Azhar to amity_2

PROJECT REPORT
ON
COMPETETION IN MICROFINANCE MARKET
IN THE OPERATIONAL AREA OF HIH

SUBMITTED TO

Under the guidance of
P. JOSEPH RAJ
Chief Manager-Operation
HAND IN HAND-KANCHEEPURAM

S.P. JAKHANWAL, IAS (Retd.)
Director General-ASRUM

Submitted by
Mohammad Azhar
MBA-Rural Management (2010-12)
Amity School of Rural Management
Amity University Uttar Pradesh

Acknowledgement

In my venture of writing this report, I have a long list of people to thank for their
interaction and help. This includes Mr. Joseph Raj (Chief Manager Operation) & Mr. S.P.
Jakhanwal (DG, ASRUM), who really helped and mentored for achieving goals and targets
of the study.

I would also like to thank all those staff of HAND IN HAND – Tamil Nadu who helped me
in field for arranging meetings with members, group interactions and take care personally.
Namely V. Priyasamy (Regional Manager), and his staff Mr. C.Udayaraj (Branch
Manager), Ms. Jareena Beevi (Credit Officer), Ms. K.Ramani (Credit Officer), Ms.
Arockiamany (Credit Officer), Ms. Syamala (Credit Officer), Ms.T.Uma (Credit
Officer),Ms. D.Illamalli (Credit Officer), and Ms. D.Papitha Ponmalar (Branch Manager).

Special thanks to all staff of SHG pillars. Personal thanks to Mr. Devaraj, G.Palanivel and
my hearty gratitude to Ms. Mohana for arranging travel; K.Thiyagarajan and
N.Rathinasekar for arranging delicious food and thanks to all security staff ,drivers and
cleaners.

Finally, warm thanks to HAND IN HAND–Tamil Nadu & Amity University Uttar Pradesh
for giving an opportunity to work on challenging objectives.

DATE: August 25, 2011
MOHAMMAD AZHAR
PLACE: Noida, India

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CERTIFICATE

This is to certify that Mr. Mohammad Azhar, pursuing MBA-Rural management in Amity
University-Uttar Pradesh successfully completed six weeks of summer assignment under ‘Global
Leaders’ Internship program with HAND IN HAND INDIA in Tamil Nadu in May – June 2011.

.

S.P. Jakhanwal – Director General-ASRUM

Email - spj@amity.edu
Phone India - +91-120-4392228

Contacts;

Email id; mba.azahar@gmail.com

azhar.amity@gmail.com

Mob; +91-(0)9953151810

Blog; http://blogs.siliconindia.com/AZHAR

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TABLE OF CONTENTS

Acknowledgement--------------------------------------------------------------------------------------(i)

Certificate-----------------------------------------------------------------------------------------------(ii)

Table of Contents-------------------------------------------------------------------------------------(iii)

1.0. INTRODUCTION-----------------------------------------------------------------------------6-12

1.1. Salient Features of SHGs-------------------------------------------------------------6
1.2. Status of Microfinance in India -----------------------------------------------------7
1.3. Statement of Problems----------------------------------------------------------------8
1.4. Introduction on Client Retention ---------------------------------------------------8
1.5. Research Objectives------------------------------------------------------------------9
1.6. Research Methodology---------------------------------------------------------------9
1.6.1. Research design-----------------------------------------------------9
1.6.2. Selection of Branches, Staff and Respondents----------------10
1.6.3. Duration of the study----------------------------------------------11
1.7.Significance of the study------------------------------------------------------------12
1.8.Limitations of the study--------------------------------------------------------------12

2.0. Introduction about the organization------------------------------------------------------13-18
2.1 Flash progress Report of HIH------------------------------------------------------18

3.0. Penetration of Various Competitors------------------------------------------------------19-33
3.1.Choice of getting loan at the time of needs in villages ------------------------33
3.2.Level of HIH penetration in village----------------------------------------------33

4.0. To assess the factors that help in client retention-------------------------------------34-55

4.1. Why are HIH SHGs inactive? ---------------------------------------------------34

4.2. Why did HIH member migrated to other MFI’s or NGO’s? -----------------37

4.3.Causes of desertion on HIH--------------------------------------------------------39
4.3.1. Growing competition-----------------------------------------------40
4.3.2. Product adequacy----------------------------------------------------41
4.3.3. Market adequacy----------------------------------------------------41
4.3.4. Regional and economic factor-------------------------------------42
4.3.5. Product image--------------------------------------------------------43
4.3.6. HIH image------------------------------------------------------------44

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4.3.7. Quality of customer service----------------------------------------48
4.3.8. Emotional involvement---------------------------------------------52
4.3.9. Segmentation variables---------------------------------------------52

5. Customer Retention------------------------------------------------------------------------------55-58

6. Against social perspective---------------------------------------------------------------------------57

7. Frame work on Retention Improvement-----------------------------------------------------58-60

8. Response sheet from best SHG Interviews---------------------------------------------------61-68

8.1. Best SHG in Rural area----------------------------------------------------------61

8.2. Best SHG in Urban area---------------------------------------------------------65

9. Conclusion----------------------------------------------------------------------------------------------69

10. Annexure-------------------------------------------------------------------------------------------70-75

Annexure 1.0 (Gram Vidyal Loan card)---------------------------------------------------------70

Annexure 1.1 (Mahashemam Loan card)--------------------------------------------------------73

Annexure 1.2 (Samastha Microfinance Loan card)--------------------------------------------75

References-------------------------------------------------------------------------------------------76

11. Opportunity with HIH--------------------------------------------------------------------------------76

12. Suggestions page--------------------------------------------------------------------------------------77

13. Reader comments-------------------------------------------------------------------------------------78

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1.0.INTRODUCTION

Jesus says: “man cannot live by the bread alone.” Abraham says “man lives by bread alone when
there is no bread.” If a person is starving only food occupies his mind. He needs the bread. It
may be not enough he needs many more things, but that many more things come only later on;
first comes the bread. It is but natural that as soon as one need is satisfied, a second need
becomes apparent. The person forgets that he or she was starving and now starts to be concerned
about a need which was formerly of less significance. People are never completely satisfied on
any need level, but a reasonable amount of gratification of first priority needs man be
forthcoming if they are to perceive a lower priority need. However, it has to be noted that the
primary goal of both “poverty lending approach” and “financial systems approach” is providing
financial services to the poor people.
“A poor person has not known what riches are, he is not frustrated. How can he go beyond riches
if he is not frustrated with them? A poor man also sometimes comes to me, but then he comes to me for
something that I cannot supply. HE ASKS FOR SUCCESS.”

(Rajneesh: The Guru of Self-help Movement)*

What is Microfinance?
The Microcredit Summit 2007*** defines microcredit as the extension of small loans to
entrepreneurs too poor to qualify for traditional bank loan. It has proven as an effective and
popular measure in the ongoing struggles against poverty, enabling those without access to
lending institutions to borrow at affordable interest rates and start small business. The key
implication of microcredit is in its name itself ‘micro’. A number of issues come to mind when
‘micro’ is considered: The small size of loans, small size of savings, the smaller frequency of
loans, shorter repayment periods and amounts, the micro/local level of activities, the community-
based proximity of microcredit, etc.
The Bangladesh experience has shown that programmes that empower women at the bottom can
make a real difference to the quality of life of the poor even under conditions of mass
deprivation. This is reflected in the steady progress front. In a way, this represents a culmination
of the growing recognition of micro-credit as an instrument of poverty alleviation, the world
over. Thirty years ago, the concept of micro-credit was unknown. Since then, its role in poverty
alleviation and empowerment of the weaker sections has gained recognition in many developing
countries and even in a few developed ones. Today, it is active in more than 100 countries and is
said to have helped more than 125 million people take their steps to reduce poverty.**
The biggest challenge to any civilized society is the economic deprivation of its bucolic part. The
most potent tool against human deprivation is building human capital among the deprived,
through the sustainable development initiative which is taken by the deprived themselves. “Self-
realization and self initiative are the two most powerful weapons to wash poverty from the world
map” this dynamic quotation of world’s greatest economist Chanakya was translated to one word
that is SHG.***

