Milaap - Field Report on GUARDIAN, MFI


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Milaap - Field Report on GUARDIAN, MFI

  1. 1. Milaap Field Report – Gramalaya Urban and Rural Development Initiatives (GUARDIAN) Tiruchirapalli – 20 March, 2010 The Milaap team made its first field trip to GUARDIAN at Tiruchirapalli, an MFI focused on water and sanitation (watsan) financing. This is the first of the series of field reports that Milaap will prepare as a part of the ongoing partnership visits. The office GUARDIAN, located in a quiet neighbourhood at Trichy, brims with activity on a Saturday – loan officers who come from the field with daily reports, people working on computers to update the database, others addressing concerns of borrowers; the regular activities of a Microfinance Institution (MFI). An MFI making to the headlines is hardly a surprise these days given the attention Indian MFIs have been eliciting from investors and the media alike. However, GUARDIAN stands apart from the rest, it is the only MFI in the country solely dedicated to water and sanitation (watsan). It may sound odd to many at present but that is true for any innovation in its nascent stage. Today, MFIs have created the first level of social innovation by establishing delivery channels for credit, but social development goes beyond credit to other fundamental needs like education, health, water as well. Developing robust delivery channels for these needs would entail another generation of social innovation. No doubt, it would gain immensely from the MFI experience, but the focused approach to each of the services is essential to devise sustainable mechanisms. We reckon, from that small office in Trichy, GUARDIAN is scripting a very important chapter in social innovation. The title of it – Water & Sanitation for All! The Organisation GUARDIAN was incorporated in 2007 to cater for watsan financing in the region. “Though Gramalaya has been involved in water development for two decades, the specialized requirements for watsan financing led to the incorporation of a separate MFI in the form of GUARDIAN”, says Mr. Paul Sathianathan, the Executive Director of GUARDIAN is his neatly arranged office. Mr. Sathianathan has been leading GUARDIAN for the past two years post a five year stint with Gramalya. An ex-Government employee, Mr. Sathianathan stresses on the importance of developing financial products adapted to needs of the borrowers. Getting the right repayment period is even more critical as it depends on the difficult variables time for construction of the facility, income levels etc. Naturally, close connect with the community is essential to operations at GUARDIAN. Equally important is training the people at GUARDAIN and the organization has been sending its people to leading MFIs like BASIX, Grammen Koota, Bandhan. Over the two years, GUARDIAN has created resources trained in field operations, Field Research Report on GUARDIAN – written and compiled by Milaap Microfunds
  2. 2. loan process and management of back-end systems; all with a focus on watsan loans. Processes at the back-end are being developed simultaneously. Detailed financial data, at the borrower level, necessary not only to generate financial reports but also to monitor the entire business is being managed by software provided by one of the best MFIs in the country. “We can generate reports as required depending on the business scenario. For example, you can adjust the PAR values and check for the risk associated with the portfolio or you could see the recoveries or group history”, says Mr. Senthil Kumar, credit manager at the unit office, while enthusiastically explaining the features of the system. The organization has gradually put the basics in place through small operations catering for nine blocks in the Trichy district. Today, it understands the needs of the people, can design relevant financing structures, has trained people and has systems to monitor and report – all ingredients in place for replicating and scaling up. Strong Connection with the Community This report needs a special mention for Mr. Senthil and his colleage Mr. Selvan, who were with the Milaap team throughout the day; explaining the operations, showing the systems, helping interact with credit officers and finally accompanying to the community visit to Gorimedu and Wannarapettai, two nearby slum areas. GUARDIAN has done extensive sanitation financing programmes, of loan sizes of INR 10,000, in Gorimedu. The satisfaction of people was evident in the warm reception given to us by Janaki, the group leader of the area. The presence of Mr. Senthil ensured an easy interaction with most of the other members, reflecting the high level of trust GUARDIAN has developed over the years. Janaki manages details of every loan in the group – origination, disbursement, utilization and repayment. A sense of pride beams across Janaki as she explains the book-keeping methods and browses through separate files managed for each JLG. Mr. Selvan was there all the time – doing the translations, taking to new borrowers, explaining how people have come up with solutions under constraints. The urge amongst people to improve their lives was strong and it reflected in the surroundings; that “slum” could easily be categorized as a developed colony in many of the Indian cities. Standardisation is the key The MFI industry in India has thrived under tough conditions – no credit information, illiteracy, inaccessibility and a society resistant to change. Among the many social innovations this sector has fostered, standardisation lies at the core of its success story. It’s entrenched in the very lifeline of an MFI – the working of a loan officer, reporting, loan products, back-end systems, people management; it’s omnipresent. Years of arduous efforts in standardization are at the root of rapid scale-up that has catapulted this sector into mainstream investments. This is exactly where GUARDIAN holds the promise. Over the years, the organization has gained knowledge to standardize watsan loans and create a pool of trained staff. “People need to be educated on need for clean water and sanitation. You need to be aware of their living conditions and needs before pushing for a loan. Then processes and cross checks have to be strictly followed” says Ramya, one of the credit officers, with a bubbly smile. Her training and experience in watsan requirements and knowledge of Field Research Report on GUARDIAN – written and compiled by Milaap Microfunds
