Information Memorandum Investment opportunity in a highly impactful Eastern India based Financial Institution

Transcription

1 Information Memorandum Investment opportunity in a highly impactful Eastern India based Financial Institution 1

2 Table of Contents 1. Investment Highlights 2. Microfinance Sector: An Overview 3. Funding Landscape: MFI Sector 4. Regional Overview: Bihar, Jharkhand, Uttar Pradesh and Haryana 5. Corporate Highlights 6. Operational Snapshot 7. Social Impact 8. Growth Strategy 2

3 Saija Finance: Only MFI based out of Bihar, poised to be a leader in the region Saija has a strong history of creating impact in high need geographies Strong growth and impact potential in Microfinance Eastern India High need geographies with lack of quality MFIs Strong success story so far Visionary and experienced founders / investors Differentiated model, well adapted to their focus regions Commitment to transparency and corporate governance MFI sector has shown remarkable resilience and growth over the last few years Top MFIs have grown at 70% CAGR Saija s focus states have an untapped microfinance credit demand of Rs 37,000 crs (US$ 6 bn) Potential to leverage distribution strength to launch new products like home loan, 2-3 wheeler loan which Saija is already discussing with partners Bihar, Jharkhand and UP are three of the most underserved states in India These states rank low on financial inclusion - low ATM penetration and branch banking penetration, low credit deposit ratios With Bandhan and RGVN and Utkarsh moving towards banking, Saija is the only one of the quality MFI s serving the region of Eastern India Strong support from on and offshore funders 2,51,569 Clients Rs crore portfolio as of March Branches with leadership position in multiple districts Presence across 4 states Company has initiated the process of direct disbursement of loans to customer s account Retained credit ratings in spite of demonetization impact. HR Attrition amongst the lowest in industry Strong support from diverse lending institutions Professional management with expertise in financial services Promoter was founding board member and managing director of Maharishi housing development Finance corporation which was acquired by ICICI Bank Co promoter has a strong background on human resources Committed investors like Accion, Pragati (IFC, CDC funded) and SIDBI who are leaders in financial inclusion investing Existing investors had infused additional growth capital of Rs 35 Cr One of few MFIs with a successful JLG product focusing on men Saija Karobar Rin (Small business loan) Only MFI in India to have partnered with MUDRA Bank for prepaid card Flexible group composition and quantum of loan to enable greater acquisition/ retention of clients Internal audit: Monthly branch audit and quarterly corporate audit reports given to board Regular client and employee feedback via satisfaction surveys Robust IT infra structure to ensure prompt reporting and data availability at all levels Three highly distinguished independent directions on board 3 15 Cr has already moved

4 Table of Contents 1. Investment Highlights 2. Microfinance Sector: An Overview 3. Funding Landscape: MFI Sector 4. Regional Overview: Bihar, Jharkhand,Uttar Pradesh and Haryana 5. Corporate Highlights 6. Operational Snapshot 7. Social Impact 8. Growth Strategy 4

5 NBFC-MFI sector in India is on a high growth trajectory India - One of the largest and most active MFI markets in the world Sector Highlights 2.53 Cr. clients, 10,077 branches Rs. 48,094 Cr. Gross loan portfolio (GLP) Growth Metrics** GLP grew by 50%, loan disbursement by 49% yoy Client base grew by 25%, branches by 25% yoy In FY17-18, NBFC-MFI received debt funding of Rs.20,695 Cr. Portfolio trends (FY17-18 Q4 FY17) GLP ( In INR Bn) 428 Disbursement ( In INR Bn) FY Q3 FY 18 Q4 FY 17 Growth in reach (FY17-18 Q4FY17) 11,250 9,000 6,750 4,500 2,250 ' Clients (Mn) Branches FY Q3 FY 18 Q4 FY Saija GLP grew by approx. 50% from Q3FY 18 to Q4 FY 18 Note : *Source: MFIN Micrometer (March 2018) 5

6 post structural reforms catalysed by AP crisis Pre Andhra Pradesh Crisis Andhra Pradesh Crisis Post Andhra Pradesh Crisis MFI s show exponential growth CAGR of 86% in loan portfolio outstanding ( ) CAGR of 96% in borrowers ( ) Witness a flurry of Investments 25+ transactions with a US$295 mn in primary investments in the microfinance space since 2006 Banks and financing institutions had a total exposure to MFIs of US$ 2.45 bn as of March 2009 ESOP-linked management structures No regulatory framework governing lending practices, pricing or operations Concentration of MFI lending in mainly two states Andhra Pradesh and Tamil Nadu AP Ordinance In October 2010, the AP government passed an Ordinance to regulate working of MFIs in AP Ordinance triggered by political reasons and instances of multiple borrowings in AP Key requirements under ordinance Registration of MFIs Prohibition on security for loans provided to SHGs Prior approval for grant of further loans to SHGs or their members Repayments to be made only by monthly installments Regulatory Intervention Implementation of Malegam committee recommendations RBI recognized NBFC MFI as a separate category of financial institutions Permits lending to MFIs as priority sector Unified code of conduct A unified code of conduct created by industry associations Sa-Dhan and MFIN and key stakeholders to adopt best practices and ensure client protection. They both have been designated as SRO s for microfinance industry Establishment of credit bureau for microfinance MFIN has collaborated with Highmark and Equifax, to establish a tracking system to share client data among MFI s Aimed to improve credit risk management and adherence to qualifying asset criteria by the RBI Microfinance Institutions Bill, 2012 I M P A C T Excessive loan book expansion focus leading to overlending and high interest rates Coercive collection practices Recovery plummeted to 10% in AP from 99% Significant write-offs in loan portfolio Banks caution in lending to MFIs Crisis/CDR referral for MFIs - Spandana, Share, Basix, Ashmitha, AML Structural changes in the industry Renewed investor interest Resurgence of bank funding Better control on multiple lending 6

7 Strong regulatory and facilitating changes providing tailwinds for growth Change Creation of NBFC MFIs and RBI reforms Key Highlights RBI recognized NBFC MFI as a separate category of financial institutions Impact Clear message from RBI that MFI are to be excluded from state jurisdiction, paving ground for the microfinance 2012 bill in the parliament Cap on spreads RBI has capped the spread between lending rates and cost of funds at 12% Processing Fee capped at 1% Opex optimization has achieved significant importance Perceived impact on industry RoAs To increase fee based income by offering more products Multiple lending restrictions A borrower cannot be a member of more than 1 group Not more than 2 NBFC-MFIs can lend to same borrower Restricts the target market Entry barrier established Easier access to debt On 19th December 2011, RBI allowed ECB for MFIs and NGOs engaged in micro finance under Automatic Route In Feb 2011, RBI restricted direct priority sector lending benefits only to NBFC MFIs Resurgence of debt followed by equity in the industry Credit bureaus functioning better Credit bureaus are facing the pressure of performing better due diligence post the crisis All MFIs have to be mandatorily members of Credit bureaus and report client level information regularly New pricing norms for NBFC MFIs recently introduced Rates charged by MFIs to be the lower of cost of funds plus margin or 2.75x average base rate of five largest commercial banks More transparency Direct linkage with market dynamics NBFCs to act as BCs RBI has allowed NBFCs to become Business Correspondents for Banks Use the existing channel to provide liability-based products Increased Fee Income Banking license In FY 11, RBI considered giving new banking license to private sector players. NBFCs also participated RBI have granted scheduled commercial bank license to IDFC limited and Bandhan (first MFI in the country ) RBI has announced SFB licenses in Sept 15 with 8 MFIs are in approval Small finance bank license Further to the declaration of Banking license RBI has decided to allow new small banks in the private sector General positive motivation for the industry to adhere to best practices so as to be eligible for a banking license MUDRA bank MUDRA bank is set up under Pradhan Mantri MUDRA Yojana Scheme to provide services to small entrepreneurs outside the service area of regular banks It will function as a NBFC and will provide MFIs and NBFCs financial support Will also provide guidelines to MFIs and give them performance ratings Saija is the first MFI to partner with IDBI Bank for offering low interest MUDRA cards to its clients 7

