Newsletter of Sanchetna Financial Services a Lucknow headquartered Microfinance Institution. www.indiamicrofinance.com www.sanchetnaindia.com

1. V O L U M E 1 , I S S U E V I 1 J U N E , 2 0 0 9
Sanchetna ties up with Unitus Capital
Sanchetna has entered into an agreement with Unitus
Capital wherein Unitus will act as a financial advisor in
respect of Sanchetna’s debt and equity capital raising
till September 2010. The Bangalore based company,
delivers a range of financial advisory and specialized in
arranging capital for Microfinance Institutions.
Sanchetna in the final leg of “Power of Ideas”
The Power of Ideas programme has entered its last leg. The
Elevator Pitches are now finally over. The final shortlist of
participants, chosen after the Elevator Pitches, has been an-
nounced. Sanchetna’s Lokesh Kumar Singh is also amongst
the finalists selected. Along with the other participants,
Lokesh will now be assigned senior mentors who can be con-
sulted over email and phone, besides face-to-face sessions,
over a dedicated period of two weeks, on everything that it
takes to create a business plan worthy of investor interest.
The candidates will go through a one-on-one mentoring for
9 days and then an investor meet in the month of June.
Barabanki gets news rays of Light
Distributed World Power (DWP), a California based energy company has entered into a partnership
with Sanchetna Financial Services Pvt. Ltd. As part of the agreement, the field associates of the Bara-
banki branch will also be taking the solar powered lamps to the villages. The product will be sold to
both the members and non – members at affordable rates. Clients will also be given special loans from
Sanchetna, the funding for which will be taken care by Distributed World Power.
DWP is positioning itself to become the leader in affordable energy generation products designed spe-
cifically for off-grid use in emerging markets. They have deep expertise in product development across
many modern technologies including solar PV, solar thermal, wind, and human-powered products, and
will be piloting their new product in the rural areas of India.

2. Do we really value our clients ?
The Chinese proverb “May you live interesting times” is apt for the Indian Microfinance sector at large. The sec-
tor has gone through a sea of changes over the last few years. The print and the electronic media have given us
world-wide coverage & the world has taken note of us. We are being talked about and written about in almost all
forums. Even the minutest of moves are being scrutinized at great length. Judgments are being passed and guilty
are being pronounced. The world is watching us closely and experts world over consider the Indian market as
somewhat unique and are using it as a testing laboratory.
However without trying to sound cynical I wonder if enough focus is being given to the most important stake-
holder without whom we all cannot exist. Yes I am talking about clients, our very own borrowers who give us our
bread and butter.
Even while preparing and setting up the company over the last one year we have spent hours on all aspects such
as putting up a team in place, selecting an area, no. of clients that we plan to reach out over the past few years,
the amount of capital we all need, our sources of funding, bankers, investors, MIS etc..
Though we spent considerable time on the product designs to what should be our loan sizes, our working model
etc. but in all this I just wonder if we have taken the clients for a ride. The reason why I am saying all this is again
to emphasize that the topic my article is to ask my readers as to “If we all have taken the clients for a ride”.
Exorbitant Interest Rates: What? But we are at least giving them credit!
When we talk about the “interest rates” to be charged to the clients we all conveniently say that the aspects such
as cost of funding, operating expenses, profit margin. Prevailing market rates, etc. are all factored. The interest-
ing thing to be noted is the capability of the borrowers is not factored. One might argue that the rates charged by
the MFI’s is way below the rates being charged by money lenders and the other sources, but then is that reason
enough to not to find out what the client really thinks of our interest rates. We in the sector also tend to justify
that we are providing them financial inclusion and hence whatever we do is for good. Well I will not entirely
question this argument but then at the end of the day it is a self-defeating argument to say the least.
Range of products: Poor need only money does not matter in what form?
MFI loan products are commodities in the current scenario. It is same as buying vegetable from market. The MFIs
(including us) here are guilty of just cut copy pasting from the existing players. Not really sure as to if it is con-
sciously being done this way or is it the lack of risk taking ability to try out something. I wonder if the credit needs
of “Prema Devi” in Uttar Pradesh are similar to that of a “Rangamma” from Tamil Nadu. Not just the business ac-
tivity for which the loan has been taken will be different but also the seasonal requirements, cash flow and other
such things impacting the loan product will be different. A client may require Rs. 5000 just before a major festival
such as Diwali to infuse into her business, or a certain business contingency may require extra capital at times.
There are also times when the loan requirement of the client may be less than the smallest loan product offered
by the MFI. The client here may end up using the balance amount for personal expenses and end getting trapped
in the debt cycle. The only way out is to keep your eyes and ears open and listen to the borrowers. They will tell
you what kind of product should be designed. Stop spending and flaunting expenditure made on R&D and start
visiting those simple rural folks.
VOLUME 1, ISSUE VI 1 JUNE, 2009 SANCHETNAINDIA.COM

3. Micro-insurance: why can’t we push one more insurance product after all there is huge commission payout
possible?
What was supposed to be a solution which could help people in rural areas and in un-organized sector has also
come across as one more stone hanging by the neck of very same people? Insurance industry has already smelt
a gold mine in the form of the rural markets and our sector provides them a perfect platform to test the wa-
ters. Micro Insurance will be surely a big thing in the coming years and no player today can afford to ignore it.
But so far we as a sector have only used this to insure our portfolio and mitigate our risks. This might be bene-
fiting the clients in a way but was that the intention in the first place? In fact the client most of the times does
not have any choice but to forcibly take the insurance. I believe that there are many useful insurance tools
which have not even been explored till date like pension plans, endowment funds. Let IRDA take care of this
and make MFIs accountable of what they promote and propagate and make sure that the poor are not paying
to fill the coffers of the MFIs.
Graduating people to mainstream financial sector: but they are my most valued customers?
The idea of microfinance was that the people would ultimately be able to get support from mainstream finan-
cial players. But the rules of the game have completely undergone a change in last few years. Now the entire
effort is not to let client go out of your clutches while you keep dishing out sub-optimal solutions to them. Here
is the role for the social minded investors to put a rigorous test of the clientele of the MFI and be sure why
there is no upward movement in the clientele.
Social Performance Measurement: what is that? We are market player?
While giving out loans to the clientele, the intention is to get them out of the vicious circle of poverty. What
really measured parameters have we set or devised to evaluate out ultimate goal of trying to reduce poverty
levels. “Social Performance Measurement” as it is so called in management parlance has been a hotly debated
issue off late. The opinion makers across the sector are trying to devise tools to measure the impact of the Mi-
cro financing in the lives of the clients. How many clients can we claim to have served whose lives we have
transformed? I doubt if it’s anything more than a fraction of the clientele. May be we could all ponder over this
so that going forward companies are not just judged on their ROI and CAGR, but also on the impact it has had
in its market.
These are some of the common vices which we all need to ponder upon as a fraternity. We need to go beyond
measuring our performance by the size of our portfolio or the number of clients only. We need to take a step
back and think is it really something that we all set out to do and in this way only. Once we are done with that I
am sure all of us would realize that there might appear some more images on horizon which we would love to
chase and chase so happily.
VOLUME 1, ISSUE VI 1 JUNE, 2009 SANCHETNAINDIA.COM

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VOLUME 1, ISSUE V 1 JUNE, 2009 SANCHETNAINDIA.COM