  3. 3. the processes evident in the discussion. Educating the community on sanitation requirements is essential to generate demand for loans. Standardisation is hence essential to rapidly train the JLG members and also assist them whenever required. Ramya remarks, “Initially, the first briefing, took nearly an hour and a half; but now I can explain new JLGs everything in half the time because I know what’s most relevant to them” – this learning curve is fundamental to achieve scale. Presence of trained staff at the ground level is essential to manage cost of operations and eventually develop a robust replicable business model. It also helps GUARDIAN build the knowledge base to acclimatize quickly to local conditions or assist its borrowers to think of innovative solutions. For example, low pressure of water supply in Wannarapettai, the second area of field visit, makes taps redundant above the ground level. The solution comes in the form of a concrete tank dug near the water connection for every household. The connections are five feet below the ground level with a concrete staircase leading to the base. The structure acts an open storage tank as well. Even the people constructing them are acquainted with the structure, leading to reduction in planning time and eventually the costs. It immediately translates to demand for more loans, proper utilization, faster recovery periods and zero defaults for GUARDIAN. The Story So Far The Self Help Groups (SHGs) nurtured by Gramalaya formed the first consumer base for GUARDIAN. The organization has started following the Joint Liability Group (JLG) model to scale up rapidly. Since it’s inception in 2007, the cumulative disbursement has been approximately INR 54 million benefiting over 8000 borrowers of 1400 groups. Capacity building – training of staff, setting up IT systems and managing the initial phase of operations, has been supported by A credit facility of approximately INR 35 million from Indian Overseas Bank is the main source of funds. Currently the loan programme has five loan products ranging from INR 3000, for water purifiers, to INR 10,000, for construction of sanitation facilities. It currently has three branches serving nine blocks of Tiruchirapalli district. Till now GUARDIAN has controlled operations to a small scale and within a focus area to learn and develop robust processes. The current interest rate of 18% diminishing is better than industry standards and has contributed to consolidation of its member base. Steady source of funds is one of the major requirements for the organization. “We have enough fund absorption capacity in the existing unit offices. A steady flow of funds to essential to smoothen the lending process and that’s our top priority for now. Initiatives like Milaap can really help us stabilize the fund flow and eventually expand to other districts” marks Mr. Sathianathan. No doubt, innovative models take time to get attention of bankers or investors. Hence, we at Milaap, were convinced that organisations like GUARDIAN provide the perfect scope utilizing retail capital for social innovation. and World Water Day Celebrations An eventful afternoon awaited us after a after a sumptuous Chettinad lunch with the GUARDIAN team. For the unfortunate, who callously limit the Tamil cuisine to dosai, idli, vada and vada-sambar, Chettinad dishes will come as a nice spicy surprise. Discussions with Mr. Field Research Report on GUARDIAN – written and compiled by Milaap Microfunds
  4. 4. Damodaran, Country Director, and Mr. Jose, Manager of MFI Programmes, at the office were eye-openers on the number of different models that are being tried to help MFIs and NGOs build sustainable watsan initiatives. Mr. Damodaran, a twenty year veteran in the social water sector and the founder of Gramalya, heads operations in India and has been instrumental in identifying opportunities with big and small partners. The portfolio includes BASIX, BISWA, Grameen Koota, GUARDIAN and many other NGOs. “We are aiming at best utilization of funds and develop funding programmes attuned to the requirements of the communities. We have specialists for watsan loans of MFIs and revolving loan funds for NGO. The models are innovative and it will need patience. I am happy that organization like Milaap is stepping forward to foster such grass root innovations”, remarks a confident Damodaran, years of experience reflecting in the talk. Participation in the Longest-toilet-queue initiative was another remarkable event for the Milaap team. Volunteers braved the heat to gather at the Cauvery Bridge with immense enthusiasm. A gathering of five- hundred people without clogging the road beside – the discipline was exemplary. An equally disciplined gathering in the local community hall marked the end of the brilliant day. It also provided the opportunity to interact with Arnie Heather, who leads the International Programmes at Her international experience and on her optimism with India, on harbingering the social innovation in water and sanitation, were great to know about. The Milaap team thanks all involved for the fantastic day. It was visible to us that clean water and sanitation has finally made beyond school text books and is well on its way to become a reality. Watch out for GUARDIAN as it leads the change! Field Research Report on GUARDIAN – written and compiled by Milaap Microfunds
  5. 5. Photographs from the filed trip Mr. Damodaran, Country Director, Mr. Sathianathan, ED, GUARDIAN Mr. Senthil & Mr. Selvan of GUARDIAN JLG operations explained to the Milaap team One of the sanitation facilities in Gorimendu Water connection in Wannarapettai Field Research Report on GUARDIAN – written and compiled by Milaap Microfunds
  6. 6. Water day celebrations – the longest toilet queue initiative Field Research Report on GUARDIAN – written and compiled by Milaap Microfunds