agent s of f i nanc i a l i nc lu s i on
61
SHG loans as well as tracking individual borrower-level
details. This is the first of its kind in the industry.
From a small pilot in October 2011, YES LEAP has
reached out to over 5.3 lakh households. One of the
highlights of YES LEAP is that all the SHGs linked with
YES BANK are women-based SHGs. See Table 3.1.
T
ABLE
3.1
Highlights of YES LEAP Programme
Number of BCs
35
Number of savings-linked SHGs
28677
Total outstanding value in savings-linked SHGs
(Rs. in billion)
0.27
Number of credit-linked SHGs
39034
Total loan outstanding in credit-linked SHGs
(Rs. in billion)
6.47
Source
: YES Bank
The focus of the bank is on rural lending through
SHGs. The primary objective of YES Bank was lending
as through lending a win-win situation can be created. It
has appointed 35 BCs (MFIs and NGOs) starting with
the NGO IBTADA in Rajasthan. These are Section 25
companies, trusts, societies and also some private limited
companies formed by NGOs. Now the trend is that 2 to
3 people are forming a company only for BC activity. The
ultimate cost to borrowers ranges between 15 and 26 per
cent. There are several interest rate variants across BCs
depending upon BC costs and comfort level subject to
bank earning a minimum interest of 13–14 per cent with
up to 12 per cent service charges for the partner. The bank
charges 1 per cent as processing fee. 70 per cent of the fee
is given to the BC. The security risk or first loss default
guarantee (FLDG) ranges from 10 per cent to 5 per cent
coming down over time with successful operations. BCs
get a decent profit through this activity and break even
in one to one-and-a-half years (see Box 3.6). Out of 35
BCs, 2 or 3 BCs are also receiving wholesale loans from
the bank for their own lending operations.
B
OX
3.6
Disha Microcredit—A Successful Credit BC of YES Bank
Disha is a 35 years old NGO, established for socio-economic upliftment of the rural poor, with special emphasis on women. SIDBI
conducted a rating of Disha and found that Disha India Micro Credit (DIMC), a Section 25 company promoted by it, was an
organization with potential to act as an MFI.
Other bankers like HDFC, HSBC, PNB, and FWWB (Ananya Finance) and NABARD also funded DIMC. However, after the
Andhra crisis of 2010 smaller MFIs were severely affected and faced closure of their MFI operations. Ultimately YES Bank came
forward to support DIMC to work as a BC. Had YES Bank not come forward DIMC’s microfinance work would have ended.
DIMC started lending to SHG group members on behalf of YES Bank. As YES Bank became comfortable by working with
DIMC they started extending larger loans to the SHG members through DIMC.
YES Bank started by giving loans to the SHGs at 24 per cent p.a. and subsequently has been charging 26 per cent p.a. In
beginning YES Bank took 10 per cent of the loan amount as security in the form of a fixed deposit with YES Bank, to provide
which was a big challenge for DIMC. Later, when YES Bank felt comfortable to work with Disha, they reduced the security to
5 per cent of the loan amount. In the beginning YES Bank was paying DIMC 10 per cent as service charge on amount returned but
currently they are providing 10 per cent as service charge, 1 per cent as incentive for 100 per cent recovery and 1 per cent incentive
on agriculture loans, therefore DIMC is getting up to 12 per cent as income now.
DIMC uses its profits every month to create fixed deposits with Yes Bank to enable it to get larger loans for its SHG members.
YES Bank has given DIMC nearly Rs. 306 million up to March 2014 for lending to the groups. As a result DIMC has been able to
provide loans to 23,000 SHG group members of 2,000 SHGs. Through the service charges which DIMC earns, it is able to meet
salary expenses of its 73 staff workers, establishment and office expenditures. After meeting all these expenses, DIMC generated a
surplus of about Rs. 114.9 million during the financial year 2013–14. This amount has been deposited with YES Bank towards the
5 per cent security amount to enable it to receive further funds for lending.
Since DIMC is a not-for-profit company private equity investors have not come forward with funds to invest in it. Such
companies may face a problem in future since RBI has allowed NBFC-MFIs to become BCs of banks as well. These NBFC-BCs
will be able to attract the lion’s share of funds from banks by being able to deposit larger security amounts, which will pose a great
challenge for the not-for-profit companies.
Source
: Information provided by K.N. Tiwari, CEO, DIMC and
DIMC Annual Report 2013–14
.