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1.1. Salient Features of SHGs:
1. It is a homogeneous group of people of similar economic status and interest and an affinity
group.
2. It is small in size and membership of one SHG is in the range from 10-20 people.
3. Non-political and voluntary and follows democratic culture.
4. SHGs have the transparency among themselves and they have the collective accountability of
financial transaction in the group.
Mohammad Yunus (2004) stated that loners from the experience of other developing countries
like Bangladesh, Indonesia, Bolivia and Philippines motivated India too to start experiencing
innovative scheme of SHGs which are also called as “thrift and credit groups”
http://www.asienkunde.de/content/zeitschrift_asien/archiv/pdf/Schrader94.pdf. The SHG is a brain child of Grameen
Bank of Bangladesh which was founded by Prof. Mohammad Yunus of Chittagong University in
the year 1975. In India NABARD initiated it in 1986-87, but the perceptible progress was made
after 1991-92 from the linkage of SHGs with the banks.
Of late, some of the leading commercial banks such as ICICI bank, HDFC bank, UTI bank and
the State Bank of India, have begun focusing on this sector rather aggressively, may be, under
the pressure from the RBI and governments. Even some of the multinational banks operating in
India, such as ABN Amro, Standard Chartered, HSBC and Citi- bank, have moved into the
sector. Not to be outdone, the old generation banks located in south India, particularly Kerala
based, Dhanalakshmi Bank have taken a great stride in meeting the aspirations of the poor and
have carried the mantle of microfinance across the state of Kerala. In Tamil Nadu, Indian Bank
plays a very vital role in financing SHGs.

1.2. Status of Microfinance in India.
India has one of the largest networks of bank branches in the world, but the hundreds of millions
of poor in the country are largely out of it. Banks were nationalized three and half decades ago
with the hope and promise that their products and services would reach the poor. But that goal is
not even close to being met today with 52,000 commercial bank branches, 14,522 branches of
Regional rural banks and 1, 00,000 Cooperative bank branches. The country is teaming with
institutions that should be able to meet the credit needs of the people. But if you are poor, you
are also probably out of luck with the banks; it is tough persuading them to ever let you open a
bank account. The consequences have been devastating. Consider these numbers; 75 million
households in India depend on moneylenders to meet financial needs; almost 90% of people in
rural India have no access to insurance; 50 million households are landless and need small credit
to start some economic activity. And even families earning Rs 5000-6000 a month in urban areas
spends huge portions of their earnings to service their never ending debt.*****

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But out of necessity and enterprise, those located out of the banking world have found a way
out. It is called microfinance- the enterprise of small loans to individuals who are too poor to
qualify for traditional bank loans, as they have no assets to be offered as guarantee. In India
microfinance has been working largely through SHGs. Predominated by women, these are
formed with simple rules---save, accumulate and give loans to each other and also get loans from
financial institutions.
India’s demand for microfinance is Rs.500 billion, and only Rs.31 billion of this amount has
been generated so far; these is still a long way to go. Nearly 7.5 million poor households in India
desperately want access to financial services to meet immediate needs. Almost 36% of the
country’s rural households have to look for credit outside the formal sector. A World Bank study
of over 6000 families in Andhra Pradesh and Uttar Pradesh, two of India’s largest states, shows
that 87% of them have no access to credit, 85% had no access to insurance and 56% borrow from
moneylenders. For addressing this problem NABARD and lot of NBFC’s, NGO’s, and voluntary
organization come to address it.******
Top NBFC’s in India are as under: Top NGO’s in India are as under:
SKS Microfinance Ltd (SKSMPL) HAND IN HAND Tamil Nadu

Spandana Sphoorty Financial Ltd (SSFL) MIMO Microfinance Dehradun

Bandhan PRADAN

Grama Vidiyal Micro Finance Pvt Ltd (GVMFL)

1.3. Statement of Problem
Excessive competition in market creates multiple borrowing, huge cash flow, over dues, excess
pressure on members to repay loan, wrong practices in lending money and making over SHGs
groups are mainly causes of competition in between microfinance companies. Unfortunately the
microfinance industry is losing customers, mainly as a result of the MFI’s approach and
strategies. In many cases focus on credit sale, expansive marketing and bottom line results loses
customer preferences. In Microfinance, credit is only a means to satisfy their goals and not an
end in and of it.

1.4. Introduction on Client Retention
The study of client retention provides insight into how to improve products and services offered
to the targeted market by developing effective retention programs and consequently creating long
term relationships between MFI’s and their clients. But why is relation so important? It is not
only because retaining a customer is less expensive than acquiring a new one or because of the
necessity of retaining customer until they are profitable? Rather, client retention is improved
because it is a value generation strategy for the MFI; that is the MFI’s value is not only related to
bottom line of its financial statements but also to the present value of its future revenues.
Guaranteeing the MFI’s future revenues greatly depends upon strengthening its customer’s
loyalty. For this reason, two MFI’s with the same number of customers may have different
revenue-streams. As such, customer retention is not only necessary for MFI sustainability but it
is also a value generation strategy of the organization and shareholders.

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1.5. Research Objectives:
The objectives of the study given by organization are:
1. To determine the level of penetration of various competitors in the study area.
2. To assess the main factors that help in client retention.
3. To identify the problems that excessive competition may lead to like multiple borrowing, over
indebtedness.
4. To identify the unmet needs of clients.
5. To suggest strategies to retain and increase current client base/market share.

1.6. Research Methodology;
Components of research methodology used in the present study are given below:

1.6.1. Research Design

• Desk research – It was undertaken to explore the current status of international
microfinance market and also to collect information about technologies available
for client retention. Desk research aims at searching for information from the
available sources such as press, internet, analytical reports, and statistical
publications.
• Observation – It was undertaken to know the study area, culture of study area, time
table of village respondents, suitability of urban respondent, CO’s availability etc.
• Prepare questionnaire – Four type of questionnaire prepared for HIH staff
members, three year old HIH SHGs, migrated drop out, inactive, dysfunction SHG
of HIH and other MFI’s members.
• Personal interviews – It was for three year old SHGs and dropout members,
personal interview of staff as well as some other NGO’s founder.
• Group discussions – This was adopted for knowing common problem of three year
old SHG members.
• Hypothesis tested:

Does training help in client retention?

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1.6.2 Selection of Branches, Staff and Respondents

The following three branches were selected in Kanchipuram district of Tamil Nadu to
receive the response of clients: -

• S.V Chatram
• Chinna Kanchipuram
• St. Thomas Mount

Table-1 Category of Respondents
Branch selected 3- year Migrated, Other MFI Total
for old SHG’s Dropout & members respondent
research members Inactive covered selected
covered covered for research
(Nos) (Nos) (Nos) (Nos)
S.V CHATRAM 20 10 7 37

CHINNA 20 20 5 45

KAANCHIPURAM

St. THOMAS MOUNT 20 20 10 50
(CHENNAI)

TOTAL 60 50 22 132

Source- field survey

• Internship period 16th May– 24th June 2011 (6-Weeks)

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The following categories of staff were selected for responding:-

Table-2 STAFF

DESIGNATION TOTAL RESPONDENTS TOTAL COVERED

Credit Officer 13 13
Branch Accountant 2 2

Branch Manager 4 4
Regional Manager 2 2
Chief Operating Officer 1 1
Training Department 3 3
Chief Manager 1 1
Legal Advisor 1 1
Credit Monitoring Manager 1 1
Management Information 1 1
Department
HR Manager 1 1
Project Developer 1 1
HO 1 1
TOTAL 32 32
nd th
Note: - On 2 & 6 June 2011, gave midterm presentation in Kanchipuram head office.

Note: - May 23rd, 24th, 25th & 26th 2011 I observed field, members and did some auditing work
on field with my mentor. Started field work on 27th with translator and one field staff like Credit
Officer, Branch managers etc.

1 – We started field work from (27-05-11)

2 – Total fifteen day we worked on field.

3 – Total 164 respondent covered. [Members+Staff]

4 – Average 11 respondents covered per day.

5 – Last four days we spend in making report.

Note: - Taken interview of VEED NGO founder at her home.

