Aarohan-Bplan

7/31/2019 Aarohan-Bplan

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MICROFINANCE BUSINESS PLAN

Submitted by:

Aarohan

Field: Microfinance

Team Members: Ashutosh Khetan, Dr. Lalit Mendhe, Aditya Maheshwari,

Sangeetha Nair, Abhishek Srivastava

Email id & Contact No: [email protected], 09937161625


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Our Team

1. Ashutosh KhetanB.Com (Hons.), Bhagalpur University, Bihar.MBA (Rural Management), KSRM, KIIT University, Bhubaneswar.I have more than two year work experiences of which I have spent more than ayear in SKS Microfinance.I will be looking the Financial Issues (Portfolio Management, Risk Management& Accounting) in Aarohan.

2. Aditya MaheshwariB.A. (History, Political Science & English Literature), University of Rajasthan.MBA (Rural Management), KSRM, KIIT University, Bhubaneswar.I have more than one year work experience in sales and marketing in IPCAlaboratories limited.I will be looking Market and Product Development in Aarohan.

3. Sangeetha NairB.E. (Mechanical), Gujarat University.MBA (Rural Management), KSRM, KIIT University, Bhubaneswar.I will be looking Operations, MIS, and Human Resource department at Aarohan.

4. Abhishek SrivastavaB.Com (Hons.), Allahabad University, Allahabad.

MBA (Rural Management), KSRM, KIIT University, Bhubaneswar.I have one year experience as an Accountant.I will be looking Field Operations and Research wing at Aarohan.

5. Dr. Lalit R. MendheB.VSc., Nagpur University.MBA (Rural Management), KSRM, KIIT University, Bhubaneswar.

I will be looking Market and Product development with Aditya.


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Table of Contents

Section No Content Page No

i List of abbreviation 4

ii Executive summary 6

1 PROJECT BACKGROUND 9

2 INTRODUCTION 9

3 STRATEGIC OBJECTIVES 10

4 MARKET AND CLIENTS 14

5 PRODUCT AND SERVICES 16

6 EXTERNAL ENVIRONMENT 18

7 INSTITUTIONAL SETTING 21

8 ORGANIZATIONAL SETTING 21

9 MANAGEMENT INFORMATION SYSTEM 23

10 INTERNAL CONTROL SYSTEMS 24

11 FINANCING PLAN 30

12 MONITORING AND EVALUATION 33

13 CONCLUSION 34

S. No Annexure

1 Gross State Domestic Product at Factor Cost by Industry of Origin in Bihar 35

2 The District Wise Male & Female Population of Bihar 36

3 Coverage of Banking Services (Ratio of Demand Deposit Accounts to the adult population) 38

4 Comparative Cost Structure of Bank, NBFC and MFO 39

5 Average Branch Cost 406 Key Cumulative Numbers For Microfinance Operations 41

7 Monitoring Indicators 42

8 Projected Income Statement 43

9 Projected Cash Flows 44


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List of Tables

S. No Content Page No

1 Growth targets for microfinance operations 30

2 Repayment plan 31

List of Diagrams

S. No Content Page No

1 Organization diagram 22

LIST OF ABBREVIATIONS

BM Branch Manager

BPLRs Benchmark Prime Lending Rates

CEO Chief executive officer

CFO Chief Financial Officer

CSO Central Statistical Organization

CUG Common User Group

ECB External Commercial Borrowing

EPF Employee Provident Fund

GDP Gross Domestic Product

GSDP Gross State Domestic Product

HR Human Resources

HSBC Hongkong and Sanghai Banking Corporation


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MFOs Microfinance Organizations

NABARD National Bank for Agriculture and Rural Development

NBFCs Non Banking Financial Companies

PACS Poorest Areas Civil Society

PSBs Public Sector Banks

RRBs Regional Rural Banks

SCBs Scheduled Commercial Banks

SHGs Self Help Groups

SKS Swayam Krishi Sangham

RM Regional Manager

AM Area Manager

UM Unit Manager


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EXECUTIVE SUMMARY

Context

Providing financial services to poor people is expensive. Without access to small amounts of

capital, these poor cannot establish small enterprises of their own, and are consistently

vulnerable to crisis that requires emergency funds. The microfinance movement over the last

two decades has provided new hope to these people for increased financial independence.However, many Micro-Finance Institutions and Community Based Financial Institutions

(CBFIs) are struggling to meet the expectations of the communities they work with.

Concept

We will do village survey or see village profile from Block development office. If theresponse is positive people will be introduced about the company, product and its

services to be offered. If people show interest then they have to undergo three days

training sessions and an eligibility test. If they pass through the test the group will be

eligible for collateral free door step loan delivery.

Products and Services

Financial Services: we will provide innovative and customized loan products for all the

income generating activities to villagers and semi-urban people. These loan products will

be covered by the micro-insurance schemes. We will also provide health Insurance. We

will be following Grameen Bank of Bangladesh model.

The Market

The commercial microfinance sector in India has grown from a total portfolio outstanding


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Target Area (Bihar) and Clients

There is a definite need for starting an MFI in Bihar as officially more than a crore peoplelive below the poverty line in Bihar. Also, Bihar is one of the under financed state with

weak financial market and poor access to credit. The state is on the verge of growth and

development and microfinance as a tool for economic development can really play a big

role. SKS microfinance and CASHPOR have started their operation in Bihar over last 18

months in similar socioeconomic environment. There has been marked improvement of

in law and order situation in last one year.

Huge investments have been promised in Bihar in infrastructure and of late there has

been increase in political support for investment. Our target clients are poor women who

want to engage themselves in some income generating activities. Activities like Selling

milk, small kirana store, small hotels, vegetable vendors etc.

Market Opportunity

Our target segment is rural as well as urban population of Bihar. Considering the average

size of family being 6, the number of potential households in the rural areas project

districts will be around 6 million. Assuming only 50% of the potential household will be

the target audience of our products, the target audience household size will be

approximately 3 million. Assuming each household will need a loan of Rs 6000 once a

year, the potential market size will be Rs 18 billion.

Competitive Advantage

The three distinct competitive advantages which will give organization the ability to scale

rapidly while maintaining near-perfect portfolio quality:


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Potential risks and Mitigation Plans

Risk Mitigation Plans

Institutional Risk Setting up interest rates such that it may cover operating costs, cost of capital,

loan loss provision, and some surplus so that we can increase our outreach

Operational risk Maintaining Excellent Portfolio quality & Standardized operating System.

Rotating staff with proper human resource policies.

Proper cash Management system.

Financial Management Risk

Integrate accounting and portfolio management.

Maintaining both manual and automated system to verify cash and repayment disbursement

register

Financial Plan

To meet the objective of serving over 2 millions clients within five years, we are planning

to acquire sick NBFC which is registered U/S 10(25). It may cost near about Rs50,00,000

(Fifty lakhs) in acquiring sick NBFC. The promoters of the company will even put their

stake of Rs 50, 00,000 (Fifty Lakhs) through promoters equity.

NBFC Rationale

As we will currently be registered as a limited liability Non-Banking Finance Company

(NBFC), a legally recognized and Reserve Bank of India (RBI) regulated entity. As a

registered NBFC, we will enjoy the following benefits: Access to fund, diverse funding

sources, outreach potential, stakeholders involvement, attracts mainstream human and

capital resources etc.

Ownership Structure


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SECTION 1: PROJECT BACKGROUND

Aarohan is an initiative by enterprising KSRM students. The main reason we can come

up with this plan is lack of proper platform and mistrust in government machinery in

Bihar to deliver credit services to the people. The other reason being poor law and order

conditions, lack of entrepreneurial activity, flight of capital and quality manpower,

unemployment and high cost of capital. Thus, Bihar is caught in a vicious circle of low

productivity, low income and low growth.