8 have resulted in strong growth across the MFI sector As compare to Q3 FY18 To Q4 FY18, there has been a increase of 23% in Gross loan portfolio of NBFC-MFIs Key Players Total Loan Portfolio (in Rs. Cr) FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 BFIL 4,320 4,110 1,806 2,359 3,113 4,171 7,677 9,150 12,594 Satin ,141 3,271 3,344 4,304 SONATA ,027 1,035 1,376 SVCL , Arohan ,015 2,171 Fusion ,558 Saija Saija has shown an impressive CAGR of 77% during this period, in spite of being operating in the most challenging geographies 8

9 Government remains focused on financial inclusion through Payment Bank and Small Finance Bank license Recommendations of the Committee on Comprehensive Financial Services for Small Business and Low Income Households Payment Banks Limited range of products (like deposits & remittances) but widespread network of access points 11 entities got in principle approval in Aug RIL, Aditya Birla Nuvo, Paytm, Vodafone, Airtel, Dept. of Posts, Cholamandalam, Tech Mahindra, NSDL, Fino PayTech, Sun Pharma s Dilip Sanghvi Sufficient access to affordable formal credit Universal Access to a Range of Deposit and Investment Products at Reasonable Charges Universal Access to a Range of Insurance and Risk Management Products at Reasonable Charges Ubiquitous Access to Payment Services and Deposit Products at Reasonable Charges Right to suitability of products and consumer protection Universal Electronic Bank Account (UEBA) for all Indian residents by 2016 Small Finance Banks (SFBs) Will provide a whole suite of basic banking products with local focus and ability to serve smaller customers Bring down the borrowing costs for MFIs so that the same could be passed on to the poor borrowers Savings Channel: Bring in the borrower into organized financial services through the savings product Micro-Banking: RBI would like to bring Banking sector s best practices into Microfinance Strong Investor Interest: Microfinance sector has managed to attract private capital from both mainstream and impact investors; global Investors have shown interest in the Indian Banking sector Proven Success Model: Strong bounce-back by MFIs by growing rapidly despite the AP crisis Improved Direct Benefit Transfer access: Govt. has strong focus to cut subsidies by focusing on DBTs Deeper Financial Inclusion: Limited success of mainstream banks to undertake financial inclusion Unique Delivery Model: Microfinance has a distinct model to deliver boutique of financial services to poor and rural population 10 entities awarded SFB license in Sept of these are MFIs: Disha, Equitas, ESAF, Janalakshmi, RGVN, Suryoday, Ujjivan, Utkarsh Saija is well positioned to be a SFB, once RBI opens SFB licensing on tap!! Source: RBI 9

10 Impact of Demonetization Trend of Impact on Industry This charts depict the trends on PAR from Q1 FY till Q4 FY 18. It is evident that the industry has regained momentum from Sep Portfolio quality has significantly. Trend of impact on Company Delinquency levels are well maintained compared to the industry trend on account of considerable collection measures deployed at each branch level. The PAR % in Q3 FY18 and Q4 FY18 are declining compared to the industry despite of significant challenges faced by the company. 10

11 Bihar: The spurt post- demonetization Bihar has observed significant traction from MFIs in the post-demonetization period. Bihar grew Y-o-Y at a rate of 53% during FY17 as against the industry growth of 25% in the same period. The portfolio of the state increased from Rs 3,799cr in FY17 to Rs 4,677cr in FY18 registering a growth of 23% YoY in FY18. Contrary to the industry trend, the portfolio quality of the state has remained significantly superior with PAR>30 at 1% as on Mar 18 as against an industry PAR>30 of 3.64% which reflects the quality of credit culture in the state as well as a relative insulation from the events plaguing the rest of the industry post demonetisation - and Saija have strong portfolio base in Bihar. 11

12 Table of Contents 1. Investment Highlights 2. Microfinance Sector: An Overview 3. Funding Landscape: MFI Sector 4. Regional Overview: Bihar, Jharkhand, Uttar Pradesh and Haryana 5. Corporate Highlights 6. Operational Snapshot 7. Social Impact 8. Growth Strategy 12

13 Microfinance sector has attracted US$800 mn+ from private equity investors Investment activity post AP crisis Almost all MFIs got funded during this period from a variety of sources that includes equity, debt and NCD. More importantly the sector saw investment from mainstream private equity funds e.g. CVCI, Wolfensohn, Sequoia Capital, Morgan Stanley, Tata Capital, Alena Pvt Ltd, Tano Capital, Texas Pacific Group, CX partners, Newquest; also from DFIs like BIO, IFC, FMO, GIC, Samridhi Fund, CDC and Proparco and strategic investors like Manappuram Finance Date Company Investors Deal Value (US$ mn) Feb-11 Satin Creditcare Network ShoreCap II Limited, Danish Microfinance Partners 8.9 Mar-11 Svasti Microfinance BlueOrchard 1.0 Apr-11 ESAF Microfinance Dia Vikas Capital 0.9 Apr-11 RGVN NE Microfinance Dia Vikas Capital 1.5 Jun-11 Utkarsh Microfinance IFC, Aavishkaar Goodwell, Norwegian Microfinance Initiative 5.5 Jun-11 Janalakshmi Financial Services Citi, Tree Line, Others 14.4 Aug-11 Bandhan IFC 27.4 Dec-11 Arman Financial Services Incofin 3.0 Feb-12 Ujjivan Financial Services Sequoia Capital India, FMO, Unitus, Wolfensohn & Co., Lok Capital, IFIF 25.5 Jun-12 Saija Finance Accion International, Pragati Fund 4.5 Jun-12 Annapurna Microfinance Incofin 2.4 Jul-12 Janalakshmi Financial Citi, India Financial Inclusion Fund, GAWA Services Microfinance Fund, Others 14.5 Aug-12 Ujjivan Financial Services Lok Capital NA Sep-12 Sonata Finance Creation Investments, MSDF 11.2 Sep-12 Ujjivan Financial Services IFC, FMO 9.5 Sep-12 Arohan Financial Services IntelleCash 10.0 Oct-12 Suryoday Microfinance HDFC 1.3 Oct-12 Equitas IFC, MicroVentures, IFIF 26.0 Jan-13 Suryoday Microfinance Aavishkaar Goodwell & Lok Capital 3.8 Feb-13 Fusion Microfinance NMI, Incofin 4.5 Date Company Investors Deal Value (US$ mn) Mar-13 Utkarsh Microfinance IFC, NMI, Aavishkaar Goodwell 4.5 Mar-13 Grameen Financial Creation Investments, Micro Ventures, Incofin 10.0 Mar-13 Satin Microfinance MicroVest, Shorecap II Ltd. & Danish Microfinance Partners Apr -13 Suryoday Microfinance IFC 2.78 Aug- 13 Janalakshmi Financial Citi, Morgan Stanley, Tata Capital, India Services Financial Inclusion Fund, Others 56.6 Sep- 13 Swadhaar SIDBI 0.5 Sep- 13 Sahayog SIDBI 0.5 Oct- 13 Ananya WWB ISIS Fund and IDBI Bank 3 Oct-13 Arohan Financial Services Aavishkar Goodwell, MSDF, others 3.5 Mar-14 Annapurna Incofin, Belgian Investment Company 5.0 Apr-14 Satin Microfinance NMI 4.5 Jul-14 RGVN Microfinance OikoCredit, NMI, DVC 7.0 May-14 Equitas Lok Capital, Creation 13.6 Oct-14 Janalakshmi Financial Services Morgan Stanley, Tata Capital, Texas Pacific Group Nov-14 Equitas IFC, FMO, CDC, DEG, IFIF, Creation 53.0 Dec-14 Utkarsh Microfinance IFC, CDC, Aavishkaar Goodwell, Lok Capital, NMI 21.0 Jan-15 Bandhan IFC,GIC Jan-15 Ujjivan Financial Services IFC, CDC, CX Partners, Newquest Mar-15 Annapurna Microfinance SIDBI 4.2 Mar-15 Arohan Financial Services Tano Capital