1.6.3. Duration of the study

The period of study was from 16th May 2011 to 24th June 2011.

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1.7 Significant of the study

This study would be helpful to HIH to adopt new strategy (see page no.40-57) in
working area. This study also brings out the level of penetration of other MFI’s, NGO’s and
other individual lenders with impact in working area. This study also helps to develop new MIS
and monitoring system because in this report mainly focuses on problems of clients and critical
evaluation of these problems. The hypothesis shows the importance of training and internal loan
in working area because this report is totally based on primary data. The suggestions are made on
the basis of market needs.

1.8. Limitations of the Study;

Time was not enough for working and making report.
Only three branches selected for field study.
Small number of respondents chosen because of time limitation.

References

*“Microfinance redefining the future” book written by V.S. Somanath and published by Excel publication in 2009.
**Sam Dalley- Haris (2007) “State of the Micro Credit Summit Campaign Report – 2007”

***“Microfinance through SHGs: A Boon for the Rural Poor” a research paper written by Rimjhim Mousumi Das
and published by DEEP & DEEP Publications Pvt. Ltd. in 2009.

****“Microfinance redefining the future” book written by V.S. Somanath and published by Excel publication in
2009

*****“Microfinance redefining the future” book written by V.S. Somanath and published by Excel publication in
2009.

******“Microfinance redefining the future” book written by V.S. Somanath and published by Excel publication in
2009.

.

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2.0 HAND IN HAND in brief (as in the organization’s MOA)

Hand-in-Hand is a Public Charitable Trust registered in the year 2002 with an initial focus on
education and the elimination of child labor. HIH worked for economic and social empowerment
of women and thus of society by creating enterprises and job. In 2005 more than 115,000 women
have been organized into, over 7,336 SHGs in 5 district of Tamil Nadu.* It is recalled that year
2005 was observed as the International Microfinance Year (IMY) with the objective of
eliminating poverty by creating enterprises and jobs.

Objective
To eliminate poverty by creating enterprises and jobs.

Vision
To alleviate poverty through job creation and integrated community development.

Mission
To work for the economic and social empowerment of women, and thus of society, by creating
enterprises and jobs. To follow with this an integrated development programmed that creates
sustainable communities.
Five year goal ending 2013-14

To create 1.3 million jobs.

Strategy adopted to fulfil objective

Introduce five-pillar activities for holistic development of poor people especially women. This
five-pillar activity is follow:

1. Job creation 2. Education 3. Health 4. Environment 5. Citizen centers. Apart from these five
pillar activities, HIH has village uplift program.

Out of these five only jobs creation is discussed below because during my research I worked
with SHG-pillar, mainly focus on Job creation.

Job creation

HIH is the only NGO in Tamil Nadu to create job with follow up and take care of SHG
members. HIH provides training to all its members the most famous training by HIH is skill
training like computer class, tailoring, glass paintings, embroiling and many more. Through
training women learn accounting, saving, borrowing & group coordination etc.

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Microfinance

In Tamil Nadu, HIH one of the biggest NGO which provide loan on lowest interest rate and
because of this International Financial Cooperation (IFC)*** invests more in Hand in Hand. HIH
lend to only women and ensures that the loan is used only for investment and creating
enterprises, not for consumption.

HIH five-pillar model has been successfully replicated in South Africa, Afghanistan and Brazil.
Encouraged by these success stories, Prof. Kasturi Rangan, a leading academic at Harvard
Business School, who also chairs the HBS-ACCION microfinance program is leading a course
on HAND IN HAND Social Entrepreneurship Program on the pattern of HBS.

Village Uplift Program (VUP)****

The Village Uplift Programmed is an integrated project in which HIH has adopted all five - pillar
program simultaneously in one village. Each village is supported by one exclusive donor, who
adopts the village for two years for $ 35000. The village uplift program symbolizes practical
application of HIH integrated development approach in one village at a time.

Note: Up to June 2011 more than 674,432 women have been organized into over 46,923 SHGs in Tamil
Nadu.*****

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HIH growth and global presence

Public Charitable Trust.

Registered in the year 2002.

Focus on child labor elimination, education, and the empowerment of women.

Kalpana Shankar is Chief Executive Officer for HIH.

In India, HIH currently active in 17 districts in Tamil Nadu, 6 districts in Madhya
Pradesh, 3 in Karnataka, Orissa, Maharashtra, as well as in the Union Territory of
Pondicherry.

Hand in Hand is also a consultant for the Inter American Development Bank and a
partner with World Vision.

HIH Growth

http://www.hihindia.org/handinhand/facts_and_figures/annual_report/

Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Women 10,000 115,000 206,664 304,000 450,000 609,027 6,74,732
organized

SHGs 500 7336 13,962 21,184 42,169 46,923

New 300 60,779 161,000 248,000 539,094 685,316
Enterprises

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Overall Growth up to July 2011

• Jobs created through SHGs – 801,842
• Child - Friendly Panchayats– 798
• NRM Projects – 14
• Medical camps held - 1913
• Camp beneficiaries - 178,860
• Children enrolled in the school - 97,280
• Village Upliftment Programs– 64
• Waste collection (house hold) - 219,580
• Trained in Job Oriented IT – 5,458
• Total number of CCE’s - 2,883

HIH Global Presence

Page 17

2.1. Flash progress report of HIH**

Resource

*http://www.hihindia.org/handinhand/facts_and_figures/reports/annual_report_2005-2006/

**http://www.hihindia.org/handinhand/facts_and_figures/annual_report/

***http://www.indiaprwire.com/pressrelease/financial-services/2009111237457.htm

****http://www.hihinternational.org/what-we-do/programmes/village-uplift-programme/

*****http://www.hihindia.org/handinhand/facts_and_figures/monthly_report/

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3.0 Penetration of various competitors:
In project area different types of MFI’s are working with full potential. These all are in the form
of Non Government Organization’s (NGO) as well as Non Banking Financial Companies
(NBFC).

NGO’s & NBFC’s were studied in three categories.
Semi-urban – NGO (1) + NBFC (5) = 6
Urban area – NGO (2) + NBFC (5) = 7
Rural area – NBFC (4) = 4

Semi-urban: In this area mainly one NGO’s and five NBFC’s are working with different
attractive strategies. The details of these MFI’s are mentioned below: -

Ragini NGO.
Average group size --- 15
Training --- No
Product --- loan
(Only bank linkage)
Credit Officer --- One man NGO
Meetings --- Twice in a month
Group coordination --- Very strong
Loan period --- First loan is provided after six month and next
loan after the repayment of first loan
Installment --- Monthly
Average Interest rate --- Depend on Bank
Document charges --- Rs.1500-Rs.2500 per SHG
Member getting loan --- All members of SHG getting equally
Money collection --- By SHG leader
Internal savings --- Rs.100 per member SHG per month

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Findings: - Total 180 SHGs are with Ragini NGO in CHENNA KAANCHIPURAM area.
Members join this NGO because of lower interest rate; easy maintenance of books of accounts
and not forcing anyone to attend meetings. This NGO provides loan to its members through
Central Cooperative Bank. Group gets Rs.60,000+Rs.1,00,000+Rs.2,00,000 in four and half
years. The most attractive strategy in Ragini which is missing in HIH is that all loans are
distributed equally to all members. Members of this group indulge in multiple borrowing because
of huge demand in market, as respect of demand they borrow loan from Gram Vidyal and paid
Rs. 270 per week installment for 50 weeks on Rs 10,000 to Gram Vidyal.

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Bandhan (NBFC)
Group size --- Depend on member availability

Training --- No

Loan size --- loan up to Rs 20,000 minimum is Rs 6,000

Credit Officer --- Only for collection money

Meetings --- No

Group coordination --- No, very weak

Loan period --- 50 weeks, and depend on suitability of

Borrowers or

loan will provide after completion of first loan

Installment --- Weekly Rs.(225+25)* on Rs 10,000

Interest rate --- 25%

Document charge --- Yes, taken but not clarify

Member getting loan --- All member getting loan

Money collection --- By CO’s

Internal savings --- No

Findings: - Majority of members in this group is above 60 years of age & they all are having self
enterprises. Bandhan has no restriction on age in giving loan. It gives loans to those members
who already have enterprise. Bandhan attracts borrowers by adopting following strategy “if you
repay Rs 10,000 within 10 weeks then we shall give Rs 6,000 on weekly installments of Rs.
(132+18) installment for 50 weeks.” Bandhan give up to Rs 15,000 to its SHGs for education
purpose. In CHENNA KAANCHEEPURAM 5% of borrowers belongs to Bandhan
Microfinance.