We strongly feel that an organization can earn profit and use those profits for further

social activities.

The idea is to implement the successful economic models like GRAMEEN MODEL,

AMUL in context of Bihar to bring wealth of common people of Bihar. We plan to

demonstrate that professionals can turn entrepreneur in Bihar and catalyze the growth of

economic activity with the help of poor people.

SECTION 2: INTRODUCTION

2.1 Introduction

The commercial microfinance sector in India has been growing at a rapid pace for the

past three to four years. The commercial microfinance sector in India has grown from a

total portfolio outstanding of Rs.100 crore in 2002 to more than 6500 crore in 2006. This

growth, however, has been lopsided. More than 90% of the total microfinance portfolio

has been concentrated in the three southern states of Andhra Pradesh, Tamilnadu and

Karnataka. The states like West Bengal, Orissa and Uttar Pradesh have shown some

promise in the recent years. There is almost no activity in the bigger states of

Maharashtra, Gujarat, Madhya Pradesh, Jharkhand and Bihar.


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play a big role. SKS microfinance and CASHPOR have started their operation in Bihar

over last two-three years in similar socioeconomic environment. Their experience

suggests that it is possible to attain growth and sustainability in the Bihar.

2.2 Vision of Microfinance Operation

To become the largest integrated microfinance player in Bihar by 2014

The word integrated means the clients will be provided services like credit, savings, and

insurance services in the form of life insurance as well general insurance services like

health, crop, weather, cattle, etc.

2.3 Mission of Microfinance Operation

To run a profitable microfinance operation with transparency and accountability to all

stakeholders

2.4 Stakeholders

The main stakeholders of the operations are

Aarohan

o Advisory committee

o Board of Directors

o Employees

Funding agencies

Lending institutions like banks

Clients

Technical Support institutions

Life and General Insurance companies


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SECTION 3: STRATEGIC OBJECTIVES

3.1 Introduction

The strategic objectives of Aarohans Microfinance operations at the end of five year

Plan are

Women empowerment

Moving the bottom of pyramid clients out of poverty by facilitating creation ofwealth

More than 1,100,500 clients

More than Rs 990 Crores of loan disbursement

Less than 1% default rate

Portfolio at risk 60 days less than 1%

3.2 The Strategy

Aarohan will replicate Grameen model in Bihar for providing credit services to people. In

Grameen Model, to obtain loans, potential borrowers must form a group of five, gather

once a week for loan repayment meetings. These decisions incorporate a code of conduct

that members are encouraged to follow in their daily life e.g. production of fruits and

vegetables in kitchen gardens, investment for improvement of housing and education for

children, use of latrines and safe drinking water for better health, rejection of dowry in

marriages etc. The groups of the same village are federated into a Centre. The formation

of the groups - the key unit in the credit programme - is the first necessary step to receive

credit. Loans are initially made to one individual in the group, who is then under pressure

from the rest of the members to repay in good time. If the borrowers default, the other

members of the group may forfeit their chance of a loan. The groups perform as an

institution to ensure mutual accountability. Credibility of the entire group and future


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o A block or cluster of 50-60 villages

o Presence of bank branch

o Accessible by kutcha road throughout the year

o Presence of petrol pump

The procedure for client acquisition and servicing is as follows

1. The Field Worker (FW) will travel to the village to obtain a village profile, and

will conduct the Introductory Meetings (IM).

2. If the village response is positive the FW will start the three day group training on

group processes and basic financial literacy that will culminate with the Eligibility

Test (ET) conducted by the branch manager.

3. Once the group passes the test each group member becomes member of the

organization and can apply for a loan in the centre meeting, which will be held

once weekly.

4. In the first center meeting, three of the five member group can apply for a loan, to

be disbursed the following week. Then the remaining two members can be

Village Profile Res onse IM

Day 3Group training

Res onse

Day 2Group training

Day 1Group training

Group is eligibleFor loan

ETResult of ET

Passed

Failed


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3.3 Expected Social and economic Outcomes

A survey by Grameen bank has shown that about 42% had no income earning occupation

at the time of application of the first loan. Thus, the Grameen Bank has helped to

generate new jobs for a large proportion of the members. Only insignificant portion of the

loans (6 per cent) was diverted for consumption and other household needs. About 50 per

cent of the loans taken by male members were for the purpose of trading and shop

keeping. 75 per cent of loans given to female members were utilized for livestock,

poultry raising, processing and manufacturing activity. As with Grameen bank original

experience, Aarohan expects that similar employment creation will take place among

clients in the Bihar. Aarohan will itself employ near about 1000 employees in its area of

operation in five year.

Most of the loans will be used for farming, livestock, poultry raising, processing,

manufacturing activity, trading and shop keeping. The capacity building programmes

provided by Aarohan will make the clients aware and capable of fighting the social evils

on their own. The clients will be encouraged to stand for local bodies and seek

participation in social processes. Aarohan expects the members to move up the economic

ladder by increase in productivity as well as scope of business and operations of its client.

Summing up, Aarohan hopes to create an impact in terms of women empowerment,increase in income, employment creation, and upward social mobility of its clients

family.

3.5 The Strategic advantage of Aarohan

The three distinct competitive advantages which will give the organization the ability toscale rapidly while maintaining near-perfect portfolio quality:

i. Operational Efficiency by real-time portfolio monitoring

We will be having excellent, flexible and in house software for our real time


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sector at various levels. The quality of education and experience is an added

advantage for the organization. Aarohan will also recruit from leading rural

management schools like KSRM for heading the operations in different region.

iii. Culture of Innovation: Continuous process of innovating through technology,

operations and management. We will be having our business development team

who will be continuously striving for innovating other loan product and services.

We will be standardizing our process through recording various field operations.

With these competitive advantages and having an access to internal news of all leading

MFIs of India, Aarohan is sure to beat the competition in Bihar.

SECTION 4: MARKET AND CLIENTS

4.1 Opportunity called Bihar: Improvement in Investment Climate of Bihar

A poor investment climate in the state has depressed development. Bihar does not have a

single externally aided project, though it is one of the poorest states in the country. One

reason for the poor investment level is Bihars inhospitable investment climate marked

by:

Poor infrastructure.

Weak financial markets and low access to credit.

Shortage of skilled labour.

Lack of political support for investment.

There has been marked improvement of in law and order situation in last one year. Huge

investments have been promised in Bihar in infrastructure and of late there has been

increase in political support for investment. The microfinance plan is trying to improve

access to credit for the masses of Bihar.

There are 37 districts and more than 500 developmental blocks in Bihar. Total population


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branches of any commercial bank at all in 2007. The quantum of deposit accounts

(current and savings) held as a ratio to the adult population also helps to assess the degree

of reach of financial services. In the Indian context, taking into account the Census of

2001, the ratio of deposit accounts (data available as on March 31, 2004) to the total adult

population was only 59% (see annexure 3). Within the country, there is a wide variation

across states. For instance, the ratio for the state of Kerala is as high as 89% while Bihar

is marked by a low coverage of 33%.

Given these statistics, an inference can be drawn that Bihar is hugely underfinanced by

national standards. There is a huge market waiting to be tapped whose population is

whopping 100 million. This is a Rs. 50 billion market if average revenue per person per

annum is Rs 500 only.

Total number of household in Bihar is 13,744,130 out of which rural household is

1,240,732 as per census 2001. Bihar is predominantly rural as more than 90% households

fall in rural area.

The Microfinance Opportunity:

Bihar is seeing inception of microfinance activities since 2006. All the activities are at a

nascent phase. Two big players have entered the Bihar Microfinance market. CASHPORhas entered Bihar from western side. Their presence is limited to four districts of

Bhojpuri region and has been able to make around 50,000 members in two years time.

