Bal Mahila Vikas Samiti VAMA - Final Reportvamaindia.org/custom/pixpage/docs/smera-mfi-rating...BAL...

SMERA MFI Rating Report

Date of Report : 23rd September, 2010 * Legal Form : NGO-MFI

SMERA- MFI Rating : MF4

MF1 Highest

MF2 High

MF3 Above Average

MF4 Average

MF5 Below Average

MF6 Inadequate

MF7 Low

MF8 Lowest

* This rating is a one-time exercise and does not envisage automatic surveillance. This rating is valid for a period of one year; subject to however, no significant changes / events occur during that period which could materially affect the business and financials parameters of the Microfinance Institution (MFI). SMERA recommends that the user of the rating may seek a review of the rating, if the rated MFI experiences significant changes / events in the business. Recommended for review in the next financial year.

BAL MAHILA VIKAS SAMITI (BMVS)

9-C, Maharana Pratap Nagar, Usha Colony, Gwalior – 474 009 Madhya Pradesh

India


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SNAPSHOT

D&B D-U-N-S® Number 91-500-3585

MFI Name BAL MAHILA VIKAS SAMITI (BMVS)

Tradestyle VAMA

Head Office Address

9-C, Maharana Pratap Nagar, Usha Colony, Gwalior – 474 009 Madhya Pradesh India

Telefax (91) (751) (2457438)

Website www.vama.org.in

Email [email protected] [email protected]

Line of Business Microfinance services using Self Help Group (SHG) Model and Joint Liability Group (JLG) Model

Chief Executive Mr. Indra Bhusan Verma, Chief Executive Officer cum Secretary

SMERA MFI Rating MF4

Legal Form Society registered under Madhya Pradesh Societies Registration Act XXI of 1860

Society Registration Number 21087/1988

Formation Date 14/Dec/1988

Date of Commencement of Microfinance Operations

February, 2005

Total Employees 42

Last AGM Date May, 2009

Last Financial Statement Date 31/Mar/2010


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RATING SMERA has assigned an MFI rating of MF4 to BAL MAHILA VIKAS SAMITI (BMVS)

(hereafter referred as VAMA). The rating indicates that in SMERA’s current opinion, the rated

MFI’s ability with regards to credit strength is average.

The MF4 rating assigned to VAMA indicates its ability to manage its operations on the strength

of its long track record of two decades in developmental activities, experienced board members

and field staff, adequate loan appraisal techniques, collection techniques and adequate cash

management system.

The rating remains constrained on account of relatively concentrated portfolio in the district of

Gwalior, moderate MIS system, high dropout rate and necessity of strengthening the second

line of management. Further SMERA has taken note of the initiative taken by VAMA for

installing Xcellence software; however the performance of the same is yet to be seen.

SMERA feels early transformation of portfolio into new software would help VAMA to achieve

its desire milestones better. SMERA also feels that management have to find alternate avenues

of funds for expansion.


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MFI BACKGROUND

BAL MAHILA VIKAS SAMITI (BMVS) is a non- profit organisation established on

14/Dec/1988 as a society registered under Madhya Pradesh Societies Registration Act XXI of

1860 by Mr. Indra Bhusan Verma for the betterment of the poor and for the empowerment of

women. At present, executive member/board is governed by eleven members having

experience in various developmental activities. The main thrust of VAMA is women

empowerment in urban and rural area, health and hygiene, issues related to gender partiality

and complete development of the rural community.

VAMA has initially worked for rural poor of the locality through various activities and

implemented various development programmes since inception such as family counseling,

nursing college, healthcare and sanitation, education, livelihood related issues, gender-related

issues, water conservation, agricultural development, etc.

VAMA has been involved in the SHG bank linkage programme of NABARD programme

especially in the rural areas from 1999 to 2002. The microfinance operations commenced from

February, 2005 in Madhya Pradesh with their own funds. VAMA was able to raise its first

external borrowing from Friends of Women's World Banking (FWWB) in August, 2006.

Microfinance operations are carried out as one of the project of VAMA. Apart from

microfinance operations, they are also involved in various development activities. It started its

microfinance programme following self help group (SHG) model till December, 2008 after that

VAMA has started following the joint-liability group (JLG) model also. At present,

management is converting the entire SHG group formed into JLG group. As on 31/Jul/2010,

VAMA has 4,169 active borrowers (both SHG and JLG) with a net portfolio outstanding of INR

30,261 (in thousands).

VAMA is governed by well experienced board members. Mr. Indra Bhusan Verma (Chief

Executive Officer cum Secretary) has done Master of Commerce and Diploma in Journalism

with a vast experience in development sector for more than two decades and other members of

the board have a decade of experience in developmental activities.


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VAMA is headquartered at Maharana Pratap Nagar, Usha Colony, Gwalior, Madhya Pradesh

and has separate offices for development activities and microfinance operations. Microfinance

operation is concentrated only in Gwalior district with 02 branches i.e. Gwalior and Dabbra

(started on July, 2010 however the disbursement is yet to be started). In the year 2009, VAMA

were also operating from a branch called “Padava” however the portfolio of the same has been

transferred to Gwalior branch. As on 31/Jul/2010, VAMA has linked to 1,325 groups and

covered more than 119 villages & 47 urban slums of Gwalior district.

VAMA has adopted the group lending model i.e. Self Help Group (SHG) approach wherein 10

to 20 members come together to form a group and Joint Liability Group (JLG) approach

wherein 05 to 10 members come together to form a group. Loans are for 06 to 24 months with

interest rate of 15% per annum (till March, 2010 it was 18%) on flat basis along with 3.5% of

loan amount as processing fees and other charges.

VAMA has tied up with Birla Sun Life Insurance Company Limited under which all the

borrowers are covered with life and accidental insurance to the insured amount of INR 10,000.

