making a point
The fundamentals consisting of preference theory, human capital, probability distributions and game theory were covered on the first day to ensure that all participants were on common ground. On the second day the focus was on learning how these concepts can be applied to real-life issues being faced by financial institutions today. Other topics covered included pricing an insurance contract and understanding how the Joint liability group behaves as an effective collateral substitute. Nachiket Mor led the discussion on asset allocation and portfolio choice and summed up the teachings of the two days.
The last assignment given to the participants was to develop a financial plan for a low-income household based on a real-life case study of one of the KGFS customers, which brought out innovative ideas on how to improve the customer’s financial well being based on the learning from the two days of training.
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Shilpa Sathe of InnerWorlds team contributed to this post.
The Wealth Management Cross-Functional Team (comprising Amit Shah, Deepti George, Shilpa Sathe, Nitin Chaudhary, Suyash Rai, Bhaskar, Chandrachudan, Viji, Anil, Dave and Bindu) have been working on crystallising the principles of wealth management based on finance theory and driving implementation of these, with the support of KGFS teams and Guru.
An important component of the process re-design was regarding the way we collect customer information in the Customer Management System (CMS). The concern has been that this is a fundamental process whose quality determines the quality of financial advice we give the customer. For example, if we are not aware of an elderly member of the household or a non-resident dependent member, we might grossly under-estimate the liquidity and insurance needs of that household.
This week, the team set about piloting a new process designed to ensure higher-quality customer data. In this pilot process, enrolment is split into two phases. Phase 1 entails the customer coming to the branch and providing very basic demographic information and she gets photographed and biometric Ids taken.
At the end of this brief process, we ask the customer when we can come to his/her house for a more confidential and detailed conversation. This is Phase II enrolment. During this phase, the Wealth Manager sits down with the relevant household members and has a detailed conversation that flows asset by asset (children, house, land, livestock, others). Within each asset, we try to understand ownership, income and expense flows associated with each, riskiness, and finally the goals and aspirations with respect to that particular asset (For ex: I want to renovate my house and put a tiled roof in the next two years or I want to admit my daughter who is currently in the Xth to engineering college). Based on this information, we then generate a Household Financial Well-Being Report that is then the basis of all product discussions and sale to the customer.
- Prof. Viji talking to a customer
- Wealth Manager converses with a customer
This week, the team conducted 15 such detailed household interviews and will go back to the same households in the next few weeks with the detailed plan. As always, the resilience and ambition of our customers humbled and inspired us. Watch this space for updates on the wealth management process re-design and talk to anyone in the team for details.
IFMR Research’s Centre for Advanced Financial Studies (CAFS) has developed a portal that lets Financial Institutions compute their Value at Risk (VaR). The context for this project, funded by IFMR Foundation, is that several market players lack the knowledge and the tools to compute with a reasonable level of accuracy the risk of their market positions.
In a demo of the portal conducted by Prof. Shankar, Executive Director of CAFS, he explained that small Financial Institutions, in particular, rely on indicative VaR numbers published by agencies such as FEDAI to measure the risk in their books. In the process, they fail to capture the benefits of (or lack of) correlation, market- neutral strategies and so on. This risk management portal allows users to enter their portfolio data, with respect to their foreign currency positions and the portal computes VaR using the Hull-White Modified Historical Simulation technique. In subsequent phases, the portal will also build capability in foreign currency options and G-Secs. The portal is being tested now – those interested to test and provide feedback, please send an email to: shankar [at] ifmr.ac.in
IFMR Capital’s website is now live at http://capital.ifmr.co.in/. Designed to promote IFMR Capital’s mission of providing reliable and efficient access to debt-capital markets for institutions impacting low income households, the website provides a host of information to microfinance institutions and investors in this space, while explaining our mission and business.
The highlight of the website is the DEAL PORTAL which aims to provide a comprehensive database of asset-backed securitisation deals in the Indian debt capital markets. This is the first deal portal for securitisations in India. It is significant because it enables originators, financial intermediaries, rating agencies and investors to compare the features of securitisation deals across asset classes like microfinance loans, commercial vehicle loans, personal loans and SME loans, and also view the latest performance data of these asset classes.
IFMR Capital also believes that the website will promote the highest standards of transparency that will encourage and give investors and other stakeholders the confidence to associate themselves with high quality institutions working at the bottom of the pyramid. This could well be the first step towards making microfinance a mainstream asset class in the debt-capital markets.
Visit our website to find out more about the interesting deals we’ve done and the interesting things coming up.
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Kirti Rao , IFMR Capital, contributed to this post.
A training exercise was undertaken recently for the wealth managers (WMs) of Sahastradhara KGFS (from 18th to 20th March) and Dhanei KGFS (from 25th to 27th March). The training involved the wealth managers who had joined recently; and also the WMs who had completed 6 months tenure in KGFS allowing them to refresh their skill-sets.