SKS Microfinance initiated the Bihar Operation in year 2006 and has been able to spread

its operation in more than 10 districts in a year. They have membership around 14,000 till

now and loan outstanding portfolio of around Rs 7 Crores.There are two more MFI working on small scale Nidan, Patna and Kanchan,

Muzaffarpur. They have a membership base less than 10000 and portfolio less than three

crores. Most of the efforts are being limited around Patna. There is hardly any


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4.2 Calculation of Market Size as per proposed area of operation

The population in the operation area of Microfinance operation is Aarohan is 40 million

out of which 35 million is rural population. Aarohan target segment is rural as well as

urban population. Considering the average size of family being 6, the number of potential

households in the rural areas project districts will be around 6 million. Assuming only

50% of the potential household will be the target audience of our products, the target

audience household size will be approximately 3 million. Assuming each household will

need a loan of Rs 6000 once a year, the potential market size will be Rs 18 billion. Given

the numbers, there is potential for at least 3-4 big players each having one million clients.

The district wise rural and urban population is shown in annexure 2.

4.3 The Clients Definition:

All the clients for microfinance operation will be women as it is with other microfinance

operations across world. Women are more prudent and more conscious about dignity and

social standing. Following are the criteria for Aarohan Microfinance operation:

A women

Member of joint liability group formed by Aarohan

Household income of Rs 1000- Rs 5000 per month

Having regular income from selling milk, selling vegetable, drivers, small pan or

kirana shops, artisans or working at hotels or dhabas.

SECTION 5: PRODUCT AND SERVICES

5.1 Introduction

The microfinance loan products will be designed as per local needs as well as the purpose


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rupees in total. The installment amount will be Rs 30 per week for 40 weeks. It will

include principle amount of Rs 25 and interest amount of Rs. 5 per week respectively.

5.3 Loan Process

1) Application per loan in weekly meeting

2) Interview of the member by loan officer and branch manager

3) Resolution by the group certifying the need of loan

4) Filling up of loan application form

5) Agreement of terms and conditions

6) Guarantors by the other group members

7) Loan will be disbursed within a week of application.

5.3 Loan Products

At present there will be only one product called personal loan. The purpose for the loan

will be mentioned in the format. The majority of the loan will be taken for the purpose

such as Emergency, Agriculture input, Business, Housing, Health, Education etc. the

features of the loan will be

Minimum loan: Rs. 1000

Maximum loan sizeFirst year- Rs. 5000

Second year- Rs. 10000

Third year- Rs. 15000

Fourth year- Rs. 20000

Fifth year- Rs. 20000

5.4 Services


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5.4.2 Life insurance

All the clients will be encouraged to take up life insurance for their life. This will help the

family in unforeseen circumstances like death. There will be tie up with suitable life

insurance company for providing these services at low cost.

5.4.3 Health Insurance

Aarohan will tie up with the general insurance companies to provide health insurance to

its clients. Local health care service providers will be organized and empanelled to

provide health care to clients at a predetermined price for predetermined problems.

Schemes likejanatinsurance and critical illness insurance would also be targeted.

5.4.4 Crop insurance, Livestock insurance and weather insurance for farmers

These insurance products will be provided to farmers for managing their risk. Aarohan

will tie up with general insurance company to provide these services.

5.4.5 Agriculture extension services

Aarohan will tie up with agriculture students who will provide extension services tomembers. They will guide the farmers about seed, fertilizers and better technique for

agriculture.

SECTION 6: EXTERNAL ENVIRONMENT

6.1 India Macro Economic ScenarioThe Indian economy has witnessed robust growth during 2006-07 for the fourth year in

succession. According to the advance estimates released by the Central Statistical

Organization (CSO), real Gross Domestic Product (GDP) growth is expected to


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6.3 The Microfinance scenario of India1

The microfinance sector in India, largely unfettered by tedious regulation and

interference is young and dynamic. M-CRIL, a leading micro-credit rating agency

provides a conservative estimate of the size of the market at Rs.480 billion (US$10.7

billion ) calculated for 60-70 million poor families at average household credit demand of

Rs.8000 (less than US$200). A more recent estimate comes from the prominent

microfinance practitioner, Mr. Vijay Mahajan, fomer head of BASIX. He pegs annual

micro-credit demand at US$30 billion (this high estimate most likely includes demand for

both microfinance and livelihood finance). Thus, India accounts for about 10% of the

estimated global aggregate demand of US$300 billion.

Up to March 31st 2005, a grand total of 1.62 million SHGs representing in total 24.3

million poor families or approximately 121.5 million people have received cumulative

loans of over Rs.68 billion (US$1.51 billion) from commercial banks (NABARD). The

amount of loans disbursed by banks to SHGs during 2004-05 is Rs.29.94 billion

(US$665.37 million).

Currently, roughly 75% of the credit supply is via the Self Help Group-Bank linkage

route largely financed by the National Bank for Agriculture and Rural Development

(NABARD) and the rest comes from MFIs, increasingly backed by commercial banks.However, the difference in market share is decreasing, as the increase in credit flow to

SHGs over the previous year is 61% while growth of loans originated by MFIS is well

beyond 100%.

6.4 The microfinance regulatory scenario2

In India, micro finance is provided by apex development financial institutions (such as

National Bank for Agriculture and Rural Development - NABARD, Small Industries

Development Bank of India, and Rashtriya Mahila Kosh), commercial banks, regional


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delivery methodologies. Presently, the lending activities of MFOs are not regulated

except for those registered as NBFCs.

Government intends to promote MFIs in a big way.3Government feels that the NABARD

or the banks should devise appropriate safeguards locally in their relationship with the

MFIs, taking into account different organizational forms of such entities. In any case, if

any statute for regulation of MFIs is contemplated, it may be at the State-level with no

involvement of the RBI as a banking regulator or for extending deposit-insurance.

In the Finance Ministers budget speech on 28th February 2005, key announcements

pertaining to the microfinance sector are as follows:

Enhancement of target for credit-linking in the next fiscal from 2 lakh SHGs to

2.5 lakh SHGs

MFIs as Banking Correspondents

Formation of Microfinance Development and Equity Fund (MFDEF) Rs. 100 to

Rs. 200 crore

The Board of MFDEF to suggest suitable legislation, which is expected to

introduced as draft bill in the next fiscal year

ECB route reopened for qualified NGOs

NGOs, SHGs, cooperatives and MFIs will be invited to become micro insurance

agents

Micro Financial Sector (Development and Regulation) Bill, 2007 is pending in

parliament. The Micro Financial Sector (Development and Regulation) Bill, 2007 seeks

to promote the sector and regulate micro financial organizations (MFO).

a. National Bank for Agriculture and Rural Development (NABARD) shallregulate the micro financial sector.

b. Every MFO that accepts deposits needs to be registered with NABARD.

Conditions for registration include (a) net owned funds of at least Rs 5


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c. Every MFO that accepts deposits has to create a reserve fund by

transferring a minimum of 15% of its net profit realized out of its thrift

and micro finance services every year.

d. The central government may establish a Micro Finance Development

Council to advise NABARD on formulation of policies related to the

micro financial sector.

e. NABARD shall constitute a Micro Finance Development and Equity Fund

to be utilized for the development of the sector

This will increase the cost of compliance but lots of funds are made available by the

government to grow the sector. The general trend seems to be buoyant for the

microfinance sector as a whole. There has been exponential growth in terms of number of

clients as well as loan outstanding. Microfinance has been able to demonstrate positive

impact on economic situation of members who are part of it. The regulatory framework is

encouraging and there is support for new microfinance organization. The market is still

emerging for microfinance institutions and new MFIs will benefited by it. In near future,

the lending rates by banks are expected to go down.