* Rs. (225+25) in this Rs. 25 is security money which will be given back to borrowers after
completion of loan.

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Gram Vidyal (NBFC)
Group size --- 15-20

Training --- yes, depend on member demand

Loan size --- loan up to Rs.25,000 minimum is Rs. 9,000

CO’s --- Only for collection money

Meetings --- No

Group coordination --- No, very weak

Loan period --- 50 weeks, and depends on suitability of

Borrowers or

loan will provide after completion of first loan

Installment --- Weekly Rs.225 on Rs.9,000

Interest rate --- approximately 18%

Document charge --- Rs.500 on Rs.9000


Money collection --- By Credit Officer (CO)


Findings: - Gram Vidyal provide social services to their client and in every 10th week provision
to less Rs.9 from interest, one of the most positive points of Gram Vidyal is that, not charging
any money in the name of security. GV has provision to give Rs.12,000 to their members as
education loan. For attracting borrowers GV approach members by giving extra loan “if you
repaid Rs.9,000 in 10 weeks then GV gives Rs.3000 for 20 weeks on the installment of Rs.75 per
week. GV target those borrowers who already have small enterprises and those who willing to
start new small enterprises. Members like GV because of easy suitability of getting loan and no
force to attend meetings. In CHENNA KANCHIPURAM lot of members having loan by GV,
approximately 20% of total borrowers in particular area. 20%-30% HIH members having loan
from GV (Gram Vidyal).

Note: For Gram Vidyal loan card see annexure 1.0.

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Mahashemam (NBFC)
Group size --- Up to 30

Training --- No

Loan size --- loan up to Rs.25,000 minimum is Rs.10,000


Meetings --- No

Group coordination --- very strong


Borrowers or

Loan will provide after completion of first loan

Installment --- Weekly Rs.459 on Rs.20,000


Document charge --- Rs.1000 on Rs.20,000




Findings: - In every 5 week provision is to reduce Rs.5 from interest and collect Rs.10 with
weekly installment for insurance. Mahashemam said to borrowers that we will give back
insurance amount to members after cylinder or dysfunction of groups. They charge Rs.1 every
week in the name of trust. The maximum members of Mahashemam are not indulging in
multiple borrowing because Mahashemam take care of customer needs. As compare to others
MFIs Mahashemam members having less overdue in group because of good group coordination
and selection of members. All members of this group have enterprises like Embroiling and
grocery, fruit, flower shops. Approximately 5%-10% borrowers belong to Mahashemam
Microfinance from total borrowers of this particular area. Approximately 20% of HIH borrowers
have loan from this NBFC in this particular area.

Note: For Mahashemam loan card see annexure 1.1

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Ashirwaad (NBFC): - On Rs.10,000 Ashirwaad charge Rs.560 for document procedure and
take weekly installment of Rs.225 for 50 weeks.

Samastha Microfinance an NBFC: - On Rs.15000 they charge Rs.500 to Rs.700 for
document procedure and charge 13% interest on loan amount.

Overall view of semi urban area: -

The impact of HIH in semi urban area is very strong. However, heavy demand of loans, wrong
selection of clients, lack of HIH awareness in SHGs and undue emphasis on attending
meetings/training are main causes of borrowers joining other MFI’s. Borrowers general
perception is that these organizations are liberal than HIH in the requirement of training and
meetings.

Chart-1.0

Peneteration of MFI's in Semi-Urban areas

HIH
GRAM VIDYAL
MAHASHEMAM
BANDHAN
Others

HIH- 55%.

Gram Vidyal-21%

Mahashemam- 9%

Bandhan- 8% and Others-7%

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Urban: - In project area different type of MFIs working with full potential. These all are in
form of NGOs as well as NBFCs. In urban area mainly two NGOs & five NBFCs working with
different attractive strategies. The full details of these MFIs are mention below.

Swathi Vaazga Valamudan Welfare Association (P. Leelavathi) (NGO)
Group size --- 15

Total SHGs --- 400

Training --- Yes, on demand mainly skill training

Product --- loan through Bank linkage

Different in loan period --- In 2008 Rs.1.5L, in 2009 Rs.3L, in 2011 Rs.4.5L

Meetings --- Monthly one meeting (80% attendances)

Group coordination --- Very strong (only one SHG dysfunction)

Loan period --- Depend on loan amount and bank


Interest rate --- depends on bank

Document charge --- 2% on loan amount

Member getting loan --- All members getting loan

Money collection --- By leader & representatives

Internal savings --- Yes, strongly believe on this Rs. 110 per month

Findings: - This is a one man NGO managed by P. Leelavati (founder) and her daughter. Total
400 SHGs are managed by this NGO mainly in Kanchipuram and St. Thomas Mount. Members
like to join because of lower interest rate, cooperative style of P.Leelawati, only one meeting in a
month, P.Leelavati’s helping nature, more emphasis on internal savings and segmentation. At the
time of migration, death or late repayment, the responsibility of clearing overdue falls on the
shoulders of all members not only on the group leader. It adopts strategy to provide small loan of
Rs.4000 to each of 15 members at initial level for learning “how to manage?” At initial level
P.Leelavati focuses on learning, group coordination, increasing internal savings, leadership and
book maintaining.

Page 25

NWTWS (NGO)

Group size --- 12 - 15

Total SHGs --- More than 200

Training --- No

Product --- loan through Bank linkage

Different in loan period --- In 2009 amid get Rs.1.5L, in 2011 get Rs.4.5L

Meetings --- Every Sunday

Group coordination --- Very strong

Loan period --- Depends on loan amount and bank


Interest rate --- depends on bank

Document charge --- 2% on loan amount

Member getting loan --- All members getting loan

Money collection --- By leader & representatives

Internal savings --- Yes, strong commitment, Rs. 210 per month

Findings: - Through bank linkage, members get more loans from bank and equally distribute
amongst all members. The most noticeable part of this organization is that members have
adequate knowledge about NWTWS, majority of group members go to branch office weekly.
Internal savings are one of the strong reasons for group coordination. Because of this they
accumulate and deposit large amounts of money in Bank and distribute to every members on the
basis of priority. Members recieve internal loan up to Rs.5000 in a month. According to
members of NWTWS, staff did not charge any fees or bribe. Credit Officers attends meetings
regularly.

Page 26

Mahashemam (NBFC)
Training --- No
Loan size --- Loan up to Rs 25,000 minimum is Rs. 5,000
Meetings --- No
Group coordination --- very strong
Loan period --- 50 weeks, and depends on suitability of
Borrowers or
Installment --- Weekly Rs 459 on Rs 20,000
Document charge --- Rs.1000 on Rs. 20,000, Rs. 700 on 10,000
Rs.380 on Rs. 5,000

Findings: - Members like lending process and after the death of husband member get Rs. 2000.
Every year give Sari & Calendar to members and provide scholarship to those members
children’s who hold first position in board exam (Rs. 5,000), second position (Rs. 3,000) and
third position (Rs. 2,000). In every 5 week the provision is to reduce Rs.5 from interest and
collects Rs.10 every week for insurance and said give back insurance amount to all members
after cylinder or dysfunction of group. Mahashemam charge Rs.1 on the behalf of trust. HIH
should be consider ‘How Mahashemam retain his client?’ Mahashemam retain clients through
business of ‘take care’ of his client needs. No overdue in group because of good group
cooperation and selection of members at the time of building SHGs. All members of this group
have small enterprises. Approximately 15%–20% is Mahashemam borrowers from total
borrowers of this particular area. Approximately 20% of HIH borrowers have loan from this MFI
in this particular area.