In case of death of the borrower, the insurance claim is settled after deducting the loan

outstanding of the borrower.

VAMA is presently banking with various banks/financial institutions like State Bank of India,

Friends of Women's World Banking (FWWB), Small Industries Development Bank of India

(SIDBI), Manaveeya’s Holding & Investment Limited and IDBI Limited. VAMA has further

applied to various banks/financial institutions for loans like Indian Bank, Punjab National

Bank, MAS Financial Services Limited, IFMR Trust, Bank of Baroda, etc. VAMA has also

received various grants / donation from various sources.


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HIGHLIGHTS OF VAMA OPERATIONS AS ON 31/JUL/2010

Particulars 31/Mar/2008 31/Mar/2009 31/Mar/2010 31/Jul/2010

No. of states 01 01 01 01

No. of districts Covered 01 01 01 01

No. of branches 02 02 01 02

No. of villages Covered 389 434 495 510

No. of SHGs and JLGs formed 865 1,407 1,305 1,325

No. of active borrowers 1,876 2,895 3,917 4,169

Cumulative Number of active borrowers

2,536 5,698 9,790 11,070

No. of Field Executive (FE) 21 27 15 12

No. of employees 33 38 37 42

Number of loans disbursed during the period in SHG

2,200 2,538 3,137 699

Number of loans disbursed during the period in JLG

0 635 955 581

Number of loans disbursed during the period in SHG & JLG

2,200 3,173 4,092 1,280

Loan disbursements during the period (INR in thousands)

17,050 25,530 42,985 15,302

Cumulative loan disbursements (INR in thousands)

19,186 44,716 87,701 103,003

Net Portfolio outstanding (INR in thousands)

9,699 15,183 29,098 30,261


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SECTOR WISE LOAN DISBURSEMENT (IN INR THOUSANDS)

For the period ended as on

31/Mar/2008 31/Mar/2009 31/Mar/2010 31/Ju1/2010

Industry Amount % Amount % Amount % Amount %

Agriculture 3,410 20.00 8,425 33.00 10,654 24.79 3,826 25.00

Services 1,705 10.00 3,064 12.00 6,875 15.99 2,448 16.00

Micro Enterprises 6,820 40.00 7,148 28.00 11,293 26.27 3,979 26.00

Animal Husbandry

4,433 26.00 5,617 22.00 8,050 18.73 2,907 19.00

Consumption 682 4.00 1,276 5.00 6,113 14.22 2,142 14.00

Total 17,050 100 25,530 100 42,985 100 15,302 100

SECTOR WISE LOAN OUTSTANDING (IN INR THOUSANDS)

For the period ended as on

31/Mar/2008 31/Mar/2009 31/Mar/2010 31/Ju1/2010

Industry Amount % Amount % Amount % Amount %

Agriculture 1,843 19.00 5,226 34.42 6,402 22.00 6,657 22.00

Services 1,070 11.03 1,974 13.00 4,947 17.00 4,539 15.00

Micro Enterprises 4,070 41.97 4,023 26.50 8,147 28.00 8,473 28.00

Animal Husbandry

2,426 25.01 3,341 22.00 5,238 18.00 5,750 19.00

Consumption 290 2.99 619 4.08 4,364 15.00 4,842 16.00

Total 9,699 100.00 15,183 100.00 29,098 100.00 30,261 100.00


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SITE VISIT OBSERVATIONS 1. VAMA has written HR manual and operational manual in place. For internal audit an

external audit firm “Geeta Dingra & Associates” is appointed.

2. MIS is prepared at head office level by MIS officer and maintained completely in MS-Excel. Collection is updated in DCB (hard copy) on daily basis and it is sent to MIS department where consolidation is done on monthly basis after 25th of every month. Recently VAMA has installed “Xcellence” software however the customization is still under process. Software is updated upto February, 2010. In MIS only repayment schedule and disbursement list is generated and other reports are generated from Excel. During the visit some errors were observed in the MIS system. They maintain loan disbursement register, overdue register, monthly report register, etc. Similarly, the accounts department maintains all the accounts data manually and in tally. During the site visit, error was observed while PAR calculation hence the accuracy of PAR cannot be commented.

3. Group formation process was standardized in the branches visited. Area covered and

villages chosen for lending purpose are well spread in urban and rural areas of Gwalior district. However the focus of lending has shifted to urban from rural area.

4. In July, 2010 VAMA has started a new branch in Dabra; however the disbursement in this

branch is not yet started. Earlier Vama was also having a branch at Padava of which the entire portfolio has been transferred to Gwalior, however in MIS Padava branch was still reflecting due to some issues in consolidation.

5. At present VAMA has stopped forming SHG group and lending only through JLG group

and converting the existing SHG groups into JLG after completion of their existing loan. 6. It was observed that loans are utilized in various income generating activities and for

consumption purpose like agriculture, trading, animal husbandry, vegetable & fruit vending, petty shops, house construction, marriage or function, education, etc.

7. Multiple lending was not observed during the visit due to limited competition because of

its brand image built over years on account of development work. 8. It was observed that VAMA provides motorbikes and fuel reimbursement to their FE for

collection. Branch manager / Assistant Branch Manager have in the past worked as FE and has reached this level owing to promotions. Promotion happens after completion of some tenor and appreciable performance.

9. VAMA has decreased the rate of interest on flat basis from 18% to 15% after April, 2010 for

JLG and processing charges are increased from 3% to 3.5%. Interest rate charged to SHG group is still 18% till the entire group repays their entire debt.


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10. Collection is made from Monday to Friday in morning from 8.00 am to 12.00 pm. Collection takes place at the centre meeting where all the members of respective groups are present. FE collects the cash from the group leader in presence of all other members and updates the repayment card of the each member and collection demand sheet containing loan outstanding and installment details and issue the repayment receipt to the members. Collected cash is deposited in head office on the same day.