14 Complemented by US$5 bn+ from debt funders Variety of instruments utilized to raise funding by MFIs Total debt funding in FY17-18 increased by 20% compared to FY16-17, representing return of lenders confidence in growth potential of the NBFC-MFIs sector. PSU Banks Private Banks NBFCs Debt Funding ( Inr Bn) Securitization ( Inr Bn) Q1 FY 17 Q2 FY 17 Q3 FY 17 Q4 FY 17 Q1 FY 18 Q2 FY 18 Q3 FY 18 FY Andhra Bank Bank of Baroda Bharatiya Mahila Bank Bank of Maharashtra Central Bank of India Corporation Bank Dena Bank IDBI Bank Indian Bank Indian Overseas Bank Oriental Bank of Commerce State Bank of India Bank of India State Bank of Patiala State Bank of Travancore Syndicate Bank UCO Bank Union Bank of India United Bank of India Vijaya Bank Allahabad Bank State Bank of Mysore Canara Bank ECBs OPIC World Business Capital IFC Axis Bank Catholic Syrian Bank City Union Bank Development Credit Bank Dhanalaxmi Bank Federal Bank HDFC Bank IndusInd Bank Karnataka Bank Kotak Mahindra Bank Lakshmi Vilas Bank Ratnakar Bank South Indian Bank Yes Bank ICICI Bank ING Vysya Bank Foreign Banks Bank of America Credit Agricole First Rand Bank HSBC Standard Chartered State Bank of Mauritius Societe Generale Deutsche Bank MAS Ananya IFMR Maanaveeya Holdings Microventures Reliance Capital Mahindra Finance Capital First Tata Capital Blue Orchard Deutsche Bank responsability Triodos Symbiotics Grey Ghost Ventures FMO Triple Jump Oiko Credit IFC Microvest NCDs 14

15 Table of Contents 1. Investment Highlights 2. Microfinance Sector: An Overview 3. Funding Landscape: MFI Sector 4. Regional Overview: Bihar, Jharkhand, Uttar Pradesh and Haryana 5. Corporate Highlights 6. Operational Snapshot 7. Social Impact 8. Growth Strategy 15

16 Saija started its journey in Bihar, which has historically been underdeveloped Recently expanded to Eastern Uttar Pradesh and Jharkhand (East India) Brief overview of states Saija operates in Key indicators Bihar Haryana Uttar Pradesh Bihar State Capital Patna 103 million Population 5 th most populous state Population Density 1,102 persons per sq km Gross State Domestic Product (GSDP) Economy US$ 66 billion Ranked 14 th out of 28 states 80% of state s population depends on agriculture GDP constitution: Primarily service oriented (73% of the economy of the state), with agriculture coming in second (22%) and industry last (5%) Key indicators Jharkhand Uttar Pradesh Haryana Punjab State Capital Ranchi Lucknow Chandigarh Chandigarh Jharkhand Population 33 million 204 million Most populous state million million Population Density 414 persons per sq km 820 persons per sq km 573 person per square km 550 person per square km Gross State Domestic Product (GSDP) US$ 43 billion Ranked 19 th out of 29 states US$ 230 billion Ranked 4 rth out of 29 states US $ 110 Billion Ranked 13 th out of 29 states US $80 billion Ranked 14 th out of 29 states Census of India,

17 Saija s focus states are home to one-third of India s rural population While more than two-thirds of India lives in rural areas, the proportion is much higher for Bihar, UP and Jharkhand Uttar Pradesh and Bihar are the two largest states in terms of rural population, and along with Jharkhand are home to one third India s rural population Himachal Pradesh Bihar Assam Odisha Meghalaya Uttar Pradesh Arunachal Pradesh Chhattisgarh Jharkhand Rajasthan Sikkim Tripura Jammu and Kashmir Madhya Pradesh Nagaland Manipurβ Uttarakhand West Bengal India Haryana Andaman and Nicobar Punjab Karnataka Telangana %age of population 68% 78% 76% 89% 0% 23% 45% 68% 90% 113% 200 mn 103 mn 33 mn 336 mn Saija is focused on states having 336 mn rural population, one-third of total rural population residing in India, which has low access to quality financial services 17

18 Bihar lags behind its peers, ranking amongst the lowest 5 states by GDP/capita Uttar Pradesh and Jharkhand are also laggards GSDP (Gross state domestic product), a measure of economic activity, is disproportionately adversely skewed for Saija s focus states Despite good growth, state domestic product per capita continues to lag behind the national average over the last decade GSDP by state Comparison vis-à-vis state population GSDP per Capita Comparison versus national average CAGR Uttar Pradesh 7.9% 16% India % Jharkhand 3% 1.8% Uttar Pradesh Jharkhand % 9% Bihar 3.3% 9% Bihar % 0% 5% 9% 14% 18% Population as a %age of all states GSDP as a %age of all states Link: IBEF Report on Bihar, August

19 Banking infrastructure in Bihar, Jharkhand and UP remains weak Low ATM and bank branch penetration Bihar, Jharkhand and Uttar Pradesh are home to 28% of India s population, but have access to only 13% of ATMs deployed Goa Delhi Sikkim Tamil Nadu Punjab Karnataka Kerala Haryana Himachal Pradesh Uttarakhand Telangana Maharashtra Gujarat Andhra Pradesh Nagaland Jammu and Kashmir India Arunachal Pradesh Mizoram Odisha Tripura Madhya Pradesh Meghalaya West Bengal Rajasthan Manipur Chhattisgarh Assam Jharkhand Uttar Pradesh Bihar *ATMs per mn people ' Bihar, Jharkhand and Uttar Pradesh are home to 28% of India s population, but have access to only 19% of bank branches Goa Himachal Pradesh Andhra Pradesh Punjab Delhi Sikkim Kerala Uttarakhand Haryana Andaman & Nicobar Islands Dadra & Nagar Haveli Karnataka Mizoram Tamil Nadu Jammu & Kashmir Gujarat India Maharashtra Meghalaya Tripura Odisha Arunachal Pradesh Rajasthan Chhattisgarh Jharkhand Madhya Pradesh West Bengal Uttar Pradesh Nagaland Assam Bihar Manipur *Bank branches per mn people This access is also largely driven by public sector banks while private sector banks, both domestic and foreign, have not focused on these regions for opening new branches or ATMS

20 Consequently, these states rank low on financial inclusion metrics Bihar, Jharkhand and UP are the lowest scoring states in India on the CRISIL Inclusix, a financial inclusion index Bihar has the lowest credit per capita and deposit per capita amongst all states, with UP and Jharkhand being substantially below national average CRISIL Inclusix is a composite measure of financial inclusion. It is a relative scale (0-100) comprising 3 parameters Branch Penetration, Deposit Penetration and Credit Penetration for banking and MFIs. India national average = 50.1 (2013) Jharkhand Bihar Uttar Pradesh 000 INR India (Average) Deposit per capita Credit per capita Credit deposit ratio trails behind national averages as well Jharkhand High (>55) Above Average (40-55) Below Average (25-40) Low (<25) Bihar Uttar Pradesh India (Average) 0% 20% 40% 60% 80% 100% 20