Page 27

Gram Vidyal (NBFC)


Training --- Yes, on demand. Handloom, bag and tailoring

Loan size --- Loan up to Rs 25,000 minimum is Rs. 75, 00

Credit officer --- Only for collection money

Meetings --- No

Group coordination --- Moderator


Borrowers or


Installment --- Weekly Rs 250 on Rs 10,000


Document charge --- Rs. 570 on Rs. 10,000


Money collection --- On Saturday in home By CO’s


Findings: - On the loan lending day all borrowers get day meal in office. Members get loan in
the order Rs.75, 00+10,000+10,000+25,000 in one year by GV. Majority borrowers of GV are
micro entrepreneur and they have flower shops, Tiffin, Vegetable shops and Sari business. GV
loan disbursement strategies are on the basis of need and requirement of borrowers. GV always
confirmed that borrowers have ability to repay the loan amount or not, when GV satisfied then
they continually provide loan up to Rs.25000. More than 50 active groups of GV in St. Thomas
Mount but majority are not satisfied.

Page 28

Equitas (NBFC)


Training --- No

Loan size --- Loan up to Rs 20,000 minimum is Rs.10, 000


Meetings --- No

Group coordination --- moderator

Loan period --- After two year and depend on suitability of

Borrowers or


Installment --- 48 times, half monthly Rs 400 on Rs 15,000


Document charge --- Rs. 250 on Rs. 15,000


Money collection --- In home By CO’s


Findings: - Equitas is an MFI, charge highest interest rate in Tamil Nadu. Equitas members get
loan in order to Rs.10,000, Rs.15, 000 and Rs.20, 000 in one year. Its target members are not
poor. Equitas provide money to those persons who already have a self micro business. In urban
area people need more money because they have good earning and that’s why borrowers do not
worry on interest rates. One misunderstanding is in between borrowers that Equitas charge 10%
of interest but in actual they approximately charge 28%. How Equitas approach it should be
consider for HIH.

Page 29

Overall view of urban area: More than 25 MFI’s actively working in urban area in this some
NGO’s provide only bank linkages and some are provide only self credit amount. HIH is far
better than these NBFC’s & NGO’s by providing both with credit plus activity. Heavy demand
of loan and enterprise size attracts MFI’s in urban area. Urban client did not want any training
and credit plus activity, this is the main reason behind to inter all MFI’s in urban area because
operational cost is less. They demand only money and market linkage. The regional economy
depend on Sari business, vegetable shop, flower shop, hand looming, leather product, perfume
cover, show ribbon, tailoring, fish merchant, Tiffin business & ice-cream shop.

Chart-1.1

Share of MFI's

HIH
GRAM VIDYAL
MAHASHEMAM
EQUITAS
Others

In urban area mainly in St. Thomas Mount Mahashemam impact is very strong. People are
attracted towards Mahashemam because they give gifts and scholarship to their group members.
They target the psychology of the borrowers, maximum borrowers attract because of its loan
installment process. In the case of Gram Vidyal; good loan size, easily availability of loan and no
interest in last week on capital attract borrowers. Provision of insurance is also one of the
strategies in making sound brand of products by NBFC’s.

HIH impact in urban area is good. The only reason to take loan from other companies is
excessive demands of loan, lack of awareness about HIH and gap between first loans to second
loan.

In urban area 50% of total borrowers belong to HIH, in this 30%-40% members involve in
multiple borrowing. The most interesting part is multiple borrowers have full trust on HIH. They
all are not like other MFI’s because of high interest but high demand of money and for survival
in the market attracts members to borrow loan from other MFI.

Page 30

Rural
In project area different types of NGO & MFI play role as a lender. In village ASEFA, FFASL
Ashirvadam, & Mahashemam working with different attractive strategies which is mention
below:

ASEFA
Training --- Provide to good SHG’s & on demand
Product --- Bank loan, group loan & individual loan
CO’s --- Different CO’s for individual loan & group loan
Meetings --- Monthly once (member not attended)
Group coordination --- Moderator (One SHG inactive out of total two)
Loan period --- After completion of loan
Installment --- Monthly for group loan & weekly for
Individual loan
Interest rate --- On 10,000 they provide 9,500 and charge 12.5%
Document charge --- Rs. 30-200 on Rs. 10,000
Money collection --- Leader collects and pays in
office
Internal savings --- Yes, Rs. 100 per month
Findings: - Members attract towards ASEFA because it provide both group loan and individual
loan in the same time period. ASEFA still in this area because of its group leader. Group leader
and group members knows staff with name, it shows staff actively involved in group. Group loan
distributed equally among all members. ASEFA approach group members to join training but
member did not like to go for training because of good enterprises.

Reason for continue: - Members replied that, ASEFA did not force to attend meeting and in other
hand HIH force to attend all meetings. According to leader “we know ASEFA charge more rate
of interest but we all are not worry about rate of interest” because we all are having good
earning.

Note: - Total 14 SHG of HIH and only one SHG of ASEFA in particular area.

Page 31

Ashirvadam
On Rs.10,000 they charge Rs.160 as document procedure and take Rs.960 as weekly installment.
Overall interest is 16.8%.

FFASL:
On Rs.10,000 they charge Rs.1000 as security and adopt weekly installment payment system.
12.5% interest rate charge on 10,000 except security.

Mahashemam: On Rs.10,000 they charge Rs.700 as document procedure and have 50 week
installment payment system. They charge Rs.15,00 interests on Rs.10, 000.

Note: Kaveri Finance also active in village area of Kaancheepuram.

Overall view of rural area: - In rural area HIH impact & image is very strong but because of
less awareness and more demand especially ‘education loan’, people like to borrow loan from
other MFI.

Chart-1.3

Share of other MFI

HIH
AHRUWALI
ASEFA
MAHASHEMAM
Others

Ahruwali (the State Government initiative scheme) having good impact in rural area. People
believe on this scheme but lack of follow up create members migration to other MFI and mostly
members are joined or willing to join HIH. In the name of competition no MFI exist in rural area.
Members borrow loan from other MFI just because of buying cow and for submitting education
fees.

Page 32

3.1. Choice of getting loan at the time of needs in the villages (three year old
SHG)
• Jewel loan --- 6%
• Individual loan --- 40%
• Other MFI loan --- 3%
• Internal loan --- 99%
• Bank --- 10%
• Member know other MFI --- 30%

Reason: -Borrowers bound to take loan because of children education, marriage, medical,
maintenance of house etc.

Note: - Government allotted houses in rural area is not in good condition. In every year at the
time of rainy season borrowers invest more in house maintenance.

Impact: - Multiple borrowing increases, overdue in between group members, pressure of excess
loan and group coordination. Internal loan demand increases because of paying overdue and this
is the main reason for group inactive.

3.2. Level of HIH penetration in village
• % of three year old SHG members know HIH vision & mission --- 60%
• % of Staff know HIH mission & vision --- 50%
• % of three year old SHG members know about product of HIH --- 65%
• % of three year old SHG members went to branch office --- 70%

Findings: - Majority of respondent belong to 5 year old SHG but 40% are totally unknown about
HIH vision & mission and other side HIH staff statement was ‘we discuss mission and vision in
every group meeting.’ Only Credit Officers going to attend group meetings and other hand only
40% of Credit Officers know exactly HIH mission & vision.

At the time of interview with some staff members use dairy to reply HIH mission & vision. HIH
is famous for its products and social services but this is also one of the fact is that 35% of three
year old SHG members did not know about HIH all products. If we talk about social services
then only 40% of three year old SHG members know HIH social services. One of the main
reasons of dysfunction SHG’s is Credit Officer resignation and after Credit Officer resignation
particular SHG members face problem in running SHG’s. This problem exist because of
members are unknown the address of branch offices and staff names. In this point of view 30%
members did not visit branch office.

Page 33

4.0 To assess the factors that help in client retention
Causes of desertion of the HIH can be categorized in five groups, which in combination
determine customer satisfaction levels:

• Satisfaction with the product

• Quality of customer service

• HIH image

• Emotional involvement and

• The profile of customer.