11. If the repayment date is less than 30 days from the date of disbursement, then for that

period only interest amount will be collected and the principle repayment will start from next month.

12. Pre settlement of loan is allowed after settling the outstanding loan amount along with the

complete interest. 13. VAMA has launched a product on pilot project called More for Cash (MFC) for individual

borrowers and value of loan was not more than INR 50,000. At present they are not promoting the same. However during the visit it was observed that MFC loan is still sanctioned to few of the reputed clients with the approval of senior management and in few cases the loan value was more than INR 50,000. In one of the instance, one loan of MFC is outstanding for more than 120 days. Post dated cheques were taken as security for MFC loan and collection is done in branch. In one instance, MFC loan of INR 50,000 sanctioned for one month only.

14. Under MFC, staff of VAMA has also taken loan which is reflecting in the MIS. 15. Vama has also started a product called Weaker Section Loan (WSL) for two wheelers in

February, 2009 and value of loan was INR 70,000. However the same was stopped in July, 2009. During the visit in one instance it was observed that WSL was sanctioned in March, 2010. As informed by the management the same was sanctioned after the approval of loan committee on the basis of credibility of the client and past record of the member.

16. Amount of overdue for June, 2010 was matching in the MIS with the register. 17. In one instance, loan was taken only for 04 months and the monthly repayment value was

INR 18,433. 18. Group members were familiar with each other and hailed from the same village and

nearby vicinity. However it was observed that the basic terms and conditions like interest rate, processing fees and benefits of insurance cover taken from VAMA was mainly known to the group leader. In few cases the purpose of loan were not matching.

19. According to the selection criteria of members, no two members in a group should have

blood relation. It was observed that in sample group visited members were from same family however having separate kitchen.

20. As per the policy the attendance during the group meeting is compulsory. In sample


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groups visited, absenteeism was not tracked. 21. In one group visited, one member has defaulted during 01st cycle and other members had

repaid their loan and she had dropped from group for 02nd cycle. In the group out 08 members, 05 members have taken loan for house repair & maintenance.

22. As per the policy, VAMA does not accept any part payment. However during the visit, it

was observed in one instance part payment was accepted due to crucial case of borrower. 23. In tally debtors of INR 1,650,000 is reflecting in the name of board members for program

development. As informed by the management, the value is grants or corpus funds of BMVS which are accidentally or by chance entered in the account of microfinance and the same were transferred to BMVS in the form of reconciliation account.

24. The outstanding portfolio of FE who left the organisation has been merged with other FE,

however the name of old FE is still reflecting in the system. As informed by the management, they don't enter any new entries on the name of old FEs after transfer of their accounts.

25. In the register maintained few discrepancies were noticed such as totaling error, difference

in balance, writing error, etc.


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OBSERVATIONS (RATIONALE) Ownership and Board Structure VAMA is governed by eleven board members (President, Vice President, Secretary, Joint Secretary, Treasurer and Six Members), who are having experience in development sectors, rural management and accounts along with microfinance operations. Subject also has advisory team having diversified functional expertise. The day-to-day activities are managed by Mr. Indra Bhusan Verma (Chief Executive Officer cum Secretary) who is guided by the other board members & advisory board and assisted by the senior management team. The board members are actively involved in policy approvals, fund mobilization and are responsible for all strategic matters relating to VAMA. Mr. Indra Bhusan Verma has done Master of Commerce and Diploma in Journalism with a vast experience in the field of development sector and journalism for more than two decades. He has implemented various developmental projects in Gwalior district. Other members of the board have a decade of experience in the development activities along with experience of more than four years in microfinance operations. VAMA is registered as a Society and the legal form of VAMA does not allow them to accept deposit from its members. Initially VAMA used to accept savings from its member; however after FY 2008 they stopped taking savings and has refunded the same along with interest to the members. In its current form it also faces difficulties in attracting equity from private investors. Board Processes The Board is involved in strategy formulation and also approves the VAMA business plan. The senior management team updates the Board regularly on operations and key developments in each department.

Board meetings are conducted quarterly and minutes are maintained properly. Board meeting

are conducted to discuss the overall performance, recruitment, updating policy, to ensure the

use of resources, approve annual work plan and budgets, implement programmes that are in

line with the mission and vision, monitor MFI’s performance and review quarterly reports. Mr. Indra Bhusan Verma involved in internal and external communication with funders, recruiting the personnel, handling overall operations & administration, reporting to the board the impact of the strategic planning through financial analysis, surveys, operational challenges, and customer statistics on an ongoing basis, identifies and addresses lapses in adhering to policy and check whether the built-in control procedures are actually functioning or need to be revised.


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ORGANOGRAM

Board Member

Chief Executive Officer

Manager Incharge

Manager - HR Chief Operational Officer

Internal Auditor

Manager -Finance

Senior Accountant

Accountant

Cashier

Branch Manager

MIS Assistant

Assist. Branch Manager

Field Executive


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Management

As on 31/Jul/2010, VAMA has 42 employees for microfinance operations. It has recruited both

females & males as staff. They have experience in the field of microfinance and rural

development activities run by VAMA. VAMA conducts continuous training to improve their

productivity and also send them to external training service provider for training on

microfinance. VAMA also has written manuals for its operations, financial and accounting and

human resources.

One of the responsibilities of the CEO is to communicate the vision and mission of the

organisation to its employees and to ensure whether they are adhering to the policy and

strengthening organisations reputation in the market place, financial sector, with government

agencies and regulators. VAMA is committed to provide financial literacy and credits for self-

employment, livelihood and other financial and technical assistance to poor and excluded in

this region. It was observed during the visit that VAMA has adhered to this commitment.

The organisation’s values include, team work, building relationship, customer delight, pursuit

of excellence and transparency. During the site visit it was observed that all borrowers were

happy with the services provided by the MFI but some of the borrowers were not aware of the

basic terms and conditions except animator which is due to lack of continuous training

provided to borrowers by the field executive (FE). VAMA has own code of conduct for their

staff.