21 Low economic activity has translated into unemployment Unemployment rates are the highest in Bihar amongst all states in India for the urban populace 10.0% 7.5% 5.0% 2.5% Bihar s, Jharkhand s and Uttar Pradesh s unemployment rates for youth are higher than the national average 5.5% 4.7% 4.9% 6.7% 9.6% 7.0% 7.7% 6.5% Rural Urban Total 7.9% 7.4% 7.3% 5.9% Of 12.9 million persons engaged across the Indian industry, Bihar accounted for only 116,396 people i.e. less than 1% with primary sectors like agriculture being the highest employer Similarly, the 66 th round of the National Sample Survey Organization (NSSO) report puts the projection of unemployed youth in Uttar Pradesh in the age group of at whopping 10 mn by the end of % India Bihar Jharkhand Uttar Pradesh Educated and qualified young people are more likely to be unemployed in Bihar than youth who are illiterate or with low education 30. Unemployment in Bihar by education level Not literate Below Primary Primary Middle-Higher Secondary Diploma/Certificate Graduate and Above Link: The Wire: The Better Educated You Are in Bihar, the Likelier You Are to Be Unemployed, Labour Ministry Data for 2014, 21

22 Consequently, social progress has been slow Low literacy rates and high incidence of poverty Bihar has the lowest literacy rate amongst all states in India More than 40% of Bihar, Jharkhand and UP struggles below poverty line UP 69% UP Jharkhand 67% Jharkhand Bihar Bihar 63% India India 74% 0% 14% 28% 42% 56% 53% 60% 68% 75% Below Poverty Line Population - Total Below Poverty Line Population - Rural Census

23 Saija is focused on Bihar, Jharkhand and Uttar Pradesh states with high need for microfinance - and is poised to be a leader in the region Microfinance snapshot Bihar* No. of MFIs operating 27 Total credit - client outreach (in Lacs) 27 Total portfolio outstanding (in Rs. Cr) 4,677 Microfinance snapshot UP* No. of MFIs operating 18 Total credit - client outreach (in mn) 26 Total portfolio outstanding (in Rs. Cr) 4,804 Saija snapshot as of March 18 2,51,569 Clients Rs Crore portfolio 80 Branches 4 States, 48 districts 806 Employees Microfinance snapshot Jharkhand* No. of MFIs operating 15 Total credit - client outreach (in lacs) 8 Total portfolio outstanding (in Rs. Cr) 1,397 Saija is the first MFI based out of Bihar *Data Source: MFIN Micrometer 23

24 Table of Contents 1. Investment Highlights 2. Microfinance Sector: An Overview 3. Funding Landscape: MFI Sector 4. Regional Overview: Bihar, Jharkhand, Uttar Pradesh and Haryana 5. Corporate Highlights 6. Operational Snapshot 7. Social Impact 8. Growth Strategy 24

25 Saija is the beacon of Eastern India built on foundation of execution, transparency and impact Business Overview Saija Finance Private Limited is first NBFC-MFI (Non Banking Finance Company Micro Finance Institution) with its head office in Patna (Bihar), and focused on Eastern India Key focus on highly underdeveloped states like Bihar, Jharkhand, Uttar Pradesh and Haryana Focuses on providing group loans for income generating activities, by the implementation of the Grameen model of the Joint-Liability Group (JLG) lending method Regional Focus Saija was formed with a focus on providing microfinance services to urban and rural poor, as well as micro and small businessmen, in the underserved geographies of Central & Eastern India, starting with Bihar The geographic regions served by Saija are amongst the poorest in India and also are grossly underserved by formal financial institutions Vision and Mission Saija s vision is to be a value-driven company that creates significant social impact through high-quality microfinance and allied services. Saija s mission is to bring innovative and transparent microfinance to millions in urban and rural India. Our committed and skilled team will provide customer-focused and efficient services to help our customers improve their quality of life. Core Values Transparency Trust Honesty Fair-Practices Non-Discrimination Discipline Accountability Responsibility Professionalism Excellence Creativity Innovation Continuous Learning Social Responsibility Sensitivity Awareness *Including managed portfolio 25

26 by building on internal competencies and ecosystem feedback A strong foundation Acknowledged and rewarded by the ecosystem Entrepreneurship Led by 2 professionals who are natives of Bihar driven by a strong desire to make an impact An organization in, by and for Eastern India Employment generation Entire staff is from Bihar who would otherwise have limited opportunities to work in world class organizations Livelihood creation Saija was the first MFI to have its head office and focused operations in Bihar. Transparency IT driven organization with strong systems and processes Only institution to have emerged from Bihar that has occupied national center stage on a variety of aspects Private equity capital Equity from 2 global impact investors in a geography where even government support has been minimal Funding Despite multiple options available, lenders (banks and NBFCs) have supported Saija Government partnership MUDRA selected Saija as its partner amongst many larger peers Model institution for international organization Time and again multiple international organizations have visited Saija to understand a model MFI With Bandhan, the leading East India based microfinance institution becoming a bank, and RGVN and Utkarsh changing their focus to SFBs, Saija faces limited competition in the region 26

27 Saija has a history of creating strong social impact since its inception in 2007 Saija over the years has emerged as a strong value-based and systems-driven company with a high level of customer focus, strong corporate governance and sound ethical practices * 2014* 2015* 2017* 2009 Equity Investment by Accion 30,833 clients 47,758 clients 109,158 clients 2,13,502 clients Expansion outside Patna, the state capital 7 branches Portfolio of Rs 25 crs 9 branches Portfolio of Rs 51 crs 27 branches Portfolio of Rs 122 crs 63 branches Portfolio of Rs crs new branches opened 2012 Equity infusion from Pragati Fund and Accion SIDBI invests Rs 3 crs in the form of Optionally Convertible Preference Shares (OCPS) Saija is identified by SIDBI for support under their DFID sponsored PSIG (Poor State Inclusive Growth) Programme Expansion to state of Jharkhand Saija is graded MF2 by ICRA which implies high sustainability of operations 2016* 166,882 clients 49 branches Portfolio of Rs 216 crs 2018* 2,51,569 clients 80 branches Successful equity infusion of INR 15 Cr. form ACCION. Successful equity infusion of INR 15 Cr. form PRAGATI FUND SIDBI has reserved the right to invest up to INR 7 cr. in equity within 12 months of the current round by our investor ACCION & Pragati. *Represents Indian financial year end = March 31 st 27

28 Founded by experienced professionals, with a history of successfully scaling businesses The founding team has more than 70 years of cumulative corporate experience, and is committed to making an impact in high need geographies like Bihar S.R. Sinha (Chairman and Managing Director) 37+ years of experience in retail banking, housing finance and insurance An alumnus of FMS, Delhi University Founding MD, Maharishi Housing Development Finance, an NBFC, which became a very strong player in very early years of its operations with one of the best growth rates in the housing finance sector and a 100% recovery record Under the leadership of Mr. Sinha in less than 4 years, asset under management increased from Rs 20 crs to Rs 100 crs. Subsequently the portfolio of the company merged with ICICI Bank Mr. Sinha subsequently worked for Lord Krishna Bank, as Senior Vice President, Retail Assets and as Country Head Cross Sell with Centurion Bank of Punjab. Rashmi Sinha (Whole Time Director) 35+ years of experience in the field of human resources and management education 18 years of experience with Steel Authority of India, the leading public sector steel giant, in the area of HR. Ms. Sinha also participated as a member of the Core Team in turnaround strategies for SAIL. She was involved in implementation of a new HR Initiatives at SAIL involving revised performance management systems, training and development initiatives and plant level study of various productivity parameters. Ms. Sinha has also been involved as a visiting and permanent faculty in reputed management institutes across Delhi. She has been conducting successful workshops on leadership, interpersonal effectiveness, change management, effective communication and team work. She has a number of publications to her credit which have found place in reputed management journals. She is an Economics Graduate from Lady Shriram College, Delhi University and MBA from Faculty of Management Studies, Delhi University. 28