Careful analysis of each of these factors reveals major dissatisfaction with product features.
Quality of customer service is a complementary source of dissatisfaction, but to a lesser extent,
emotional connection the customer possesses with the HIH mitigates most weaknesses in
customer services.

Competition and the pressure of growth goals make the HIH define a broader market and
develop more credit products, with little differentiation among them, diluting its market focus
and complicating the administration with limited retention results. Similarly, HIH emphasizes
improving customer service, to gain a competitive edge; yet, this does not necessarily diminish
attrition, given the limited window the HIH has for innovation.

Page 34

4.1. Why HIH SHGs are inactive? Some of the important reasons are: -

Multiple borrowing;

SHG members migrating to any other area;

SHG members leave the place after borrowing HIH loan;

SHG members leave the area after borrowing internal loan;

After leaving members from SHG all responsibility is on leader;

Loan amount is not distributed equally;

Out of 12-15 group members only nine members get first Grameen loan;

Members have overdue;

Lack of leadership quality group;

Leaders and representatives do not rotate their position in group ;

Lack of group coordination;

Leaders and representative get more internal loan;

In maximum cases leader and representative of a group get first loan, second loan& third
loan;

loan size;

Illiteracy among members;

Marriage of leaders and representatives;

When SHGs Leader getting better job;

Problem not solved in meetings and

Meetings are not arranged properly.

Page 35

Findings: - Multiple borrowing is the main cause of dysfunction in SHGs. In urban areas
borrowers do not want huge amount of money in one installment, they want amount in a few
installments. For example; a borrower has an ice-cream shop. In Tamil Nadu demand of
ice-cream depends on seasons (consumption rate of ice-cream is high in May and June) So,
in the month of March demand of loan is almost nil but in April it increases, in May
demand increases further, June is the peak month for ice-cream business so the shop
keepers want loan to fulfill the demand and this is the time to earn more.

Migration of SHG members is one of the main causes of SHGs becoming inactive. Sometimes
members migrate from one place to another because of her husband’s job, relatives call,
member’s marriage, family migration, and for son’s or daughter’s education etc; after migration
the whole calculation of internal savings and the loan amount is affected negatively. If leaders
and representatives migrate, probability for group becoming inactive is very high.

99% chance to group will become inactive when members leave the place after getting loan. In
this condition all responsibility would come on the shoulder of leaders. Leader is only member
who has to pay all over dues of migrated members.

Group coordination or less coordination is also one of the major factors which force group to
become inactive at the time of loan distribution. Main reason in lacking group coordination is
HIH not providing loan to all members. Leaders & Representatives want to tag more loans. So,
the ego problems between them creates problem in group coordination.

Illiteracy is one of the major problem in all SHGs, most of the SHGs are inactive because of only
one member is educated in the group; and when she dies, migrates, gets job or because of any
other reason she leaves the group, then the whole group becomes inactive. All information and
calculation will go with migrated member who manages all books of account. Uneducated SHG
members are totally blank about their internal savings & how much they get bank loan or HIH
loan.

Problems of group member are not sorted out easily because of improper arrangement of
meetings. Members have problem like 1) overdue, 2) who will be going to branch office to pay
installment? 3) Internal loan distribution and; 4) Book keeping. Because of these four problems
lot of SHGs deactivate.

Last and valid reason of group becoming inactive is:-

Credit Officers resignation or non availability of Credit Officers.

Page 36

4.2. Why HIH members migrated to other MFIs or NGOs?

Inadequate loan size from HIH;

Delay in providing loan;

Demand of money;

For education loan;

Wrong selection of members;

Monthly installments;

Misunderstanding between members at the time of loan distribution;

Multiple borrowing by clients;

When groups called inactive, then inactive group members migrate to borrow loan;

In HIH, members gets Grameen loan after six month of joining not on emergency time;

HIH inspect that member start business or not and

Members did not get services and training.

After area migration, all responsibility of overdue comes on the leader shoulder.
Findings: - The main reason of migration is loan size; near about 70% of weightage of all
problems is loan size of HIH. In urban area borrowers want current loan because they have daily
business activity and they earn on the basis of daily business that’s why borrowers choose other
MFIs because maximum of NBFCs provide loan on current demand and on weekly payment of
installment. The time gap between HIH first loan to second loan also affects borrowers. For
example: a borrower having tea business (supplies tea in offices) and her daily expense in
making tea is Rs.1,000 means Rs.26,000 is the total expenditure in a month. In tea business
borrowers get money from offices in the form of cheque at the end of every month. In this
situation borrowers need to get urgent loan and this time Gram Vidyal, Mahashemam &
Equitas stand outside the doors of borrowers with money.

Majority of members in villages work on daily basis that is why they refer to pay weekly
payment.

Page 37

Overall view of 4.1 &4.2

Four major reasons behind HIH SHGs being inactive are (a) Lack in group coordination,
(b) Migration of members, (c) Illiteracy among group members and delay in loan disbursement.

Graph-1.0

45

40

35

30

25 Group coordination

20 Members migrated
illiteracy
15
loan delay
10

5

0
Group Members Illiteracy loan delay
cordination migration

Findings: - Above graph shows that 40% of group migrated or became inactive because of not
having sound group coordination. 25% of SHGs became inactive and migrated because of
migration of other group members from one place to another place. 20% of group migrated or
became inactive because they did not have any criteria or management to follow those SHGs
who have only one educated women and 10% of HIH SHGs migrated in any other MFIs just
because of delay in loan disbursement.

Note: - Loan size of HIH should be taken into consideration because in both, rural as well as
urban areas borrowers dislike loan size.

Page 38

4.3. Causes of desertion in HIH;

STRUCTURAL

DESERTION

CUSTOMER
SEGMENTATION
SATISFACTION

CUSTOMER
STRUCTURAL SEGMENTATION
SATISFACTION

Geogr-
Growing Product HIH Customer
competetion adequacy Product image profile phical
image
factor

Psychogr-
Market Regional Economic Customer Emotional Self Behaviour phic
Life style
adequacy factor factor service value esteem patterns segmenta-
tion

To improve retention, HIH needs to review the causes of desertion. Causes of desertion are
numerous and sometimes inter-related, as below: -

Page 39

4.3.1 Growing competition:-

In the same target market 5-6 big names create face to face competition. For instance:
Mahashemam, Spandana, Gram Vidyal, ASEFA, Equitas and lot of ‘one man NGO’s. In
general, all these MFIs & NGOs operate in fragmented market, in which diverse
participants in nature and size compete; as a result, the market share of HIH is diluted.
Even the leader of the market (like HIH) will fail to reach to 30% market participation.
The small MFIs & NGOs compete with large NGOs (like HIH). For example: some
places in St. Thomas Mount, an NGO named Swathi Vaazga Valamudan Welfare
Association did microfinance business with clients and this small NGO reduced the
positional advantage of HIH.

Human Resources: - Moreover, having a credit evolution methodology is not an entry barrier for
new competitors since it is based on the expertise of its human recourses, which can be captured
by a new entrant by hiring away the competing MFI’s and NGO’s staff. Indeed, this aggressive
competitive strategy is taking place, evidence by high levels of loan officer turnover in the
microfinance industry.

Impact of growing competition: -

1- Attractive offers by other MFI’s easily attract consumer & HIH members.

2- People easily understand difference between two MFI’s, this may create problem or may
increase the trust level of HIH. The loan size of HIH is less than the other MFI’s,
according to this point of view borrowers make negative perception in mind and on other
hand HIH provides trainings & social services, this should make positive perception in
the mind of borrowers.

3- Multiple borrowing, because of increasing competition, members easily borrow loan
from other MFI’s.

4- Overdue, by increasing multiple borrowing overdue also create problems for borrowers.

5- 30%-40% group coordination is affected by increasing competition.

Note: - see 3.0 for knowing the penetration of other MFI’s & NGO’s in working field.

Page 40

4.3.2. Product adequacy: -

The basic credit product proposition, with stepped lending amounts, does not fit with the
client that has already learned and evolved in members credit needs, where microcredit is
not necessarily the most adequate product, resulting in high attrition levels due to the lack
of sustainability that small loans produce or due to the vulnerability of customers being
approached.