SECTION 7: INSTITUTIONAL SETTING

7.1. The Future Plan for Microfinance operation

Aarohan will try to make its microfinance operation independent as soon as it breaks

even. Aarohan will follow the examples set up by SKS microfinance Pvt. Ltd., Share,

Spandana for transferring its non profit microfinance operation to a private limited

company. The process will be guided by legal experts and all the guidelines by the

government will be adhered by the Advisors. This process is important to access capital

easily for the growth plan of microfinance operation.


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Board of Directors

CEO

HR/Admin

Finance/Account

InternalAudit

ITInsuranceOperations BusinessDevelopment

RM (N)

AM AM AM AM

UM UMUMUM

BM BM BM

Loan

Officer

Loan

Officer

Loan

Officer

RM (E)RM (S)

HRExecutives

HRMana er

A/CManager

I/ AuditManager

ITMan

A/CExecutives

I/AuditExecutive

ITExecutives

Organization Diagram


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The apex of the organization will be the Board of Directors. The CEO will report to the

management committee quarterly. The CEO and COO will be top management who will

take strategic decisions and ultimately responsible for the growth of the microfinance

business. There will be four regional managers who will look after different regions of

Bihar namely south, west, east and north. They will be reporting to the COO of the

microfinance operation. Each regional manager will look after approximately 25

branches. Area mangers will be reporting to the regional managers, who will be recruited

from freshly graduated with rural management degree. Each branch will be managed by a

branch manager and 6 loan officers.

SECTION 9: Management Information Systems

As current delivery models are not quite meeting the challenges especially when it comes

to serving rural remote location. So, technological innovation is a great hope. As we feel

that future of microfinance industry will be shaped by innovative technologies.

Management Information System will be the cornerstone of the organizations

technology platform. It will enable us to manage small transactions efficiently, increase

staff productivity, reduce operational cost, provide accountability for funds and generate

report for effective and efficient management and decision making. Taking few points

into consideration:

a.Accurate and easy to use MIS will be built with an easy to use graphical user

interface (GUI) so that anyone can learn to use it in a matter of days regardless

of education level or computer training.b.Design for Scale MIS will be designed and built as a series of modules that can

be added and subtracted as the needs of the organizational changes. The MIs will

also have a high degree of flexibility, with a capability to track small savings,


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c.Integrated with accounts Financial portfolio will be directly linked to its

backend accounting function through the MIS. All the outgoing transactions

automatically enter into the accounts software.

d.Extensive reporting As our outreach will be very high so it is extremely

important for us to track all activities at the micro level. The reporting features

will help us to monitor activities at the individual level and respond quickly to

any problem in the field.

e.Online data transfer To track field level operations we will develop an online

data transfer system that allows it to send summary data, back to the head office.

SECTION 10: INTERNAL CONTROL SYSTEMS

10.1 Surprise audit by Branch managers

Budget/Decision Making

Business plan

Evaluation

Analysis

Monitoring

Operational

Financial

Impact

Portfolio Management Accounts HRD/Admin

Mobile Data Capture


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10.2 Surprise Audit by Top Management

The top management will conduct surprise visit to the field operation at least thrice

weekly. This visit will be kept confidential from the branch personals including branch

managers. This will help the key decision makers to be aware of happenings in the field

and check the processes in the field.

10.3 Risk Management

The branch will maintain the list of clients who have defaulted even once during the 40

week period. Their will be list will be maintained as following

Clients defaulting once during the 40 weeks cycle

Clients defaulting 2-4 times within a month and resuming repayment again

Clients defaulting more than 4 times in three month period

The process of risk management:

1. The client is unable to pay the weekly installments

2. The loan officer informs the branch manager immediately by phone. The branch

manager immediately visits the member who defaulted.3. The branch manager will inform the top management as soon as he/she receives

operation.

4. The loan officer will understand the reasons behind the default

a. Unexpected health problems in family members

b. Death in family

c. Failure of business

d. Illness of main earner of the family

e. Unexpected arrival of relatives


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5. The loan officer will gather evidence whether the default is willful or non willful

and inform the branch manager.

6. In case on non willful or genuine default

a. The repayment schedule will be changed as per mutual agreement

b. The interest rate penalty will be decided by group.

7. In case of willful default

a. The other group members will be asked to pressurize the client to pay the

remaining installments

b. In case of failure of peer pressure, the other group members have to pay

the remaining installments.

c. The concerned person will be expelled from the group

d. The information of being defaulter communicated to whole village and

relevant authorities

e. Legal notice will be served to the defaulting members.

8. The loan officer will stay at village till decision about future course is taken.

9. The whole process will be documented by the loan officer.

10.The report about the case will be prepared by the branch manager and sent to

management.

10.4 Accounting system

The branch will maintain following registers as a part of accounting information system.

Daybook

This register will record all the transaction taken during the day in the branch.

Cashbook

The incoming cash and outgoing cash will be documented in this register.

Cash deposit- withdrawal register


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This register will record the loan taken by the clients as well as due dates of

installments.

Movement register

This register will record the details of movement of the loan officers and branch

managers to and from the field

Log book register

This register will record the details of movement, cost of petrol and maintenance

of motorcycles and other vehicles

Bank statement file

This file will contain copies of bank transaction statement pertaining to the branch.

Safe Key Register

This register will maintain the record of opening and closing of safe by authorized

person.

MIS problem register

The entire problem encountered during the operation will be recorded in this

register.

The registers maintained at head office:

Salary and Incentive Register

This register will record the salary and incentive paid to the employees.

Asset register

Details of all the assets such as computer, motorcycles, and other machinery will

be maintained in this register. The details will be purchase date, price, unique

identity numbers etc.

10.5 The role and responsibility of various profiles

10.5.1 Chief Executive Officer


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Raise grants and funds for the microfinance operations

10.5.2 Chief Operating Officer

Will be responsible for day to day running of operations in branches

Will report to CEO

Will be responsible for designing new products in tandem with CFO

Will develop the standard Operation procedures

Will be responsible for cost of each branch operation

Performance bonus linked to low default rates, portfolio at risk and cost of

operation

Regional manager will report to COO

10.5.3 Chief Financial Officer

Will be responsible for internal control system of the organizations

Will report to CEO

Will formulate policies on financial matters

Will be responsible for designing new products in tandem with COO

10.5.4 Regional manager

Will have the overall responsibility of microfinance operation of its zone

Will be directly reporting to COO with matrix reporting to CFO

Will be responsible for cost of each branch operation

Performance bonus linked to low default rates, portfolio at risk and cost of

operation

10 5 5 HR Team


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all the recruitment of branch managers, loan officer and accountants

staffing and their costing in 108 branches

Incentive will be built on hiring and retaining specified number of people at

low cost year

Reporting to VP HR.

10.5.6 Branch Manager

Will be responsible for operation of the branches

Monitoring disbursement and repayments

Visiting 5 centers in different area daily

Will responsible for day to day cash management

Will be responsible for maintenance of MIS at branch level manually

Incentive will be built on the level on zero default rate in repayment as well as

following of standard operating procedure

10.5.7 Accounts Manager

Key responsibility of verifying books of accounts including vouching, verification

of manual books, physical cash and books of accounts in MIS at the branch level.

Training field staffs, cashier, branch managers in accounting and record keeping

and assisting in the maintenance of village level as well as branch level books of

accounts.

Consolidate Balance sheet, Trail Balance, Income statement at the Area office

level for about 10 Branches.

Have responsibility for external audit of the Branch and Area office level

Reports to CFO.