29 Supported by a strong management team Professional team of 50 corporate staff, with experienced individuals heading key functions Atul Bhola (Senior Vice President & Financial Controller) Joined Saija in November 2017 and is currently heading the Finance department. He is a Chartered Certified Accountant (ACCA, U.K) and ACMA, CGMA (CIMA, U.K). He has more than 14 years of experience in the field of Finance, Accounts, Taxation and Corporate Planning. His robust experience spans across industries such as Financial Services, Construction and Food Retail. In the past he has worked with a larges NBFC of Religare group with an approximate balance sheet size of INR 20,000 C and others such as Laing O Roureke(U.K based large constuction co.) and Jubilant FoodWorks Limited (Domino s Pizza India). Ms. Vasudha Goel Sr. Vice President -Controller of Client Servicing Joined Saija in February She is heading Operation, Commercial & Quality department. She holds a BA degree from Lady Shriram College, Delhi University and a MBA from Amity University. She has over 19 years work experience in Retail Branch Banking. She worked her way up to a Leadership role during her 19 years stint with HDFC Bank. Her core competencies include Team Management, Business expansion, Operations and Compliance. She has worked across various levels to increase Branch expansion and Market share. Ms. Jaya Jas Mittal AVP Human Resource & Training Joined SAIJA in May 2018 and is currently heading the Human Resource & Training Department. She has over 14 years of experience in HR Operations. She has done her masters in HR & prior to joining Saija was associated with Weather Risk Management Services & Apollomunich as Head HR. Her core competencies include Employee Relations, Environment Management, Performance Management System and executing the same for enhancing the operational efficiency of the employees, Process stabilization, Recruitment, Policies and Procedures. Rajnish Kumar (Deputy Vice President Commercial, Bihar ) Joined Saija in September He is heading the Commercial Team (Business Head). He has an experience of 8 years in banking and microfinance sector and is an MBA with specialization in Marketing and Finance. Prior to Joining Saija he was with Satin Credit care Network limited where he was looking after internal audit and risk management function of company. He has also worked with ICICI Bank with credit team of Business Lending Group.. 29

30 Supported by a strong management team Professional team of 50 corporate staff, with experienced individuals heading key functions MD Tofique Alam (AVP Commercial) Joined Saija in July He is heading the Commercial Team (Business Head). He has an experience of more than 4 years in Internal Audit and business operations. He has done PGDM Finance from XISS. Prior to Joining Saija, he was with Samunnati Financial Intermediations and IFMR Rural channels where he was looking after the internal audit. He has also worked with ICICI Securities as a relationship manager. Thakur Manish Singh (AVP IT) Joined Saija in January He is an IT professional with an experience of over 8 years. Earlier employed with Xenitis Group Ltd, his core strengths are managing IT infrastructure, Server and Network side Administration and developing business systems for organization with different verticals. He has several global technical certifications from organizations like Red Hat, Microsoft and Cisco. He is a M. Tech in Computer Science and has done Master in Computer Science from Karnataka University and has also done Post Graduate Diploma in IT Infrastructure Management from SMU. Mr. Rakesh Bharati AVP, Quality Joined SAIJA in October He is heading the Quality department. He is an MBA from Pune University and has an experience of more than 8+ years in Micro Finance Industry. Prior joining SAIJA, he has worked with Ujjivan Small finance bank in Customer service and Distribution team in various geographical areas like Bangalore, Pune, Nagpur, Chhattisgarh.and New delhi. Mr.NeerajSharma SeniorManager-InternalAudit Joined SAIJA in January 2018 and currently handling Risk & Internal Audit department. He has more than 9 year of experience in internal audit, Risk and fraud investigations. He is AML/KYC certified from IIBF & completed his MBA from SMU. In past, He has worked with financial companies such as Religare finvest limited and Fino paytech pvt ltd. Mr. Vinod Chauhan Joined Saija in February 2018 and is currently heading the Resource department. He is an MBA in Finance, from Entrepreneurship and Management Processes International Business School, India and France. He has more than 9 Years of experience in the field of Corporate Finance, Treasury, Project Finance,Fund Raising and Financial Planning and Analysis. His robust experience spans across industries such as Banking, Airport Infrastructure, Oil & Gas and IT. In the past he has worked with Bank of America (US based Bank) Yes Bank, GMR Airports Limited, SANMARG Projects Pvt. Ltd and ACS Global Tech solutions Pvt Ltd (US Based IT Company). 30

31 Leading investors in the impact investment ecosystem have given their support to Saija Accion invested in Saija in 2008 A global pioneer and leader in microfinance, Accion was found in 1961 and has to-date helped build 63 microfinance institutions in 32 countries on four continents. As of March 2014 those institutions were collectively serving 4.96 million people with microloans and 3.64 million people with savings products. Apart from making equity infusion in Saija, Accion also provides key management talent support and extensive high quality technical assistance. They have also provided grant support for strengthening the company. With support from Credit Suisse, Accion also provides free and regular capacity building interventions at Saija Finance. ACCION had again invested INR 15 cr. equity in FY Pragati invested in Saija in 2012 Setup in 2011, Pragati India Fund is an India focused private equity fund investing in small and medium sized companies with strong entrepreneurial and management capabilities. Pragati partners with businesses based out of North & Central India that are looking to grow, and works with them by providing capital and operational support. The fund has commitments from Commonwealth Development Corporation (CDC, the investment arm of the UK Government) and International Finance Corporation (IFC, the private sector arm of the World Bank). As of date, the Pragati portfolio has become a part of CDC s India operations. Pragati had again invested INR 15 cr. equity in FY SIDBI invested in Saija in 2013 SIDBI Foundation for Micro Credit (SFMC) was launched by the Bank in January 1999 for channelizing funds to the poor in line with the success of pilot phase of Micro Credit Scheme. SFMC s mission is to create a national network of strong, viable and sustainable Micro Finance Institutions (MFIs) from the informal and formal financial sector to provide micro finance services to the poor, especially women. In keeping with its mission, SIDBI Foundation identifies nurtures and develops select potential MFIs as long term partners and provides credit support for their micro credit initiatives. SIDBI has reserved the right to invest up to INR 7 cr. in equity within 12 months of the current round by our investor ACCION & Pragati. Shareholding Pattern 9% 40% Promoters 5% 3% 3% Accion Gateway LLC 40% Accion Africa Asia Investment Company Pragati India Fund Limited Small Industrial Development Bank of India Saija Management and Employee Welfare Trust Successful Equity infusion of INR 30 Cr from existing Investors (ACCION and PRAGATI FUND) 31

32 High corporate governance with reputed independent directors Ravi Shankar (Independent Director) Founder Director of Brickwork Ratings; Finance professional with 25+ years of experience Ex-MD, Asia-Pacific Risk Solutions Business, Standard and Poor s and simultaneously Executive Director, CRISIL (heading the India Risk Solutions Business); Ex-President & CEO, Polaris Retail Infotech Ltd.; CEO of Cholamandalam Cazenove Mutual Fund; Fund Manager & Vice President at Reliance Mutual Fund; Chief Investment Officer of GIC Mutual Fund, etc. Shaibal Gupta (Independent Director) Social scientist, Founder Member-Secretary of Asian Development Research Institute in Patna, Bihar; Director of Centre for Economic Policy and Public Finance, set-up in ADRI by the Government of Bihar; Best known expert on the politics and economics of Bihar. He has held advisory positions in various committees. He was a director of the Andhra Bank until his term expired and Member Executive Committee, National Literacy Mission (NLM) India, Government of India, Ministry of HRD, New Delhi. Vishwanath Prasad Singh (Independent Director) He has long exposure with international financial institutions including World Bank, Asian Development Bank, European Investment Bank, KFW, DEG, FMO, Japan Development Bank and JABIC in the areas of co-financing of infrastructure projects and institutional development Carlos Castello (Accion Nominee Director) Manages Root Capital s global program operations, including lending, risk management, and financial advisory services. He brings 25 years of experience at ACCION International, having served most recently as executive managing director of global programs. In this position, he managed and coordinated ACCION s technical assistance and management services for more than 30 microfinance partner institutions in Africa, China, India, and Latin America. Carlos holds an M.A. in economics and an M.S. in Foreign Service from Georgetown University as well as a B.A. in international administration from Union College. 32