Mrs. Nilofer Khan (Chief Operational Officer) joined VAMA in the year 1998 in one of the

project of development activity, further she was transferred to microfinance division in the year

2005. She worked in all the level of microfinance from FE to COO. She is responsible for branch

expansion, day to day operations, monitoring & taking regular reports from branch manager

and training to field staff. client outreach under guidance from CEO.

VAMA have written manual for human resource policy. Human resource department is

recently started by appointing Ms. Richa Khatri, (Human Resource - Manager). She has done

Automobile Engineering and Mater of Business Administration and manages activities related

to selection, recruitment, training, motivating, evaluating the staff performance and developing

a team who will effectively carry out organisations mission, performance appraisal of the staff.

It has implemented an incentive–based pay structure for the staff.


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Systems and Processes Internal Audit System VAMA has appointed an external audit firm “Geeta Dingra & Associates” to conduct internal audit of the organisation. They are responsible for conducting surprise branch visit, field visit and cross checking the documents and MIS maintained in the branch, test for compliance to systems, policies and procedures in all operational areas and file the report to the board / CEO. Audit is conducted on monthly basis and audited report is prepared on quarterly basis. Area selection Area survey is conducted through secondary and primary data collection by the FE. The criteria for selection of new villages for lending are population density, history of area, proximity to existing operational areas, infrastructure, sources of income and savings, other loan sources, water availability, political & social sources, etc. VAMA is operating in both urban and rural area, however currently the focus for lending is diverting from rural area to urban area. Lending Model

VAMA has adopted the group lending model i.e. SHG and JLG. SHG’s consists of 10 to 20 members each and JLG consists of 05 to 10 members each. Group formation is undertaken by the FE and Assistant Branch Manager (ABM) through various steps such as selecting the client as per the criteria, briefing about organisations mission, product and services, duties and responsibility of the groups, benefits of group methodology, etc. Further compulsory group training (CGT) is provided to interest member for next 03 days by FE and the group is presented to the ABM / BM for approval. ABM / BM conducted Group recognition test (GRT), wherein they seek clarifications on the dynamics of the group, credit mechanisms, needs of the group, etc. After satisfying about the genuineness of the members formal group is formed and INR 100 is collect as a membership fees along with application form, residence and photo identity proof of borrower and guarantor.

Earlier VAMA used to motivate the member of SHGs to save on regular basis and monitor their account for atleast six months before disbursement of loan and the training was given to SHGs for maintenance of books of accounts, internal lending and recovery mechanism out of SHG savings. However, VAMA has stopped forming SHG groups and converting the existing SHG groups into JLG groups after completion of existing loan.

VAMA has documented policies and procedures for its overall microfinance operations and this is updated at regular intervals. At present the lending decisions are centralized at head offices after the approval of CEO.

After the group formation and GRT, loan application is collected as per the prescribed format and FE verifies the same and submits it to concern ABM /BM. The application is further cross-verified by the ABM /BM as per the criteria and presents the same to credit committee (CC) which is conducted twice a month. Credit committee consists of 05 members i.e. CEO, COO, BM, ABM and FE.


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Once the loan is sanctioned, concerned FE intimates the borrower about the sanction of loan, time of disbursement, requirement of documents and to deposit 3.5% processing fee and other charges. Disbursement starts on 12th of every month and continues till 20th of the same month. The disbursement is made through cash at the branches in the presence of BM and all the borrowing group members along with guarantor. Processing and other charges are recovered at the time of disbursement by Cashier/Accountant and distributes the loan amount while making the appropriate accounting entries. The repayment date will be decided at the time of disbursement.

BM or ABM conducts the loan utilization check on random basis within one month’s time from disbursement as per the policy. VAMA has revised the format for loan utilization check after FY 2010. All the KYC documents collected and kept in the head office.

The repayment of the loan is monthly in case of SHG model and JLG model. Collection takes place at the meeting at a pre-fixed date and time where all the members of respective groups are present. Collection schedule is decided at the time of disbursement. President or Secretary of group will collects repayment from all group members and handover to FE. FE updates the repayment card of the each member by putting date and sign and issuing the collection receipt to group members and Demand Collection and Balance Sheet (DCB) provided to each FE containing loan outstanding and installment details. FE tally the collected cash with the carbon copy of receipt issued and submits the same along with DCB to MIS department. The repayment data of the borrower is updated in the respective excels by MIS officer and submit the cash with loan deposit slip to accountant. Cash received is deposited in the same day in the bank account. If cash collected is not deposited on the same day then it should be deposited on next day as per the policy. VAMA has taken cash fidelity and cash in transit insurance from The Oriental Insurance Company Limited. VAMA’s cash management system is adequate.

In case of any delay, VAMA charges penalty of INR 50 per day. FE, ABM, BM and COO and other members of group follows up for early clearance of overdue after prescribed dates. If any overdue are above 120 days then COO puts such cases for write off. Even after writing-off of the loan due, they follow with the defaulted member regularly for repayment. VAMA also creates provision of 2% for loan loss reserve.

Pre payment of loan is allowed in case a member wants to drop out or she may be permanently leaving the village after settling the outstanding loan amount with interest. Pre settlement is allowed only after repayment of 50% of loan amount. Part payment is not collected by VAMA.

MIS is prepared at head office level by MIS officer and maintained completely in MS-Excel. Collection is updated in DCB (hard copy) on daily basis and sent it to MIS department where it’s consolidated on monthly basis after 25th of every month. Recently VAMA has installed “Xcellence” software however the customization is still under process. SMERA feels that VAMA needs to implement robust management information systems (MIS) at the earliest to support its envisaged growth plans. VAMA has started updating the MIS from Excel to newly installed software; it is updated upto February, 2010 however the complete updation is yet to be seen. They also maintain loan disbursement register, overdue register, monthly report register, etc. however during the visit some errors were observed in the registers. Backup of the MIS is taken on monthly basis on CD-ROM or other hard drive storage device. The bank reconciliation is also done at head office level monthly.