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Will manage 25 groups in a day

Will manage the relationship with the group members

Will be responsible for collection of repayments weekly

Incentive will be built on having zero percent default during weekly repayment

from the clients

10.5.9 Audit committee

Maintaining internal control system

Process monitoring and evaluation

Reporting deviation from processes

Detecting financial frauds

Conduct surprise audit process

SECTION 11: FINANCING PLAN

11.1 Funding Mobilisation Strategy

To meet its objective of serving over 500,000 clients within five years, we are planning to

acquire old microfinance company which is registered under NBFC (Non Banking

Financial Company). It may cost near about Rs 50, 00,000 (Fifty lakhs).

NBFC Rationale

As we will be currently being registered as a limited liability Non-Banking Finance

Company (NBFC), a legally recognized and Reserve Bank of India (RBI) regulated

entity. As a registered NBFC, we will enjoy the following benefits: Access to fund,

diverse funding sources, outreach potential, stakeholders involvement, attracts

mainstream human and capital resources. Etc.

Funding Sources:


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We will enter partnership with leading financial institutions like HDFC bank, ICICI

Bank, UNITUS and other institution to provide loans for disbursement.

Growth Target for each year:

The following are the targets which we have set for our 5 years of operations.

Growth targets of Microfinance operations

year ofoperations

No ofBranches Noofemployee AverageLoanSizeRs. Noofclients Expected Total Loandisbursement inRs

LoanOfficer BranchManager

1styear 2 14 2 5,000 4,000 20,000,000

2ndyear 7 49 7 6,000 24,050 144,300,000

3rd year 21 147 21 7,000 125,000 875,000,000

4thyear 63 441 63 8,000 413,000 3,304,000,000

5thyear 100 700 100 9,000 1,100,500 9,904,500,000

Capital cost incurred in starting up the Branch

Financial Assumptions:

The assumptions are basically used for calculating the future projections and creations of

cash flows, income statement and balance sheet.

Ownership Structure:

Our Ownership will be structured in a way that it gives all stakeholders including clients,

management, employees and investors the opportunity to hold ownership and to

participate in governance. The companys proposed ownership structure at

commencement of operationsis as follows:

Shareholder Investment Shares Owned

(as if converted)

Common Ownership

Social Venture 50 00 000 5 Lakhs 50%


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option plan )

Members / Clientele ----- --- ---

Some Financial Assumptions:

Following are the assumptions used for calculating the future projections and creation of

cash flows, income statement and balance sheet.

1. Since the inception we will be having two branches, and in the first financial year

we will be having 4,000 members for both the branches.2. A branch can cater maximum of 10,000 members.

3. A branch will have 7 Loan officers and a one Branch Manager.

4. We are going to charge Rs 25/ per annum as membership fee, loan processing fee

is 2% of the loan amount.

5. The income from commission of Life insurance is Rs 10 in first year of operation.

In the second year, it is Rs 15 per client and later its Rs 20 per client.

6. The microfinance loan is given at the flat rate of 20% per annum to the clients.

7. The loan installment cycle will be of 50 weeks.

Repayment Plan

Loan

Amount

Repayment in

Rs

Principal per

week

Interest per

week

Total Repayment per

week1,000 1200 20 4 24

2,000 2400 40 8 48

3,000 3600 60 12 72

4,000 4800 80 16 96

5,000 6000 100 20 120

6,000 7200 120 24 144

7,000 8400 140 28 1688,000 9600 160 32 192

9,000 10800 180 36 216

10,000 12000 200 40 240

11 000 13200 220 44 264


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1. We have assumed that loan loss provision is 2% and then PAR 30 - 1%, PAR 60 -

0.50%, and PAR 90 -0.50%. We will be taking value of PAR30 to be the loan

written off for the respective periods. This risk has been written off as financial

expenses in the income and statement and has been reflected in the balance sheet.

2. The loan amount is available at the rate of 14% per annum on declining balance

for the year 2009 10. The interest will be repaid monthly and principal will be

repaid quarterly.

3. We are planning to raise equity by Rs 50 lakhs through promoters and we will

even raise fund through social venture capitalist (i.e. Bellweather, Unitus,

FWWB, BASIX, Ford Foundation etc) by Rs 50 lakhs during the first year of

operations. We will even take debt from bank near about three times of our

equity. We are going to raise equity through other sources of Rs 3.5 Crores in

first year. We will even offer ESOPs to our employees and we are planning evento convert our membership fee income to as our equity shareholders. In second,

third, fourth, and fifth year we are planning to manage our fund through taking

debt from bank through our outstanding gross loan portfolio, raising equity,

ESOPs and various other financial sources.

4. We have calculated the depreciation on the basis of straight line method (SLM);

whose salvage value will be for five years period.

5. We will be taking five loans. The period for the loans taken is in the following

manner:

Loan (particulars) Repayment Period

Loan1 1 year

Loan2 2 years

Loan3 3 years


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SECTION 12: MONITORING AND EVALUATION

The key indicators for monitoring and evaluation are given in annexure 6. Performance

Measurement can be gauged from ratios like operating margin and net financial margin.

Internal feedback and control mechanisms are detailed in above mentioned sections.

Impact assessment will be done through independent studies being conducted by research

bodies like Centre for Microfinance Research. The trust and later on NBFC will conduct

their impact assessment by inviting bright students from top management schools for

doing studies on impact of microfinance in Bihar. Aarohan will maintain total

transparency and accountability to all its stakeholders by providing reports on key

indicators as desired quarterly, half yearly and annually. The key results will be available

on the website also. Annual progress reports will be sent to all the stakeholders.

SECTION 13: CONCLUSION

The project assumes explosive growth in microfinance sector in Bihar. The other

assumptions are improvement in investment climate in Bihar and capital and human

resources are available to facilitate the growth of microfinance operation.

As we have seen dearth of commercial bank lending so there is good bit of opportunity

for our organization. Much has been said about financial inclusion this model will be in

its kind with viable business proposition.

It will be New generation microfinance companies which will run by rural managerswho have distinct skills sets and have urge to work for the society. It is model which can

be scaled up with rapid pace.


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A nnex u r e 1 : Gr os s Sta te D omes t i c P r oduct ( GSD P) a t Facto r Cos t by I ndus t r y o f O r ig in ( A t 19 93 - 94 P r i ces ) i n B iha r4

( 2 0 0 0 - 2 0 0 1 t o 2 0 0 5 - 2 0 0 6 )

(Rs . in Lakh)

Se ct o r 2 0 0 0 - 0 1 2 0 0 1 - 0 2 2 0 0 2 - 0 3 2 0 0 3 - 0 4 2 0 0 4 - 0 5 2 0 0 5 - 0 6

1. Agriculture 1399831 1153179 1435946 1129894 1343006 1182454

2. Forestry & logging 55316 55848 56927 58374 59789 61471

3. Fishing 50191 64275 69782 71250 71523 71795

4. Mining & quarrying 9224 18138 7703 8126 8144 8127

Su b T ot a l o f Pr i m a r y 1 5 1 4 5 6 2 1 2 9 1 4 4 0 1 5 7 0 3 5 8 1 2 6 7 6 4 4 1 4 8 2 4 6 2 1 3 2 3 8 4 7

5 . M a n u f ac t u r i n g 1 3 6 1 5 0 1 1 5 4 2 1 1 6 8 0 1 8 1 7 8 9 9 3 1 9 2 4 7 6 2 0 6 3 4 8

Manu-Registered 52724 44233 79671 87842 97652 108110

Manu-Unregistered 83426 71188 88347 91151 94824 98238

6. Construction 170688 140646 147516 167857 180003 191381

7. Electricity, gas and Water supply 51553 51814 51567 55969 60150 64508

Sub To ta l o f Seconda r y 358391 307881 367101 402819 432629 462237

8 . T r ans por t , s to r age & c omm un ic a t i on 182147 195022 222374 242638 270150 298019