33 High corporate governance with reputed independent directors Abhishek Agrawal (Accion Nominee Director) Currently heading Accion in India as Country Director Abhishek had been seconded to Swadhaar FinServe Pvt. Ltd. as CFO in Prior to joining the Swadhaar team, he was seconded by Accion to YES Bank for microfinance division. Before joining ACCION, Abhishek worked for nearly 5 years with FINCA International, a global network of microfinance institutions (MFIs). Ashutosh Binayake Mahendra (Pragati Fund, Nominee Director) He has over fifteen years of experience in India across project finance, private equity and corporate finance. He also functions as CFO for UTI Capital He has strong infrastructure expertise and at UTI Capital he focuses on originating and evaluating equity investments, over-seeing the portfolio and creating exit opportunities within the private equity business. Bhanu Prakash Verma (SIDBI Nominee Director) Deputy General Manager in Small Industries Development Bank of India(SIDBI), having experience in development banking, promotion and financing of MSMEs. SIDBI is an internally acclaimed financial institution. It provides financial and development assistance to micro, small and medium enterprises towards creating sustainable business units. 33

34 Table of Contents 1. Investment Highlights 2. Microfinance Sector: An Overview 3. Funding Landscape: MFI Sector 4. Regional Overview: Bihar, Jharkhand, Uttar Pradesh and Haryana 5. Corporate Highlights 6. Operational Snapshot 7. Social Impact 8. Growth Strategy 34

35 Focus on income generating and high social impact products Saija has 3 main loan products currently and 3 three top up products Products Saija Mahila Rin (SMR) Only women borrowers Saija Karobar Rin (SKR) Both men and women borrowers Saija Urja Rin (SUR) Loan for clean energy products Ticket size Rs 5,000 to 100,000 Rs 5,000 to 100,000 Rs 1,899 Tenor Up to Rs 30,000: 1 year tenure Rs Rs 1,00,000: 2 Years tenure Fortnightly/Monthly Up to Rs 30,000: 1 year tenure Rs Rs 1,00,000: 2 Years tenure Fortnightly/Monthly 13 fortnightly instalments Rate % reducing per annum % reducing per annum % reducing per annum End Use For income generation, select consumption needs like house repair, children s education Provides financial assistance to women Business and select personal needs Group Sizes JLG of 06 to 30 members JLG of 4 6 members JLG 91.07% of portfolio 3.91% of portfolio Innovative product as a part of Solar Initiative ( 3.03 % of portfolio) Saija has received support from USAID to further its Solar initiative and has tied up with Greenlight Planet to finance solar products under the Saija Urja Rin 35

36 Saija follows the Grameen Model, suitably modified to a workable Joint Liability Group model Promotion Credit Appraisal Group Formation day process CGT GRT Disbursement Group Meetings Promotion meetings are planned in the village/town with ABM leading the effort. Usually involves meetings colead by important persons in the village and also door to door canvassing for people to attend the meeting HighMark credit appraisal for (i) Borrower should not have more than 1 outstanding loan from MFIs (ii) Borrower s outstanding cannot exceed Rs 100, men/women (SKR) or 6-30 women (SMR), who live in the same area and have known each other for the past 3-5 years form a group The group is selfmade with support from the Saija Executive and includes members who are comfortable but unrelated with each other A clear Leader for the group is also identified Household survey is performed Compulsory Group Training (CGT): Once the group is formed, the group is given training on: (i) Products, including insurance (ii) Policies and procedures to be followed (iii) Group guarantee concept (iv) Benefits of the model CGT consists of 3 modules, each comprising 1.5 hour long sessions (last module is GRT) Group Recognition Test (GRT): Once the training is completed, Saija conducts a formal test to ensure that all the members of the group are aware of and understand the loan concepts For a group to be eligible to receive a loan from Saija, this test has to be compulsorily passed Disbursement happens at the branch Each SMR group has a mandatory weekly or fortnightly meeting. During these meetings, the following takes place: (i) Discussion of community issues (ii) Communication of Saija developments/changes if any (iii) Collection of repayments For SKR, there are no group meetings, the group leader collects the repayment and deposits it with Saija field staff 36

37 Saija uses OMNI platform which has integrated credit and accounts functionality OMNI is a flexible, comprehensive software which allows Saija to manage core banking as well as accounts finalization on one platform 37

38 Implementation of Front End Technology Solution Saija Leveraging Technology Benefits Technology plays a critical role at Saija and is a vital element of the innovation taking place to advance financial inclusion. Saija is seeking a mobile solution where our Field officers. will be able to complete the loan application using a Mobile/Tablet device. Our attempt is to apply client-focused technologies. The mobile / tablet device will help Saija increase the productivity and efficiency of loan officers in performing key tasks. Implementation Plan Cost Benefit Impact Improve d Quality Phase-I Better TAT Jharkhand Phase-II Bihar Phase-III UP and Haryana Paperless Sourcing Credit back-office not required Increased Productivity Higher number of loans serviced by a Field Officer Higher Income per Field Officer Almost Nil Data error Pre-populated Disbursement Kit Increase in Productivity, with a TAT of less than 5 days Faster Funder Compliances / Audits Faster Securitization Audits 38

39 Saija places strong emphasis on responsible lending Various initiatives to ensure transparency in lending practices Saija is a responsible lender that ensures that best practices in consumer protection are followed throughout its products and services Saija s lending methodology places strong emphasis on establishing the customer s capacity to repay and avoiding overindebtedness. Capacity-based lending has been a trademark of Accion International and its partner institutions around the world and has been successfully adopted by Saija. Multiple lending and over-indebtedness are becoming a concern in the Indian microfinance space, and various initiatives including the adoption of a code of conduct for responsible lending and the creation of a credit bureau for microfinance institutions are underway. Saija takes various initiatives to ensure that customers are adequately supported and protected by doing the following: Adoption of the responsible lending principles of the SMART campaign, which is led by ACCION International s Center for Financial Inclusion. The Client Protection Principles encompassed in the SMART campaign are as follows : Appropriate product design and delivery Prevention of over-indebtedness Transparency Responsible pricing Fair and respectful treatment of clients Privacy of client data Mechanisms for complaint resolution Adoption of a Code of Conduct derived from the Compliance with the Codes of Conduct of Microfinance Institutions Network (MFIN), an association of Indian microfinance companies and Sa-Dhan, the Association of Community Development Financial Institutions. Information disclosure on loan features to forums such as MF Transparency Reporting social performance on the MIX (Microfinance Industry Exchange) 39

40 Saija has diversified its lender base, which now includes banks, NBFCs and DFIs Public Banks Private Banks DFIs and Impact focused lenders NBFCs 40

41 which is reflected in rating upgrades by external agencies MFI grading = M2 upgraded from MfR4 (CRISIL) Rated as BBB- Rated high ( SP2+)in Social Performance Assessment Rated favourably on social performance and responsible financing grading (2014) Loan Portfolio Audit and Systems evaluation conducted stated good management systems and reasonable control mechanism, which has helped them to maintain a good portfolio quality 41 41

42 Strong growth over the last few years, with improving profitability metrics Portfolio (Rs crs) Clients( 000) Revenue and Profitability (Rs Crs) Steady increase in revenue and profitability metrics over last few years x increase in GLP over the last 4 years x increase in client base over the last 4 years Revenue PAT '