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VAMA face competition in operations from Sambhav Micro Finance Institute and SHARE Microfin Limited. However VAMA does not perceive any threat to its market share because of its brand image built over years due to community development work, local staff working for more than six years with the community, easy access to senior management for clarification and grievance redressal, etc.

Accounting Policies Accounting software tally is maintained in head office which was installed in the year 2009. All registers, ledgers and cash book are maintained manually for recording income & expenses. The records maintained are cash book, internal receipt, payment voucher, etc. Ms. Swati Dubey (Finance Manager) has done Master of Business Management in Finance and Marketing. Accounts manager along with accountant are mainly responsible for proper recording of all the accounting transactions, generation of MIS reports, overall maintenance of accounting functions, branch collections, advance and daily cash balance, cash & bank reconciliation, etc. Receipt and payment reports are prepared on weekly basis and other reports are prepared on monthly basis. Asset Quality At present, the portfolio composition is concentrated in Gwalior district through two branches i.e. Gwalior and Dabra (started in July, 2010 however the disbursement is yet to be started).

It has to be noted that the loan portfolio has been diversified to different sectors during the period. The loan is utilized by the borrower’s family as a whole. About 28% of loan has been disbursed for micro enterprise and 22% for agriculture as on 31/Jul/2010.

Capital Adequacy Ratio (CAR) is adequate during the period. It has increased from 2.58% in March, 2008 to 24.24% in March, 2009. It has further increased to 25.76% in March, 2010. This growth was largely on account of growth of portfolio and increase in capital and grants.

The asset liability maturity profile of VAMA is comfortable, as all the SHG and JLG loans are for 06 to 24 months while the borrowings are for a tenor of 18 months to 48 months. The seasonality of the portfolio is majorly upto 05th Cycle.

VAMA has availed loan at the interest of 10% to 14% per annum from bank / financial

institution and charging interest to the borrowers on flat basis @ 15% per annum for the loan

products. Financial Arrangements

VAMA is presently banking with various banks/financial institutions like State Bank of India,

Friends of Women's World Banking (FWWB), Small Industries Development Bank of India

(SIDBI), Manaveeya’s Holding & Investment Limited and IDBI Limited. VAMA has further

applied to various banks/financial institutions for loans like Indian Bank, Punjab National

Bank, MAS Financial Services Limited, IFMR Trust, Bank of Baroda, etc. VAMA has also

received various grants / donation from various sources.


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SALIENT FEATURES

STRENGTHS RISK FACTORS

Business Orientation � Clarity of vision & mission � Ability to raise funds from

banks/financial institutions/apex bodies � Integrated approach (blend of

microfinance activities with social activities)

Operational Performance � Good repayment rate and asset quality � Cash in transit insurance and cash fidelity

insurance cover is taken by VAMA � Operational self sufficiency of

microfinance activity is 141.2% in FY 2010. Management � Experienced board member and staff � Diversity of technical expertise in the

board and advisory Team � Adequate internal audit, which is

conducted by the external audit firm “Geeta Dingra & Associates”.

Financial � Adequate CAR during the period under

study � Profitable operations during the period

under study Outreach � Seasonality is up to 05th cycle � No. of villages covered is 510 with active

borrowers base of 4,169 members as on 31/Jul/2010.

Business Orientation � Management has to find alternate avenue

of funds for expansion.

Operational Performance � Moderate excel based MIS system and

data is consolidated on monthly basis however there is a needs of improvisation in the documentations and ledgers

� Implementation of robust management information systems (MIS) across its branches to support growth plans

� Group cohesiveness needs further improvement.

� High dropout rate Management � High dependency on Mr. Indra Bhusan

Verma � Second line of management need to be

strengthened. Financial � Yield on portfolio has declined in FY 2010

over FY 2009 � Portfolio outstanding per loan officer has

increased during the period under study. Outreach � Though area covered and villages chosen

for lending is well spread, the portfolio remains concentrated in Gwalior district.


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OTHER INFORMATION

� Profit of VAMA has arrived mainly after receiving grants / donations during the period

under study.

� VAMA face the competition in operations from Sambhav Micro Finance Institute and

SHARE Microfin Limited. However VAMA does not perceive any threat to its market

share because of its brand image built over years due to community development work,

local staff working for more than six years with the community, easy access to senior

management for clarification and grievance redressal, etc.

� VAMA has decreased the rate of interest on flat basis from 18% to 15% after April, 2010 and

processing charges has been increased from 3% to 3.5%. Interest rate charged to SHG group

is still 18% till the entire group repays their entire outstanding debt.


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CONSOLIDATED FISCAL BALANCE SHEET (INR IN THOUSANDS)

As on date 31/Mar/2008 31/Mar/2009 31/Mar/2010

Audited Audited Audited

SOURCES OF FUNDS

Capital Fund 305 4,443 8,965

Total Equity 305 4,443 8,965

Liabilities

Short-Term liabilities

Short-term time deposits 544 142 0

Commercial Loans from Banks/FIs 0 4,371 4,876

Account payable & other short-term liabilities

800 1,239 2,152

Total Short-Term Liabilities 1,344 5,752 7,028

Long-Term Liabilities

Commercial Loans from Banks/FIs 12,962 10,982 25,174

Total Long-term liabilities 12,962 10,982 25,174

Provision for Loan Loss 97 152 291

TOTAL LIABILITIES 14,708 21,329 41,458


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APPLICATION OF FUNDS

Fixed Assets 3,816 4,247 7,579

Current Assets

Cash and Bank Balances 874 536 2,544

Investment in Fixed Deposit 250 675 650

Loan Portfolio

Loan Portfolio 9,699 15,183 29,098

Net Loan Portfolio 9,699 15,183 29,098

Accounts Receivable and Other Assets 69 688 1,587

TOTAL ASSETS 14,708 21,329 41,458


20

CONSOLIDATED INCOME AND EXPENDITURE STATEMENT (INR IN THOUSANDS)