Railways 75113 80212 82150 87422 90780 94268

Transport by other means 48803 46819 50447 48481 52474 52885

Storage

Communication 58231 67991 89777 106735 126896 150866

9. Trade, hotels and restaurants 559634 449316 533920 456127 518472 484502

10. Banking & Insurance 113343 129011 155690 167283 179739 193123

4 Downloaded from www.indiastat.com


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Aarohan 36

11. Real estate, ownership of dwellings andbusiness services 122094 129417 137360 146616 157207 169047

12. Public administration 264530 316577 292821 312790 332957 354331

13. Other services 335397 307272 336337 295033 314580 334713

Sub To ta l o f Ter t i a r y 157714 5 152661 5 1678502 162048 7 177310 5 183373 5

14. State domestic product (Rs. lakh) 3450098 3125936 3615961 3290950 3688196 3619819

15. Ca lcu la ted S ta te domest ic p roduc t (Rs .

L ak h ) 3 4 5 0 0 9 8 3 1 2 5 9 3 6 3 6 1 5 9 6 1 3 2 9 0 9 5 0 3 6 8 8 1 9 6 3 6 1 9 8 1 9

16. Population 81873000 84251000 85578000 87161000 88687000 9E+07

17. State Per Capita Income (Rs.) 4214 3710 4225 3776 4159 4013

18 . Ca l cu la ted Sta te P er Cap i ta I nc ome ( R s .) 4214 3710 4225 3776 4159 4013


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Aarohan 37

A nnex u r e 2 : The D ist r i c t W is e Ma le & Fema le P opu la t i on o f B iha r 5

Popu la t ion Rura l B ihar Popu la t ion Urban B ihar

(Census 2001) (Census 2001)

S

N o D ist r i c t To ta l Ma le % Fema le % To ta l Ma le % Fema le %

1

Pashchim

Champaran 2733561 1436667 52.6 1296894 47.4 309483 164186 53.1 145297 46.9

2

Purba

Champaran 3682196 1937024 52.6 1745172 47.4 251440 135326 53.8 116114 46.2

3 Sheohar 492961 259907 52.7 233054 47.3 21327 11354 53.2 9973 46.8

4 Sitamarhi 2516636 1327819 52.8 1188817 47.2 153251 82330 53.7 70921 46.3

5 Madhubani 3446248 1771686 51.4 1674562 48.6 124403 65675 52.8 58728 47.2

6 Supaul 1657175 862101 52 795074 48 87894 46754 53.2 41140 46.8

7 Araria 1992293 1037973 52.1 954320 47.9 132538 70951 53.5 61587 46.5

8 Kishanganj 1165057 597760 51.3 567297 48.7 129006 69150 53.6 59856 46.4

9 Purnia 2318848 1205927 52 1112921 48 221940 119867 54 102073 46

10 Katihar 2171287 1128240 52 1043047 48 218246 116703 53.5 101543 46.5

11 Madhepura 1456660 759283 52.1 697377 47.9 67936 36989 54.4 30947 45.6

12 Saharsa 1382403 721575 52.2 660828 47.8 124015 67010 54 57005 46

5 Downloaded from indiastat.com


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Aarohan 38

1 3 Darbhanga 3018639 1574598 52.2 1444041 47.8 266834 142042 53.2 124792 46.8

1 4 Muzaffarpur 3395565 1754769 51.7 1640796 48.3 348271 186711 53.6 161560 46.4

15 Gopalganj 2018807 1004505 49.8 1014302 50.2 130536 67646 51.8 62890 48.2

1 6 Siwan 2561094 1254632 49 1306462 51 14 7746 77586 5 2.5 70160 47.5

17 Saran 2953345 1495945 50.7 1457400 49.3 298129 158483 53.2 139646 46.8

1 8 Vaishali 2525912 1313552 52 1212360 48 186477 98724 52.9 87753 47.1

1 9 Samastipur 3289978 1705576 51.8 1584402 48.2 123435 65673 53.2 57762 46.8

2 0 Begusarai 2235786 1168708 52.3 1067078 47.7 107203 57349 53.5 49854 46.5

2 1 Khagaria 1200458 634194 52.8 566264 47.2 76219 41307 54.2 34912 45.8

2 2 Bhagalpur 1978412 1051749 53.2 926663 46.8 451919 242443 53.6 209476 46.4

2 3 Banka 1552432 812894 52.4 739538 47.6 56346 30167 5 3.5 26179 46.5

2 4 Munger 818913 435774 53.2 383139 46.8 316586 168888 53.3 147698 46.7

25 Lakhisarai 683588 354279 51.8 329309 48.2 117585 62448 53.1 55137 46.9

26 Sheikhpura 443837 230375 51.9 213462 48.1 81300 43093 53 38207 47

27 Nalanda 2014884 1050249 52.1 964635 47.9 353443 186218 52.7 167225 47.3

2 8 Patna 2740927 1449850 52.9 1291077 47.1 1968924 10650 99 54.1 903825 45.9

2 9 Bhojpur 1921121 1006468 52.4 914653 47.6 312294 168865 54.1 143429 45.9

3 0 Buxar 1274691 669446 52.5 605245 47.5 128771 68793 53.4 59978 46.6

31

Kaimur

(Bhabua) 1243068 650973 52.4 592095 47.6 41507 22583 54.4 18924 45.6

32 Rohtas 2122175 1109288 52.3 1012887 47.7 326587 173367 53.1 153220 46.9

33 Jehanabad 1399513 724219 51.7 675294 48.3 111893 59741 53.4 52152 46.6


39/48

Aarohan 39

3 4 Aurangabad 1836127 946826 51.6 889301 48.4 168833 88931 52.7 79902 47.3

35 Gaya 2989942 1536340 51.4 1453602 48.6 475041 252891 53.2 222150 46.8

36 Nawada 1670759 855675 51.2 815084 48.8 138666 72963 52.6 65703 47.4

3 7 Jamui 1294298 673840 52.1 620458 47.9 103176 54972 53.3 48204 46.7

* The bold rows are proposed districts for microfinance plan.

ANNEXURE 3: Coverage o f Bank ing Serv ices (Rat io o f Deman d Depos i t Accounts to t he adu l t popu la t ion)6

Re g io n / St a t e / U n io n

Te r r i to r y

Cur rent

Accounts

Sav ings

Accounts

Tota l

Popu la t ion

Adu l t

Popu la t ion

( A bov e 19

years )

Tota l No. Of

accounts

No. o f acc .

P e r 100 o f

popu la t i on

No. o f acc .

P e r 100 o f

adu l t pop .