43 SAIJA: SUCCESS FACTORS 1. CHOOSING THE RIGHT BUSINESS MODEL Saija created a hybrid model which balanced the need for energy officers to conduct product demonstrations and capacity building with the important role of loan officers in appraising loans 2. DEVELOP APPROPRIATE INCENTIVES FOR STAFF It is difficult to scale an energy finance program without the proper incentives. The incentive was crafted carefully and intelligently so that it does not result in forced selling or push marketing 3. HIRE THE RIGHT ENERGY TEAM LEADER Finding someone,, who understands what the company is trying to achieve, and knows how to convey that idea with enthusiasm is critical. 4. PILOT THE PROGRAM CAREFULLY Saija has learned that a carefully designed pilot phase that precedes scale-up is critical as it enables the MFI to learn from mistakes and better understand its new and unfamiliar business and also ensure that the model is right before committing to investment in expansion. 5. INVEST IN TRAINING Training staff so that they are confident at their job, problems are identified, tactics are honed, feedback provided and talent identified. Training is always an investment that pays off 43

44 Compliance and transparency are a fulcrum of the organization Robust Operational Procedures: Well laid out SOPs as well as a comprehensive IT system which enables reporting for management decisions at a fast pace Independent Directors and Board Supervision: Saija has 3 reputed independent directors and 4 investor nominee directors Reputed Investors and Lenders: Over 20 investors and lenders have open access to information in the company highlighting the transparency in the system Internal Audit: Monthly audit for all branches and quarterly audit of corporate functions by IA team which reports to the board High focus on being a compliant and transparent organization Saija frequently hosts leading names in the impact ecosystem providing them with open access to its operations 44

45 along with constant focus on initiatives to improve organisational efficiency HR initiatives Competitive remuneration and career progression offered to all employees, along with a transparent and strong work ethic (Whistle Blower Policy, Staff Grievance Handling policy, Exit Interviews) Regular staff satisfaction surveys being conducted (Staff Satisfaction Survey Conducted in 2011, 2013, 2015 and 2017) Partnership with Accion and SIDBI provides Saija staff global exposure and world class training Talent Retention Survey to understand the motivating factors of employees, analyze the gap areas and taken required measures Regular and detailed monthly Field Executive Productivity Study carried out to identify areas of weakness and work on them through focused capacity building and counseling. A structured and periodic succession planning is carried out with emphasis on grooming and internal promotions Performance Management System Study Conducted by Towers Watson which involved review and suitable recommendations pertaining to existing compensation, performance assessment and reward systems in the company HR Software on Employee Information Portal which strengthen the HR MIS and smoothen the departmental work Attrition rate is very low as compared to industry standards Empolyees having completed 10 years. Foreign Training Exposure to employees Saija boasts of High Retention levels with 39 employees in the company having completed more than 5 yrs and 71 employees having completed more than 3 Years when maximum recruitment (318 out of 450) has been done only over the last two years. 45

46 SAIJA: Saija Energy Lending Program & it s Initiatives Energy Lending Program Initiatives Saija wants to equip their clients with clean and green energy which could help in improving their basic standard of living. Saija Finance has tied up with Green light Saija has got a huge client base, which is increasing rapidly. Planet, as technology partner,for providing In addition to the credit support, Saija wants to offer non financial good quality Solar lamps. support to the clients in areas of health,education, energy, Saija Finance has introduced a new financial environment and livelihood. product termed as Saija Urja Rin (A loan We realise that energy is the most important and efficient parameter, product for making the solar lamp affordable which can improve client s life and catalyse all round development. to its huge and diverse client base ). Saija has initiated a Energy Lending Program to equip the energy poor As of April,18 we have covered more than clients with basic and reliable source of lighting. 47 % of the total client base of with Technical assistance is provided by USAID for our energy initiation. over clean energy initiative. T.A. support to be provided by Blue Orchard w.e.f. June Debt support of $ 6.5 million ( by Blue Orchard and DWM.) *Represents Indian financial year end = March 31 st 46

47 SAIJA: Solar Stakeholders & Solar Product Portfolio Product Companies Saija Finance tied up with Green light planet as technology partners for providing good quality solar products in Bihar, Jharkhand and U.P. Arc Finance Saija signed a MoU with Nexant in order to realise its vision of building/expanding renewal energy lending program. Arc finance which is a global organisation with many year of experience in supporting MFI s develop clean energy lending program, will lead the delivery of all technical assistance for Saija. US AID USAID provides Technical Assistance to Saija for Solar energy solutions such as: - Selection of quality products and vendors - Regular scanning of market/customers - Capacity building - Implementing best practices 47

48 FUTURE THRUST AREAS IN CLEAN ENERGY INDIVIDUAL ENERGY LOANS FOR HIGHER END SOLAR PRODUCTS, SOLAR PUMPS, SOLAR GENERATORS, SOLAR INVERTORS DEVELOPING SOLAR ENTREPRENEURS FROM AMONGST OUR CLIENTS CLEAN ENERGY SOLAR MICRO GRID *Represents Indian financial year end = March 31 st 48

49 Table of Contents 1. Investment Highlights 2. Microfinance Sector: An Overview 3. Funding Landscape: MFI Sector 4. Regional Overview: Bihar, Jharkhand, Uttar Pradesh and Haryana 5. Corporate Highlights 6. Operational Snapshot 7. Social Impact 8. Growth Strategy 49

50 MEDIA REPORTS GREEN LENDING AND GREEN GROWTH organized by PRASAC Conference Madhya Pradesh Inclusive Finance Conference Mrs. Sinha had share her experiences at the Green Lending Event organised by GLOBAL CLIMATE PARTNERSHIP FUND AND RESPONSIBILITY, on 24 May 2018 at Phnom Penh hotel in Cambodia organized by PRASAC, the leading financial institution in Cambodia. -The event was presided over by the representative of Ministry of Environment, and participated by financial institutions, international financiers, local and international NGOs, international development partners, renewable energy/energy efficiency technology providers, business associations, and small and medium-sized enterprises (SMEs). ACCESS ASSIST in association with the Government of Madhya Pradesh, NABARD, SIDBI and DFID, has convened the Madhya Pradesh Inclusive Finance Conference under the aegis of the Poorest States Inclusive Growth (PSIG) Programme. The Conference aimed to help create an eco-system where all efforts towards financial inclusion add up and contribute an aggregate outcome. The conference has designed appropriate panels on themes that will attempt to understand roles of each stakeholder, identify impeding and enabling factors, assess the value of different models understand technology innovations, and focus on the enabling environment. More importantly, the conference helped in highlighting the significant accomplishments of the MP Samruddhi programme and seeks convergence with other stakeholders to accomplish its goals. 50

51 Well recognised in the impact ecosystem for being a visionary organisation serving an underdeveloped region DFID is extending special assistance to Saija for microfinance and social upliftment support to one lakh women at the bottom of the pyramid during a 5 year period. A nine member delegation of British Parliamentarians accompanied by Mr. Sam Sharpe, then head of DFID in India, visited Saija. DFID, under PSIG Debt fund scheme, extended a financial assistance of a term loan of Rs 250 Lakhs. Post the disbursement, British High Commissioner to India, Sir James David Bevan along with DFID met Saija clients and discussed the impact of support received to them. SIDBI Chairman visited Saija office for feedback on the MUDRA prepaid card model 51

52 Various reputed bodies have partnered with Saija to further its mission, and recognised its impact Skoch Order-of-Merit Award 2015 was bestowed on Saija for its exemplary work in the field of financial inclusion and Technology Intervention Saija was one of the only three entrepreneurs from Bihar which made it to the list of 67 finalists at the concluding function of 2nd Bihar Innovation Forum (BIF) Selected to participate in Westpac s Ruby Connection Program for supporting women in business Recognized by CRISIL as one of the emerging MFIs in the report - India s 25 Leading MFIs Saija has been graded A in SIDBI sponsored Code of Conduct Assessment carried out by Access Assist Financial literacy training: SIDBI has engaged Indian School of Microfinance for Women as a Resource Organization for implementing the pilot which aims to cover women clients of MFIs. Saija, with the support from SIDBI, has conducted Financial Literacy (FL) Programme for approximately 14,000 client Saija reports on a comprehensive Economic, Social and Governance ( ESG ) matrix to the Board. IFC has conducted a detailed feasibility study on Saija exposure to home improvement and home finance In 2015,Saija was selected as one of the MFIs for Technical Assistance support under USAID, PACE D program for clean and sustainable energy 52