Period FY 2008 FY 2009 FY 2010

Months 12 12 12

Audited Audited Audited

Financial revenue from operations 1,939 5,275 6,837

Financial expenses from operations 743 1,588 2,320

Gross financial margin 1,196 3,687 4,517

Provisions for Bad Debts 97 55 166

Net financial margin 1,099 3,632 4,351

Operating Expenses

Personnel Expense 209 1,266 2,194

Other Administrative Expense 4,370 3,599 1,899

Depreciation and Amortization Expense 382 394 242

Net Operating Income Before Donations / Grants

(3,862) (1,627) 16

Add: Donations / Grants 4,417 2,961 2,248

Net income 555 1,334 2,264

The above financials are taken from the audited financials.


21

FISCAL BALANCE SHEET (INR IN THOUSANDS) (Microfinance Unit)

As on date 31/Mar/2010

Audited

SOURCES OF FUNDS

Capital Fund 6,302

Total Equity 6,302

Liabilities

Short-Term liabilities

Commercial Loans from Banks/FIs 4,876

Account payable & other short-term liabilities 344

Total Short-Term Liabilities 5,220


Commercial Loans from Banks/FIs 25,174

Total Long-term liabilities 25,174

Provision for Loan Loss 291

TOTAL LIABILITIES 36,987


Fixed Assets 3,468

Current Assets

Cash and Bank Balances 2,379

Investment in Fixed Deposit 650

Loan Portfolio

Loan Portfolio 29,098

Net Loan Portfolio 29,098

Accounts Receivable and Other Assets 1,392

TOTAL ASSETS 36,987


22

INCOME AND EXPENDITURE STATEMENT (INR IN THOUSANDS)

(Microfinance Unit)

Period FY 2010

Months 12

Audited

Financial revenue from operations 6,828

Financial expenses from operations 2,320

Gross financial margin 4,508

Provisions for Bad Debts 166

Net financial margin 4,342

Operating Expenses

Personnel Expense 1,539

Other Administrative Expense 624

Depreciation and Amortization Expense 187

Net Operating Income Before Donations / Grants 1,992

Add: Donations / Grants 274

Net income 2,266

AUDITOR P. B. Singh & Associates (Chartered Accountants), Gopal Madhav Palace, Shinde Ki Chawni, Gwalior – 474 009 Madhya Pradesh India


23

PROJECTED FISCAL BALANCE SHEET (INR IN THOUSANDS)

As on date 31/Mar/2011 31/Mar/2012 31/Mar/2013 31/Mar/2014

SOURCES OF FUNDS

Capital Fund 14,951 27,361 47,241 67,873

Total Equity 14,951 27,361 47,241 67,873

Liabilities

Cash Security 3,070 6,361 10,201 15,184

Total Short-Term Liabilities 3,070 6,361 10,201 15,184


Commercial Loans from Banks/FIs

33,943 53,639 72,296 100,631

Total Long-term liabilities 33,943 53,639 72,296 100,631

Provision for Loan Loss 705 1,219 1,931 2,814

TOTAL LIABILITIES 52,669 88,580 131,669 186,502


Fixed Assets

Gross Block 5,529 5,687 5,860 6,240

Less: Depreciation 1,766 2,106 2,433 2,812

Net Block 3,763 3,581 3,427 3,428

Current Assets

Cash and Bank Balances 1,669 2,365 3,232 4,113

Interest Bearing Deposit 2,777 5,258 9,234 13,361

Loan Portfolio

Net Loan Portfolio 44,460 77,376 115,776 165,600

TOTAL ASSETS 52,669 88,580 131,669 186,502


24

PROJECTED INCOME AND EXPENDITURE STATEMENT (INR IN THOUSANDS)

Period FY 2011 FY 2012 FY 2013 FY 2014

Months 12 12 12 12

Financial revenue from operations 16,146 27,244 42,083 52,854

Financial expenses from operations 4,934 8,529 13,521 19,696

Gross financial margin 11,212 18,715 28,562 33,158

Provisions for Loan Loss 334 514 713 882

Net financial margin 10,878 18,201 27,849 32,276

Operating Expenses

Personnel Expense 2,775 4,091 5,685 8,351

Other Administrative Expense 3,236 3,176 3,327 3,943

Depreciation and Amortization Expense

368 339 326 380

Net income before Grants / Donations

4,499 10,595 18,511 19,602

Grants / Donations 2,410 1,815 1,368 1,031

Net income After Grants / Donations 6,909 12,410 19,879 20,633

The above financials are taken from projected financial report provided by VAMA.


25

AGEING SCHEDULE OF THE LOAN PORTFOLIO

As on 31st March

FY 2008 FY 2009 FY 2010 31/Jul/2010

Total loan outstanding that are

No of Active borrower

Value of Portfolio o/s

(INR in ‘000)



(INR in ‘000)

No of Active borrowe

r


(INR in ‘000)



(INR in ‘000)

On time 1,873 9,697 2,844 15,006 3,902 29,008 4,146 30,037

Late (At least one payment)

1-30 days 3 2 18 49 9 50 15 114

31-60 days 0 0 18 74 6 40 5 50

61-90 days 0 0 10 24 0 0 3 60

91-180 days 0 0 5 30 0 0 0 0

181-360 days

0 0 0 0 0 0 0 0

>360 days 0 0 0 0 0 0 0 0

Total 1,876 9,699 2,895 15,183 3,917 29,098 4,169 30,261


26

INFORMATION ON BANK(S)/ FINANCIAL INSTITUTION(S) AS ON 31/JUL/2010

* The above loan has been disbursed in August, 2010.