N ORTHER N R EGI ON 4215701 5241612 5 132676 462 678223 12 566318 26 43 84

Haryana 572660 8031472 21082989 11308025 8604132 41 76

Himachal Pradesh 134285 2433595 6077248 3566886 2567880 42 72

Jammu & Kashmir 277529 3094790 10069917 5379594 3372319 33 63

Punjab 1156137 13742201 24289296 14185190 14898338 61 105

Rajasthan 689657 12139302 56473122 28473743 12828959 23 45

Chandigarh 80607 1126696 900914 546171 1207303 134 221

Delhi 1304826 11848069 13782976 7929589 13152895 95 166

6 Retrieved from www.rbi.org.in


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Aarohan 40

NORTH-EASTERN

R EGI ON 476603 6891081 384950 89 197089 82 736768 4 19 37

Arunachal Pradesh 10538 209073 1091117 544582 219611 20 40

Assam 378729 5071058 26638407 14074393 5449787 20 39

Manipur 12514 200593 2388634 1222107 213107 9 17

Meghalaya 24305 458779 2306069 1088165 483084 21 44

Mizoram 3441 117885 891058 476205 121326 14 25

Nagaland 13819 195452 1988636 995523 209271 11 21

Tripura 33257 638241 3191168 1784212 671498 21 38

EA STER N R EGI ON 181421 9 478761 40 227613 073 122136 133 496903 59 2 2 41

Bihar 464511 13225242 82878796 40934170 13689753 17 33

Jharkhand 166007 5834341 26909428 13737485 6000348 22 44

Orissa 228160 7030004 36706920 21065404 7258164 20 34

Sikkim 4097 125365 540493 288500 129462 24 45

West Bengal 942733 21544753 80221171 45896914 22487486 28 49

Andaman & Nicobar

Islands 8711 116435 356265 213660 125146 35 59

CEN TRA L R EGI ON 2202217 6425418 9 255713 495 129316 677 664564 06 2 6 51

Chhattisgarh 192067 3346898 20795956 11209425 3538965 17 32

Madhya Pradesh 553381 11731918 60385118 31404990 12285299 20 39

Uttar Pradesh 1324509 45804350 166052859 82229748 47128859 28 57

Uttaranchal 132260 3371023 8479562 4472514 3503283 41 78

WE STER N R EGI ON 3178102 495251 01 149071 747 861822 06 527032 03 35 61


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Aarohan 41

Goa 81551 1584177 1343998 891411 1665728 124 187

Gujarat 955964 16220262 50596992 28863095 17176226 34 60

Maharashtra 2127240 31568184 96752247 56207604 33695424 35 60

Dadra & Nagar Haveli 6076 69308 220451 122765 75384 34 61

Daman & Diu 7271 83170 158059 97331 90441 57 93

SOUTHER N R EGI ON 466601 4 833868 98 223445 381 135574 225 880529 12 39 65

Andhra Pradesh 1156405 23974580 75727541 44231918 25130985 33 57

Karnataka 1086662 19147819 52733958 30623289 20234481 38 66

Kerala 600065 17669723 31838619 20560323 18269788 57 89

Tamil Nadu 1786514 22052812 62110839 39511038 23839326 38 60

Lakshadweep 491 22997 60595 33686 23488 39 70

Pondicherry 35877 518967 973829 613971 554844 57 90

A LL - I N D I A 1 6 5 5 2 8 5 6 3 0 4 3 4 9 5 3 4 1 . 0 2 7 E+ 0 9 5 4 1 0 3 1 5 5 3 3 2 0 9 0 2 3 9 0 3 1 5 9


42/48

Aarohan 42

Annexu re 4 : Com para t ive Cos t St r uc tu re o f Bank , NBFC and MFO7

Bank NBFC MFO

Average Interest rate on lending

(%)

8.3 10.6 19.1

Average Interest rate on

borrowing (%)

5.3 6.3 6.6

Net Interest Spread (%) 3.0 4.3 12.5

Operation Cost as % of loans 3.9 2.5 9.6

Note: Data used for banks is State Bank of India, 2006-07; for NBFCs, Sundaram

Finance Ltd., 2005-06; and for MFOs, Bangladesh Grameen Bank, 2005. Averages

calculated by PRS.

7 India Together Legislative Brief on the Microfinance (Development and Regulation) Bill - 26 June 2007.htm


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Aarohan 43

Annexur e 5 : Average Branch Cos t

EstimatedcostinvolvedinsettingupaBranchParticulars Amount

FixedCostFurnitureandFixtures 50,000

ComputerandPrinters 50,000

SafeCashLocker 25,000

Batteries

and

Inverter

25,000

VariableCostFuelandLocalConveyance(Rs2,000perFOandBM) 192000

OfficeStationery 12,000

LoanDocumentationPrinting 12,000

TelephoneBills(800permonth) 9,600

Couriercharges(100permonths) 1,200

Internet

charges

(

200

per

months)

2,400

OfficeLightining(1,000permonths) 12,000

OfficeRent (2,000permonths) 24,000

Traningcost(1,000permonths) 12000

Staffsalaries andIncentives

BranchManager(7,000PerMonths) 84000

FieldOfficer(3,000permonths)/7FOoneBranch 252000

MiscalleneousExpenses

(1,000

per

months)

12000

TotalCost 775,200


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Aarohan 44

A nnex u r e 6 : K ey Cum u la t i v e N um ber s Fo r M ic r o f i nance Ope r a t i ons

K ey Cum u la t i v e N um ber s Fo r M ic r o f i nance Ope r a t i ons

Ist Year Iind Year III rd Year IV th Year V th year

To ta l N umber o f B r anches 2 7 21 63 100

To ta l num ber o f g r oup 800 4,810 25000 82,600 220100

To ta l N o o f Member s 4,000 24,050 125,000 413,000 1,100,500

Loan Of f icer 14 49 147 441 700

Average loan s ize (Rs) 5,000 6,000 7,000 8,000 9,000

To ta l Loan D isbu r s ed 20 ,000 ,000 144 ,300 ,000 875 ,000 ,000 3 ,304 ,000 ,000 9 ,904 ,500 ,000

To ta l Loan Ou ts tand ing 12,530,000 89,820,000 499,940,000 2,019,600,000 4,938,300,000

A moun t R epay men t r ec e iv ed 7 ,470 ,000 67 ,010 ,000 464 ,880 ,000 1 ,784 ,340 ,000 6 ,985 ,800 ,000

I n t e r es t I n co m e 1,494,000 13,402,000 92,976,000 356,868,000 1,397,160,000

Member s h ip Fee Inc om e 40,000 240,500 1,250,000 4,130,000 11,005,000

Loan Pr oc ess ing I nc ome 400,000 2,886,000 17,500,000 66,080,000 198,090,000

Loan tak en f r om B ank 25 ,000 ,000 200 ,000 ,000 600 ,000 ,000 2 ,000 ,000 ,000 6 ,000 ,000 ,000

R epay men t to B ank 25 ,000 ,000 100 ,000 ,000 250 ,000 ,000 866 ,666 ,667 2 ,866 ,666 ,667

I n te r es t pa id to Bank 2,187,500 22,750,000 77,000,000 292,833,333 735,495,833

Salary Cost 560,000 1,596,000 4,928,000 14,420,000 16,184,000

Adm in Cost 482,000 1,373,700 4,241,600 12,411,500 13,929,800

CAPTI AL COST FOR BRANCHOPENI NG 300,000 750,000 2,100,000 6,300,000 5,550,000

Loan Loss prov is ion 250,600 1,796,400 9,998,800 40,392,000 98,766,000

To ta l Loan w r i t ten o f f 125,300 898,200 4,999,400 20,196,000 49,383,000

Deprec ia t ion @ 20% 47,500 142,500 440,000 1,287,500 2,045,000


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Aarohan 45

A nnex u r e 7 : Mon i to r i ng I nd i c a to r s

FY2002010 FY20102011 FY20112012 FY20122013 FY20132014

TotalNumberofbranches 2 7 21 63 100

Totalmembers 4,000 24,050 125,000 413,000 1,100,500

Averagenumberofclientsperbranch 2,000 3,436 5,952 6,556 11,005

Totalnumberofloanmade 4,000 24,050 125,000 413,000 1,100,500

Disbursements 20,000,000 144,300,000 875,000,000 3,304,000,000 9,904,500,000

Equity 40000000 35000000 70,000,000 490,000,000 650,000,000

Portfoliooutstanding(Rs) 12,530,000 89,820,000 499,940,000 2,019,600,000 4,938,300,000

Portfolio

growth

NA

622%

506%

278%

200%

Averageloansize(Rs) 5,000 6,000 7,000 8,000 9,000

Totalnoofloanofficer 14 49 147 441 700

NoofactiveborrowersperLO 285.7142857 490.8163265 850.3401361 936.5079365 1572.142857