53 Collaboration with the Progress Out of Poverty Index initiative The Progress out of Poverty Index (PPI) is a poverty measurement tool for organizations and businesses with a mission to serve the poor The PPI is statistically-sound, yet simple to use: the answers to 10 questions about a household s characteristics and asset ownership are scored to compute the likelihood that the household is living below the poverty line or above it by only a narrow margin. With the PPI, organizations can identify the clients, customers, or employees who are most likely to be poor or are vulnerable to poverty, enabling them to integrate objective poverty data into their assessments and strategic decision-making. Saija will be collaborating on the Progress out of Poverty Index, helping on data collection from its clients Poverty measurement benefits for investors/donors Insight into the funded organization s pro-poor approach Efficacy of a project in reaching out to the desired segment in the regional population Comparison between the concentration in portfolios for different investees/advisory clients Helps in tracking changes in poverty levels of clients over time Helps provide conviction in understanding the ability of a program/project to sustainably service the poor Statistical relevance renders the PPI as good tool for monitoring and evaluation and can be used along with other parameters relevant to the user Client level insights that helps showcase social return on investment/grants Poverty index will help in introducing new products related to energy access, water and sanitation 53

54 Key initiatives taken by Saija to ensure strong and healthy growth of company The Progress out of Poverty Index (PPI) is a poverty measurement tool for organizations and businesses with a Non-Financial Linkage projects undertaken by the Company mission to serve the poor In 2015,Saija was selected as one of the MFIs for Technical Assistance support under USAID, PACE D program for clean and sustainable energy Conducted 3 Solar Ambassador Training for our clients and 5 Front line staff training in association with Arc Finance(US-AID) for our branches in Bihar, Jharkhand and UP in April-August Promotion of Solar products under Energy Efficiency Initiative Piloting solar entrepreneurs for providing solar lamps to non-clients in the community that we serve ( Support from US AID ) During FY1718, the Company has sold 63,617 units of clean energy products and disbursed INR Crores as energy loans. In the month of March 18, the Company has sold 17,625 units of clean energy products which is the highest as compared to any other month. As of March 18 the portfolio outstanding for Solar products was INR Crores. Promotion of Other other value added products Conducted 3 Solar Ambassador Training for our clients and 5 Front line staff training in association Successfully launched Saija Pankha Rin (SPR) in May 2016 in Deoria and Gorakhpur branches of UP. Initiated Pilot for introduction of new products such as mobile and water purifier. 54

55 Table of Contents 1. Investment Highlights 2. Microfinance Sector: An Overview 3. Funding Landscape: MFI Sector 4. Regional Overview: Bihar, Jharkhand, Uttar Pradesh and Haryana 5. Corporate Highlights 6. Operational Snapshot 7. Social Impact 8. Growth Strategy 55

56 On a strong growth path with plans of launching 180 new branches over the next 5 years INR Mn 2.0 FY 17(A) FY 18(E ) FY 19(E ) FY 20(E ) FY 21(E ) New branch opening guidelines Timelines and operational highlights Identification of village/urban colonies Branch Operational Highlights Once the village is identified, a staff member goes to the village and collects some basic information about the village as below. Population in the village and the number of poor households Sub section details of population (SCs, BCs, and STs etc.) Main economic activity of poor households and sources of income Seasonal availability of work for poor (employment days) and level of out-migration Land under agriculture (irrigated and non-irrigated) Sources of irrigation Political situation and names of important leaders (Sarpanch, VAO, Political leaders) Presence of government schemes (like SHGs) or other NGOs) Credit History and presence of other MFIs Only after a thorough assessment of all these parameters, Saija undertakes opening a new branch Disbursements/Branch GLP/Branch FEs/Branch 56

57 Saija has a successful business correspondent relationship with IDBI Bank which it has leveraged further for MUDRA Bank partnership Business Correspondent Operations MUDRA Bank Partnership Saija has entered into a tripartite agreement with MUDRA Bank and IDBI Bank, as a part of which Saija will help in distribution of co-branded MUDRA Debit Cards On-lending finance for Microfinance clients This RuPay card can be used at ATMs and at Point of Sale (PoS) machines for merchants to buy raw materials or good needed for their business Interest on used/withdrawn amount will be charged on a daily balance basis IDBI Bank will become the co-issuer of the MUDRA cobranded debit card IDBI Bank has agreed to provide the eligible customers credit limit in the form of working capital facilities IDBI Bank will sanction cash credit facility up to the extent of 20% or more of the sanctioned term loan MUDRA will provide refinance to IDBI Bank against their average outstanding in the card accounts of the customer with IDBI Bank MUDRA will share part of the risk undertaken by IDBI Bank Saija is the only MFI in India to have partnered with MUDRA bank for prepaid cards Saija s role will be to identify potential clients, collect KYC information, completing formalities as needed by IDBI Bank Post disbursement, responsible for recovery and other services Saija will share part of the risk undertaken by IDBI Bank 57

58 and will continue to launch new products in tie-up with reputed partners Saija is in advanced stages of discussion with various partners for new product lines Current Products and Services Near Term Growth Plans Long Term Strategy Microfinance JLG Products (SKR, SMR) Non Microfinance Products with partners Full service impact focused financial services business with a potential of listing in stock market SUR in partnership with Greenlight Planet Small ticket housing loans Small Finance Bank Business Correspondent with IDBI Bank MUDRA Card Build on past success to consolidate position in its target geographies Mine untapped geographies by leveraging local knowledge 2-3 wheeler finance Personal Loans and Non Financial Products Focus on building new product portfolio Try to optimize the distribution channel by cross selling non-microfinance products. Build an intelligent data warehouse that captures key requirements of a client and what Saija can offer A study conducted by Deloitte stated Current operations of Saija fit well within the ambit of the RBI guidelines for an SFB license Saija is well placed to be granted the banking license for an SFB in the medium term given RBI s focus on the region it operates in. In the near term, Saija will continue to partner with full service financial institutions to provide non-mfi products needed by its clientele. 58

59 Key initiatives taken by Saija to ensure strong and healthy growth of company Sl No Department Steps Taken Exploring co-lending model for expansion of loan book Grant for mobile based front end technology 1 Strategy Implementation of progress out of poverty index (PPI) Piloted Tele-calling to clients by Vindhya Piloting of solar entrepreneurs, Monitoring of impact studies Initiated Development of monitoring calendar and credit scoring system for groups 2 Resource Minimizing cost of borrowings Tracking of covenants as per sanction letter 3 Risk Implementation of Risk Framework 4 Commercial Initiated Cashless disbursement through prepaid cards and bank account transfers Collection through payment banks Clients depositing at branch 5 Operations Disbursement through accounts Quality Improvement Initiated Smart Campaign certification 59

60 Key initiatives taken by Saija to ensure strong and healthy growth of company Sl No Department Steps Taken 6 IT Mobile based front end technology pilot with IFMR and esthonos. Basis pilot we have selected IFMR 7 Robust HR & Training Recruitment Plans Implementation of HR software Human Resource Management Assessment Employee Engagement activites Performance Management System upgrade through Tower Watson Training program (Saksham) for supervisors and field officers Staff Satisfaction Survey and Exit interviews. Regular Core Values Workshops and Capacity Building Activities A separate compliance follow up sheet to keep a track of compliance verification and pending status. Incorporation of cash in transit, cash insurance limit etc. audit in the internal audit scope. 8 Internal Audit Introduction of branch wise list of high risk areas to be shared with management and state heads at the completion of every branch audit cycle We have engaged Shaishiv consultant who will conduct certain percentage of branch audit. The process has been introduced to further strengthen the internal audit department 60

61 Thank you 61