Name of the Funding Agency

Date of Sanction

Amount Sanctioned (INR in ‘000)

Interest rate (%)

Loan Tenor (in

month)

Repayment Frequency

Amount Disbursed (INR in ‘000)

Amount Outstanding (INR in ‘000)

State Bank of India

June, 2008

5,000 10.00 - - 5,000 5,040

February,2008

2,500 10.00 36 Monthly 2,500 182

Friends of Women's World Banking (FWWB)

June, 2006 to February, 2010

20,500 11.50 18 Monthly 20,500 8,167

Small Industries Development Bank of India (SIDBI)

24/Dec/2008

5,000 14.00 42 Quarterly 5,000 3,214

07/Jan/2010

5,000 12.25 48 Quarterly 5,000 5,000

Manaveeya’s Holding & Investment Limited

31/Aug/2009

10,000 13.50 36 Half Yearly 10,000 10,000

IDBI Limited 23/Jun/2010

5,000 12.75 24 Monthly * *


27

INFORMATION ON DONATION/GRANTS AS ON 31/MAR /2010

Name of the organisation

Date of Sanction

Amount Sanctioned

(Amount in INR) Purpose

Amount outstanding (Amount in INR)

Birla Sun Life Insurance Company Limited

18/Jul/2009 24,126 Capacity Building

0


02/Jun/2008 10,000 Capacity Building

0

SIDBI 24/Dec/2008 590,000 Capacity Building

0

Access development Services

01/Jan/2008 182,550 Capacity Building

0

Access development Services

18/Sep/2007 380,000 Capacity Building

0

ICICI Prudential 06/Sep/2007 10,000 Capacity Building

0

Care Cashe 08/May/2007 12,795 Capacity Building

0

BASIX Group (Refundable)

19/Dec/2009 250,000 Software Support

237,500

MONTHLY END CASH AND BANK BALANCES (IN INR THOUSANDS)

Cash Plus Bank Balances FYE 2008 FYE 2009 FYE 2010 FYE 2011

April 354 921 201 514

May 425 461 292 201

June 669 763 85 401

July 416 449 348 226

August 406 533 241 -

September 3,723 554 81 -

October 3,310 181 1,185 -

November 2,370 652 319 -

December 1,879 1,031 418 -

January 983 129 1,226 -

February 484 448 544 -

March 1,170 755 2,379 -


28

CAPITAL DETAILS

Capital INR 8,965 (in thousands) as on 31/Mar/2010

MEMBERS’ DETAILS

Name Indra Bhusan Verma

Year of Birth 1966

Current Designation Chief Executive Officer cum Secretary

Appointed to Present Position 1988

Started with Subject 1988

Educational Qualification Master of Commerce and Diploma in Journalism

Related Experience since 1988

Active in daily operations Yes

Founder of Subject Yes

Residential Address

12-A, Shubanjali Apartment, Tansen Nagar, Gwalior – 474 009 Madhya Pradesh India

Mobile number (91) (9826299566)

Email ID [email protected]


29

EXECUTIVE COMMITTEE MEMBERS

Name Designation Qualification Profile

Mrs. Uma Kikan President

Bachelor of Science and Bachelor of Ayurvedic Medicine and Surgery (BAMS)

Founder member of the organisation, Account officer in Health Department. Gwalior. Devoted social worker associated with the organisation since beginning for the welfare of rural poor women struggling hard for livelihood and victim of harassment.

Mr. Aditya Saxena Vice President

Master of Science

Government employees and founder member of the organisation. He has been association with the organisation since last two decade as an active social worker besides he is also an active member of Rotary Club, Gwalior.

Mr. Indra Bhusan Verma

Chief Executive Officer cum Secretary

Master of Commerce and Diploma in Journalism

He has conducted various studies like Panchyati Raj Institutions, Mines Worker, Child Labor, Girl Child Infanticide, Chambal Ravines, Participatory Irrigation Act, etc. He has been working in the voluntary sector for the last two decades.

Mr. Avadesh Namdev

Treasurer Master of Arts

The various study of violence against Women, Child Rights & Panchyati Raj Adhiniyam. He has been associated in social sector for last 5 years

Mrs. Shobha Suryavanshi

Joint Secretary

Bachelor of Arts (Sociology)

Presently Government employees in Health Department. Social worker associated with the organisation for the welfare of rural poor child and their health. Promoted formal education in rural areas under DASTAK program.

Mr. Abhishek Gautam

Member

Master of Business Administration (Rural Management)

He has been associated with the organisation since last 5 years as an active social worker.

Mrs. Laxmi Tomar Member Graduate

At present working in ICDS Department. She has been associated with various social organisations of the town for the benefits of the rural poor. Actively participated in the activities


30

Mrs. Mithlesh Member Pre university

She has been associated with various social organisations of the town for the benefits of the rural poor. Actively participated in the activities.

Mr. Shankar Kukreja

Member Master of Business Administration

Working in corporate sector in Delhi. He has been associated with the organisation since last five years i.e. when he was studying MBA (HR) from S P Jain Institute of Management and Research and has been in the organisation on placement for completing his field work.

Mr. Arun Tyagi Member Bachelor of Arts (Sociology)

Working in social advocacy field for last 16 years. He is actively connected as social worker with marginalized and grass root community and is also a founder member of Gram Sudhar Samiti, Rewa and Satna

Mr. Rahul Avdey Member Master of Social Worker (Planning)

Ex. Statistical Officer in Government of Madhya Pradesh. After taking voluntary retirement presently working as Program Manager at NGO India. He has also been associated with in various social organisations including Samarthan, Bhopal.