PortfolioperLO 1,428,571 2,944,898 5,952,381 7,492,063 14,149,286

Costperunitofmoneylent 0.054475 0.021567568 0.0109824 0.008510593 0.003246888

Costperloanmade 272.375 129.4054054 76.8768 68.08474576 29.22199

AdministrativeEfficiency 0.17638 0.19167429 0.1104096 0.109365718 0.087477473

LoanDisbursementatrisk 250,600 1,796,400 9,998,800 40,392,000 98,766,000

PAR30

125,300

898,200

4,999,400

20,196,000

49,383,000

PAR60 62,650 449,100 2,499,700 10,098,000 24,691,500

PAR90 62,650 449,100 2,499,700 10,098,000 24,691,500

TotalLoanwrittenoff 125,300 898,200 4,999,400 20,196,000 49,383,000

PAR30 1.00% 1.00% 1.00% 1.00% 1.00%

PAR60 0.50% 0.50% 0.50% 0.50% 0.50%

PAR90 0.50% 0.50% 0.50% 0.50% 0.50%

Loanloss writtenoff 1.00% 1.00% 1.00% 1.00% 1.00%

Returnonperformingassets 15.43% 18.40% 22.35% 21.15% 32.53%

FinancialCost

Ratio

17.46%

25.33%

15.40%

14.50%

14.89%

OperatingCostRatio 8.70% 3.46% 1.92% 1.39% 0.65%

OperatingSelfSufficiency 12.47% 11.30% 19.41% 19.43% 24.13%

FinancialSelfSufficiency 12.05% 10.95% 18.45% 18.40% 22.83%

Loanlossprovisionratio 0.02 0.02 0.02 0.02 0.02

Riskweightedcapital 12,530,000 89,820,000 499,940,000 2,019,600,000 4,938,300,000

CapitalAdequacyRatio 319.23% 38.97% 14.00% 24.26% 13.16%


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A nnex u r e 8 : Pr o jec ted I nc ome Sta tem en t

I nc ome FY 2009 - 20 10 FY 2010 - 2 011FY 2011 -2012 FY 2012 - 2 013 FY 2013 - 20 14

I n t e r es t I n co m e 1,494,000 13,402,000 92,976,000 356,868,000 1,397,160,000

Memb ersh ip Fees 40,000 240,500 1,250,000 4,130,000 11,005,000

Loan Processing Fee 400,000 2,886,000 17,500,000 66,080,000 198,090,000

To ta l I nc ome 1 ,934 ,000 16 ,528 ,500 111 ,726 ,000 427 ,078 ,000 1 ,606 ,255 ,000

Opera t ing Expenses

Salar ies 560,000 1,596,000 4,928,000 14,420,000 16,184,000

Othe r admin i s t r a t i v e ex pens es 482,000 1,373,700 4,241,600 12,411,500 13,929,800

Deprec ia t ion 47,500 142,500 440,000 1,287,500 2,045,000

To ta l Ope r a t i ng ex pens es 1 ,089 ,500 3 ,112 ,200 9 ,609 ,600 28 ,119 ,000 32 ,158 ,800

Financ ia l expenses

I n te r es t and fee ex pens es onfund ing l i ab i l i t i e s 2,187,500 22,750,000 77,000,000 292,833,333 735,495,833

Loan l oss w r i te o f f 125,300 898,200 4,999,400 20,196,000 49,383,000

Tota l f inanc ia l expenses 2,312,800 23,648,200 81,999,400 313,029,333 784,878,833

To ta l Ex pens es 3 ,402 ,300 26 ,760 ,400 91 ,609 ,000 341 ,148 ,333 817 ,037 ,633

N e t I nc ome B e fo r e Tax - 1 ,468 ,300 - 10 ,231 ,900 20 ,117 ,000 85 ,929 ,667 789 ,217 ,367


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Annexu re 9 : P ro jec ted Cash F lows

Fo r the y ea r FY 2009 - 20 10 FY 2010 - 20 11 FY 2011 - 20 12 FY 2012 - 20 13 FY 2013 - 20 14

I n f l o w s

Open ing cash 0 25,874,500 73,643,300 106,979,700 311,766,200

Ex te r na l bo r r ow ings 25,000,000 200,000,000 600,000,000 2,000,000,000 6,000,000,000

R epay men t r ec ei v ed 7,470,000 67,010,000 464,880,000 1,784,340,000 6,985,800,000

E qu i t y In f l ow 40,000,000 35,000,000 70,000,000 490,000,000 650,000,000

I n t e r e st i n c o m e 1,494,000 13,402,000 92,976,000 356,868,000 1,397,160,000

Member s h ip fees 40,000 240,500 1,250,000 4,130,000 11,005,000

Loan process ing fees 400,000 2,886,000 17,500,000 66,080,000 198,090,000

To ta l I n f l ow s 74 ,404 ,000 344 ,413 ,000 1 ,320 ,249 ,300 4 ,808 ,397 ,700 15 ,553 ,821 ,200

O u t f l o w s

D is bu r s emen t 20,000,000 144,300,000 875,000,000 3,304,000,000 9,904,500,000

R epay men t s to l ende r s 25,000,000 100,000,000 250,000,000 866,666,667 2,866,666,667

Salar ies 560,000 1,596,000 4,928,000 14,420,000 16,184,000

Othe r admins i t r a t i v e

expenses 482,000 1,373,700 4,241,600 12,411,500 13,929,800

I n t e r e st p a i d o n b o r r o w i n g s 2,187,500 22,750,000 77,000,000 292,833,333 735,495,833

Fixed assets p urchased 300,000 750,000 2,100,000 6,300,000 5,550,000

To ta l Ou t f l ow s 48 ,529 ,500 270 ,769 ,700 1 ,213 ,269 ,600 4 ,496 ,631 ,500 13 ,542 ,326 ,300

N e t c ash ba lance 25 ,874 ,500 73 ,643 ,300 106 ,979 ,700 31 1 ,766 ,200 2 ,011 ,494 ,900


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Aarohan 48

Annexu re 10 : P ro j ec ted Ba lance Sheet

2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

L I A B I L I T I ES

EQUI TY

SELF RAI SED EQUI TY 500,000

EQUI TY FROM

SHAREHOLDERS 39,500,000 75,000,000 145,000,000 635,000,000 1,285,000,000

RETAI NED EARNI NGS -1,468,300 -11,700,200 8,416,800 94,346,467 883,563,833

SECURED LOAN 0 100,000,000 450,000,000 1,583,333,333 4,716,666,667

LOAN LOSS PROVI SION 250,600 2,047,000 12,045,800 52,437,800 151,203,800

0 0 0 0

TOTAL L IA B I L IT I ES 38 ,782 ,300 165 ,346 ,800 615 ,462 ,600 2 ,365 ,117 ,600 7 ,036 ,434 ,300

ASSETS

FI XED ASSETS 300,000 1,002,500 2,960,000 8,820,000 13,082,500

LESS DEPRECI ATI ON 47,500 142,500 440,000 1,287,500 2,045,000

NET ASSETS 252,500 860,000 2,520,000 7,532,500 11,037,500

OUTSTANDI NG LOAN

PORTFOLI O 12,530,000 89,820,000 499,940,000 2,019,600,000 4,938,300,000

CASH & BANK BALA NCES 25,874,500 73,643,300 106,979,700 311,766,200 2,011,494,900

LOAN LOSS W RI TTEN OFF 125,300 1,023,500 6,022,900 26,218,900 75,601,900

TOTAL ASSETS 38,78 2,300 165,3 46,80 0 615 ,462,60 0 2 ,365 ,117,60 0 7 ,036 ,434,30 0

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