For expansion of credit portfolio or for credit renewal HIH will adopt Consumer
Confidence Index (CCI). CCI measures how optimistic or pessimistic consumers are with
respect to the economy in the near future.

Note: - HIH does not have any study on product adequacy and this is the main reason behind the
gap between the first loan to second loan and size of loan.

By field: -

% of three year old SHGs know HIH products --- 35%

% of staff know about HIH products (CO’s & BM’s) --- 100%

% of staff believe that the HIH loan size is good --- 80%

% of SHGs inactive and migrated because of only loan size --- 10%

4.3.3 Market adequacy: -

The basic microfinance model assumes, a market that has to be developed and HIH
develops market with positive impact in urban as well as in rural areas. Lot of potential
customers who took loan from individual person on high interest rate, now maximum of
them have become HIH’s good clients. This type of clients are continuing with HIH and
because of these clients market expands like anything, up to June total 6,43,633 number
of enterprises have been created so far.
HIH start SHGs with training without charging cost, this is a very attractive part to catch
market. HIH follows the famous quotation “First impression is the last impression” that’s
why at the time of introducing SHGs they provide training to group members on ‘how to
manage internal savings and loan.’

Note: - HIH does not have any study on market adequacy and this is the main reason of a
gap between the loan period, loan size and CO’s resignation.

Page 41

4.3.4 Regional and economic factor: -

Regional economic factor is one of the most influencing factor for desertion. On the basis
of regional economy micro entrepreneurs project the future sale. The regional economy is
an essential consideration in the decision to renew credit, regardless of the quality of
credit offer.

In HIH working area 80%-90% of regional economy is based on milk business,
embroiling, zarf, silk sari production, leather made products, flower shop, agriculture,
aquaculture, Tiffin business, tailoring, small grocery shop, tea business, ice-cream sale
and vegetable shops. If, HIH focuses to promote these business by providing loan then
client will find it easy to repay the loan amount and then no overdue on group members,
no training would be necessary only follow up and take care of product will be required .

In rural area; mainly milk business, agriculture and embroiling work is done by micro
entrepreneurs and these three micro business shares approximately 90% of regional economy.

In urban area; zarf work, sari sales, leather, flower shop, Tiffin business, tailoring, small grocery
shop, tea business, ice-cream shops and vegetable shops share 80% of borrower’s regional
economy.

Note: - Regional economy study provides to learn client unmet needs. HIH does not have any
study on client unmet needs.

% of three year old HIH borrowers has own enterprise ---70%

% of borrowers spend money in their family business ---20%

% of HIH members has multiple borrowing because of expansion in regional business ---20%

Findings: - Total 70% of HIH borrowers have own small enterprises and 20% is spent in their
family business. HIH has to maintain this pattern and take care. HIH needs strategy to provide
loan at the time of emergency otherwise these borrowers will be indulging in multiple
borrowing.

Page 42

4.3.5 Product image: -

HIH has five types of loan products.
1- Grameen loan a) first installment of Rs.7500
b) Second installment of Rs.10,000
c) Third installment of Rs.15,000
SHG members will receive first installment loan after six month of formation, then
second and third installment loan will get after the completion of first and second loan
simultaneously.

% of minimum three year old SHGs member get third loan --- 63%
% of three year old SHGs member unlike Grameen loan in urban area --- 80%
% of staff believe that loan size is main cause of multiple borrowing --- 30%
% of CO’s have problem in approaching client because of loan size --- 40%
% of SHGs inactive and migrated because of loan size --- 10%

2- Through Bank linkage member receive loan up to Rs.5,00,000 and minimum is
Rs.60,000.

% of minimum three year old HIH SHGs members like bank linkage --- 80%

% of minimum three year old HIH SHGs member satisfied --- 80%

3- Educational loan Rs.7,500 to Rs.12, 000 per member. (all for three year old SHG)

% of three year old HIH SHGs want education loan --- 50%
% of HIH SHGs member already have education loan from other MFIs--- 15%
% of HIH SHGs members using internal loan for education purpose --- 85%

4- Water loan --- Rs.3000 in rural area and Rs.6000 in urban area
5- Toilet loan --- Rs.7500 in both area

Interest rate: - 15% per annum excluding bank linkage.

HIH SHGs members who are worried about interest rate --- 12%

Page 43

Findings: - In urban area 80% of borrowers not like Grameen loan because of its size and time
period. All SHG members did not get first loan (only 9/15 get) and if member having Grameen
loan then they will not apply for bank linkage. Education loan is one of the most demanding
products in between HIH SHG members because mostly members depend on daily wages, that’s
why at the time of school reopen demand of education loan increases.

4.3.6. HIH image: - Depend on follow up

No doubt is being made on HIH image, but this image needs to be converted into trust.
The main reason of migration is losing trust, whether from the side of staff or by
products.
HIH is famous for its social services. This is one of the most eminent Trusts in Tamil
Nadu which provides lot of social services as credit plus activity like health camp, eye
camp, environmental camp provide education to SHGs member children etc.

% of 3 year old HIH SHGs member knows about social services --- 64%
% of 3 year old HIH SHGs members benefited --- 29%
% of HIH inactive & migrated SHGs members knows social service --- 50%

HIH image also depends upon Credit Officers (CO) behavior on field and the way she
approach, solve disputes in meetings, attend meetings, politeness at the time of overdue
and help in book maintaining etc.
Note: - One of the branch manager told in interview that CO’s approaching style is not
good some time it hurts and give suggestion to HIH for build up new strategy on CO’s.
% of CO’s attend group meetings (as per the CO’s) --- 100%
% of CO’s behavior change after overdue --- 50%
% of groups inactive because of lacking weekly meeting --- 30%
% of three year old SHGs member like their CO’s --- 100%
% of 3 year old SHGs members knows BM & RM --- 20%
% of 3 year old SHGs member visited branch office (except leaders) --- 20%
% of migrated, inactive member’s disputes not solved by staff --- 0%
% of inactive members want to become active if problem solved --- 60%

Note: - 100% member like CO’s but after overdue 50% members not like CO’s

Page 44

4.3.7. Quality of customer service: -

Though HAND IN HAND still has lots of grounds with respect to improving customer
services, since HIH customers have lower expectation about service, except training, this
makes it less important cause for desertion. In addition, the personalization and emotional
involvement of the customer frequently replaces the service weakness of the HIH.
Quality of customer service based on three types;

1- Training;

2- Social services; and

3- Follow up.

Training: -

Issue: Does training help for client retention?

HIH provide four types of training to SHGs members namely;

a) Animator & Representative training: - This training is for animators, leaders &
representatives. Branch Managers and Credit Officers give A&R training at the time of
starting SHGs. The objective of this training is to provide full knowledge on book
keeping and account maintaining.

b) M-1 training: - This training is for all group members. The objective of this training is to
maintain group coordination among SHG members. M-1 training is compulsory for every
group member after one month of starting of the group.

c) M-2 training: - This training is compulsory for every member. The main objective of M-2
training is to provide basic concept of micro business or micro enterprises.

d) M-3 training: - This is not compulsory, it is given on demand of members. The main
objective of this training is to develop skills in group members for starting enterprises.
The main component of this training is tailoring classes, computer classes, and hand loom
product making techniques, glass paintings and many more.

Page 45

My field interviews through up the following patterns in training:-

In Rural Areas: -

% of three year old members who did not get skill training --- 50%

% of members who want skill training --- 60%

% of members “like” skill training --- 80%

% of SHGs inactive because of not getting skill training --- 0%

% of members who got skill training but not using it --- 25%

% of inactive members who did not get skill training --- 40%

In Urban Areas: -

% of members who did not get skill training --- 85%

% of members who got skill training but not using it --- 20%

% of three year members who want skill training --- 23%

% of members “like” skill training --- 80%

% of SHGs inactive because of not getting training --- 0%

% of inactive members needs training --- 10%

% of inactive members who did not get training --- 20%

In both areas: -

% of staff who thinks training is very useful for client retention --- 50%

% of other MFIs & NGOs like HIH training (total 10 members know HIH) --- 50%

Findings: - No group migrated to other NBFC’s or NGO’s & became inactive because of not
getting training. HIH services are very active in rural area. 60% rural SHGs member wants skill
training. HIH training and services are liked by majorly all borrowers where as other MFI’s
members also like HIH training. In short training does not play very important role to stop group
or members migration.