The trainees were first exposed to assets, liabilities, income and expenditure, and cash-flow of a household and what are the initiatives a household could take in order to improve income, reduce expenses, pay-off high interest borrowings and build assets.
New Inductees during training at Dhanei KGFS
Our focus was mainly on the Wealth Management module for both the new inductees and the refreshers. Discussions were held as to the fears, goals and aspirations of households, and how a Household Diagnostic Report (HDR) is generated out of Customer Management System (CMS). Participants were shown a demo on Life Wealth Envelope (LIWE), showing the comparison of best and worst cases that a household might face and how the worst cases could improve by availing insurance products.
WMs explaining the HDR during the training at Sahastradhara KGFS
A sample Branch Index was also shown to them that helped understand the importance of:
- Collecting comprehensive and accurate data in CMS
- Based on HDR what products need to be prescribed to the household
- Quality of internal controls (Audit)
For the WMs to understand the concept well, an exercise was conducted involving three teams. Each team was given a household data to analyze the financial position and asked to come out with their Household Diagnostic Report (HDR) by drawing pie charts and make recommendations on suitable insurance and investment plans. The teams discussed the entire financial position of the household and as to how the surplus money could be deployed to achieve their goals and aspirations.
We also introduced modules related to Post office products, Public Provident Fund (PPF), National savings certificate (NSC), Kisan Vikas Patra, Time deposits, Recurring deposits, Monthly income scheme, RBI bonds to create awareness on products that are safe, liquid and give a reasonable return. A special module on Mutual Funds was introduced for the trainees to understand the concept of mutual funds and the various categories of it.
An absorbing game was also introduced to emphasize how teamwork plays a very vital role in an organization’s success. The participation was total with everyone realizing the essence of team spirit and togetherness.
Game in progress at Dhanei KGFS
Finally the training ended with an open house where WMs were given space to share their suggestions/feedback.
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Chandrachudan V, Seethalakshmi, Deepti George, Rajesh E of IFMR Rural Finance training team contributed to this post.
Mr. M Dandapani Reddy of Badakushastali village, Orissa underwent a traumatic night on 9th March 2010, when his daughter N Rebati Reddy had fallen down and cut her chin. The accident required her to be rushed to the nearest medical centre in Berhampur late in the night for immediate medical attention; Dandapani had to arrange cash for the treatment quickly.
Being a Dhanei KGFS customer (Dhanei as we are fondly known here), he remembered being told by the WMs that his card would help him to get an emergency loan of up to Rs 2000 anytime he wished to avail. At that hour of the day, our branch in his village was closed. He then immediately rang up the Help Desk mobile number given on the card and was pleasantly surprised as it was attended immediately. The Help Desk enquired about the nature of emergency and provided him with a three-digit code and told him to go to the house of Jayanti Behera of the same village who had been appointed as Disbursement Agent (DA) for Emergency Loan.
On reaching her house, he handed over the card to the agent and she opened the lock of the cash box after checking against the given code and handed over Rs 2000.00 to him. All this happened within just 20 minutes.
Mr. M Dandapani Reddy at his tea shop
“…I got money when I was in trouble. Probably I would not have got the amount at that hour of the day so quickly and easily…“. He was happy that he got the cash, we were happy that we could help one of our customers and importantly enable him to have his self-esteem intact without he having to scramble to make ends meet.
This is just one of the stories of the 26 customers who have availed Emergency Loan (Totaling Rs 52,000.00 till now) from us within 49 days of it being launched. Customers like Purna Chandra Sahu have likened the emergency loan to a 24×7 Live ATM, while some like Ganesh Sahu have requested for a higher ticket size for the loan.
Meanwhile, we also took the view of our Disbursement Agent Jayanti Behera (pictured left) as to whether she disliked somebody coming to her house at odd hours (though she had agreed to our terms and conditions earlier). She told us that she was very happy as she could be of some help to her fellow villagers.
At present the product is in its pilot phase and from the initial outlook it looks set to become very popular among the locals.
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Ashit Mahapartra, CEO, Dhanei KGFS contributed to this post.
Rural Energy Network Enterprise (RENE), an incubatee company of IFMR Ventures, is focused on enabling sustainable access to energy for people living in rural areas of India. Towards such aims, RENE analyses, designs and pilots specific interventions across the country.
In line with this RENE has been working on establishing a last mile distribution channel in Thanjavur for energy efficient products (improved stoves, solar lights etc.) in order to identify ground issues.
It is experimenting with a multi-level marketing structure involving a referral and commission mechanism for distribution of such products. Also is engaged in identifying viable channel financing mechanisms to support working capital requirements of various players in the supply chain.
Further it is exploring the possibility of establishing a private electricity distribution network to cater to the requirements of niche customer segments in rural areas. Preliminary feasibility study for this has been completed and a detailed study is being planned along with IIT Madras.
View the RENE presentation below:
Follow RENE on:
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For more information about RENE contact Anu.Valli [at] ifmr.co.in