ADVISORY COMMITTEE MEMBERS

Name Profile

Mr. Krishna Kumar Singh

He had done post graduation in Programme in Rural Management (PRM) and having a experience of 7 years in the social and microfinance sector. He has worked with various organisations like Sir Ratan Tata Trust, Friend’s of Women’s World Banking, Samhita Community Development Services at managerial level.

Mr. Love Kashyap He is a microfinance consultant and has also worked with BASIX and ACCESS Development Services as a microfinance consultant.

Mrs. Prasanna Nagpal She is working as a Chartered Accountant for last five years and has worked with many organisations.

Mr. G.M. Soni He is working as a High court layer since last 15 years.


31

SENIOR MANAGEMENT DETAILS

Name Designation Qualification Year of Joining

Mrs. Nilofer Khan Chief Operational Officer

Bachelor of Arts (Sociology) and pursuing Master of Arts (Sociology)

1998

Ms. Swati Dubey Finance Manager Master of Business Management in Finance and Marketing

2009

Ms. Richa Khatri Human Resource - Manager

Automobile Engineering and Mater of Business Administration

2010

Mr. Deepak Malhotra

Branch Manager – Gwalior

Bachelor of Arts 2001

Mr. Dharmendra Pathak

Branch Manager – Dabra

Master of Business Management

2010

Mr. Vikas Verma Manager Program Mater of Arts 2005


32

INFORMATION ON LOAN PRODUCTS

Type of loan Agriculture and allied services

Income generating activities

Animal husbandry

Consumption Micro

Enterprise

Loan term 06-24 months 06-24 months 06-24 months 06-24 months 06-24 months

Repayment Frequency

Monthly Monthly Monthly Monthly Monthly

Loan size (Amount in INR)

INR 5,000 to INR 50,000

INR 5,000 to INR 50,000

INR 5,000 to INR 50,000

INR 5,000 to INR 50,000

INR 5,000 to INR 50,000

Interest rate per annum

15% on flat basis (earlier charging 18% on flat basis till March, 2010)

Loan processing fees

3.5% of loan amount (earlier charging 3% till March, 2010)

Membership Fees INR 100 for both the model

Penalty INR 50 per

day INR 50 per

day INR 50 per

day INR 50 per

day INR 50 per

day

No of women borrowers

22% 17% 18% 15% 28%

INFORMATION ON OTHER PRODUCTS – INSURANCE

Name Premium Insured Amount Insured Detail


INR 100 INR 10,000

Borrower life insurance and accidental life insurance


33

EMPLOYEE(s) DETAILS FOR MICROFINANCE OPERATIONS

FY 2008 FY 2009 FY 2010 July, 2010

No. of Field staff 21 27 15 12

Non Field staff 12 11 22 30

No. of newly recruited staff 0 05 11 08

No. of terminated/leaving staff 0 0 12 03

Total staff 33 38 37 42

ACHIEVEMENTS/AWARDS/REGISTRATIONS/ MEMBERSHIP

Certificates Membership/Registration Dated of Expiry

Society registered under Madhya Pradesh Societies Registration Act XXI of 1860

21087/1988 -

PAN AAATB5621Q -

Foreign Contribution Regulation Act, 1976 (FCRA )

63280015 -

CRISIL mfR5 August, 2010

� Income Tax Exemption No. 22/15/03-04 dated February 13, 2004 (for 80-G) and 31/3/03-04

dated February 13, 2004 (for 12-A).


34

FUTURE PLANS

Particulars FY 2011 FY 2012 FY 2013 FY 2014

No. of states 1 1 1 1

No. of districts 1 1 1 1

No. of branches 3 3 4 5

No. of villages 550 670 790 900

No. of Groups 2,650 3,800 5,100 6,600

No. of members 21,200 30,400 40,800 46,400

No. of active borrowers 14,880 22,240 31,200 41,760

No. of employees 46 63 79 104

No. of FO 28 30 52 69

Loan disbursements (INR in Thousands)

74,100 128,960 192,960 276,000

Portfolio outstanding (INR in Thousands)

44,460 77,376 115,776 165,600

CURRENT INVESTIGATION On 16/Sep/2010, Mr. Indra Bhusan Verma, Chief Executive Officer cum Secretary, confirmed all information in this report.


35

CURRENCY: All amounts in this report are in local currency unless otherwise stated. -------------------------------------------------------------------------------------------------------------------------------

RIGHTS TO THE REPORT ARE WITH SME RATING AGENCY OF INDIA LIMITED (SMERA).

THIS REPORT MAY NOT BE REPRODUCED IN WHOLE OR IN PART IN ANY FORM OR MANNER WHATSOEVER.

-------------------------------------------------------------------------------------------------------------------------------- The SMERA – MFI Rating shall be read with the SMERA – MFI Rating Report on the subject issued by SMERA. All information contained in the SMERA – MFI Rating Report is obtained by SMERA from the subject and third party sources, and is believed to be accurate and reliable. Although reasonable care has been taken to ensure that the information in the Rating Report is true, such information is provided “as is” without any warranty of any kind and SMERA, in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information SMERA is not responsible for any errors in transmission and specifically states that SMERA shall have no financial liability whatsoever to the users of the Rating Report. The rating does not constitute an audit and SMERA’s work is significantly different from that of an audit and accordingly, cannot be relied upon to provide the same level of assurance as an audit. Please note that the SMERA – MFI Rating Report is not a recommendation to purchase, sell or hold any securities and investors should take their own decision. In providing this Rating, SMERA does not underwrite the risks of any third party or that of the subject. SMERA is not liable to the Company or any third party in respect of any matter specified in the Rating Report. SMERA may revise, suspend or withdraw the rating at any time in the future as a result of information changes in circumstances or unavailability of information. The SMERA – MFI Rating Report is not intended for distribution/ publication/ reproduction in any form without SMERA’s prior written approval.

-- End of Report --

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