Page 46

Social services: -

HIH is well known for its social services. This is an NGO in Tamil Nadu which provides
a number of social services like health camp, eye camp, and environmental camp. HIH
provides education to children of SHG members and many more.

% of CO’s and Branch Manager (BM) who are aware of social services --- 100%
% of three year old SHG members who are aware of social services --- 62%
% of three year old SHG members benefited by social service --- 33%
% of inactive & migrated SHG members who are aware of social service --- 50%

Findings: - All Credit officers (CO), have knowledge on social services but they do not like to
share it. Social service is a type of weapon which can be use only for sound not for shoot. When
I was takin interview of Mahashemam, I saw her eyes full of emotional attachment with
Mahashemam because every year Mahashemam provide her a sari and give scholarship to the
children of SHGs members.

Follow up: -

Group follow up is very important to know a) client needs, b) client problems, c) special
issues, d) problem in distributing internal savings, e) building trust and proper group
coordination. This work should be done properly by Credit Officers & Branch Managers.

After CO’s resignation SHGs members do not know the staff and liable to be inactive,
follow up is only the solution to this problem.

60% of inactive SHGs will become active if group coordination is maintained and they
solve their internal group problems.

Note: -1 - In St. Thomas Mount 10 HIH SHGs are inactive because of two Credit
Officer resignation.

Note: -2 - HIH needs to provide training to CO’s and Branch Managers on ‘how to follow
groups? Only attending meeting is not enough, must share & care with SHGs. This is the sure
way to build trust.

Note: - 3 - % of three year old SHGs members know mission and vision of HIH --- 50%

Page 47

4.3.8 Emotional involvement: -

Emotional involvement plays a crucial role to coordinate in between both sides. As
Shown in the diagram below, this is not a one way approach.

Staff Staff

Lower Upper
Staff staff

SHGs
Staff
member

Staff HIH

Emotional involvement in between Staff & SHGs builds trust. Sometimes client’s
expectation is high from the side of staff, wants to indulge in between them and wants a
relation. Client knows very well that only staff will help in providing loan and help us at
bad time.
HIH is internationally famous for its five-pillar activity and on the basis of this Dr.
Ranjan started programme on social entrepreneur. “Credit Plus” program is totally based
on five-pillar activity so, it’s very necessary to maintain good coordination between all
pillar staff. HR manager plays very crucial role for doing this job.
HIH Credit Officers have inhibition to discuss the problem with Regional Managers and
RM’s have inhibition to discuss with the COO. To address this problem, first kill fear and
make friendly atmosphere in working place. For instance; Play Rajnikant movie and
invite higher as well as lower staff of all pillars in Kanchipuram head office.

Page 48

Techniques to build emotional involvements: -

1- TAKE CARE

STRATEGY
MAKERS

TRAINING
TEAM

HIH SHG
members

: - Through example the above diagram should be clear.

• HIH plan to disburse loan for buying Sewing Machines because of heavy demand and
regional economic factor. This information is sent to all branches of HIH. Regional
Managers and Branch Managers provide information to Credit Officer and set target of
giving loan to 100 members. Credit Officer collects all information and application of
100 members. After analyzing all the factors of 100 applicants, strategy makers found
that 50 applicants did not know tailoring. Strategy maker passed order to training
department to provide training on tailoring. Borrowers were so happy because they got
training as well as loan. In the eye of borrowers HIH is called as “parent” (HIH builds
attachment here) and Credit Officers are very good according to borrowers.

Cont…..

Page 49

• All borrowers bought sewing machines and they continually earn money and every
month they paid installment on time. After 6 months HIH found that 20 borrowers did
not pay the 7th installment. Credit Officers found that these 20 borrowers sewing
machine did not worked properly. At the beginning stage machine performance and
output was very good but after 6 months machine performance decreased in absence of
maintenance care. Borrowers did not know as to, when machine required servicing, after
how many days handle should be greased and all small-small factors which were directly
responsible to decrease the performance of sewing machine. Out of these 20 borrowers,
10 borrower’s machine stopped working and they spent Rs.1000 in repairing sewing
machine, means, an amount equal to two installments. At last borrowers were not able to
pay the loan installment.

Effects: -

a) Overdue on borrowers;
b) Increasing pressure to pay overdue on borrowers;
c) Because of overdue Credit Officer got pressure from RM’s and BM’s;
d) Resignation of Credit Officer;
e) Credit Officers behavior and attitude changed at the time of approaching borrowers after
over dues; and
Note: - 50% Credit Officer’s behavior change after overdue
f) Lacking group coordination in between group members.

Results: - a) Multiple borrowing

b) If 20 members belong from five different SHGs, it means 4 members per SHG have this
problem. So, may be out of this five SHGs two SHGs will become inactive.

c) In short, out of 100 members 8 members will face trouble and because of these 8
members 2 SHG will become inactive and two SHG inactive means 24- 32 members will
not be empowered.

Overall: - 24% to 32% of members out of 100 are inactive just because of HIH did not have
appropriate strategies to take care of borrower asset (sewing machine).

Solution: -

a) At the time of giving M-3 training, HIH must provide training on how to take care of
borrower assets.
b) Introduce COMMUNITY RADIO http://en.wikipedia.org/wiki/Community_radio in
village area. This is 100% subsidy scheme announced by Central Government.

Page 50

2- ROLE OF OPERATION / HR MANAGER FOR EMPLOYEE RETENTION
Note: - Because of two Credit Officer’s resignation 10 SHGs migrated and
became inactive.

A) Review meetings must be arranged in proper management with certain objective and
should adopt strong MIS for analyzing performance of staff, particularly Credit Officers,
Branch Managers & Regional Managers.

B) Find the factors & solutions of releasing the target on the staff.

C) Motivational activities should be organized at the work place with certain objectives.

D) Right recruitment, because some Credit Officers do not have the extent level of
understanding and cannot solve the dispute among members. Dispute is one of the
biggest factors responsible for the lack in group coordination.

Findings:-

1) 40% of SHGs became inactive and migrated because of inadequacy in group
coordination.

2) According to HIH Human Resource Manager; employee retention is directly
proportional to client retention & SHGs are inactive mostly because of lack of
monitoring and lack of staff participation with groups.

3) HIH SHG operation department does not have any training on client retention.
Interaction between staff is not sound.

Page 51

4.3.9. Segmentation variables which directly related to client retention
directly
Clients may be analyzed from various perspectives, called segmentation variables. In the
case of inactiveness & migration, it is very important to note that segmentation variables
must be based not only on elements related to credit, but also on behavior patterns, like
credit,
psychographic (i.e. life style) segmentation that will provide in depth insight as to the
in-depth
reason for migration and inactive
inactiveness.

Segmentation variables involved in retention -
retention:

Customer should be analyze by----------------Six perspectives or segmentation variables
analyzed

Stability of family income
Borrowers have confidence Tention free at the time of overdue

Microbusiness level income
Knows current business Need only monitoring & follow up

Attitude towards loan

On the basis of caste

Age and experience as a micro entrepreneur
micro-entrepreneur

Intensity of doing work
Find out members goals What they knows about work

Page 52

At the time of forming an SHG, always remember the following:
Do not allow unmarried girls to join and if other members of SHG select them, then
never give them big responsibilities (i.e. leader & representative)

In group, atleast 2-3 members should be educated and have training for book keeping
through HIH.

Members are only from local area.

Government working women should not be a leader of a group.

Leader of a group should not be working in any private job.

Ensure that before joining SHG, members did not have any multiple borrowings.

If applicant migrated from any other area and wants to join SHG in present living area,
then find out the reason of migration.

Supportive arguments: - In fig. 85% member migrated or inactive just because of
wrong segmentation.

Graph- 1.1

4.5

4

3.5

3

2.5 Group coordination

2 Members migrated
illiteracy
1.5
loan delay
1

0.5

0
Group Members Illiteracy loan delay
cordination migration

Page 53

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