SWADHAAR FINSERVE Second Annual Report 2009
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About us Swadhaar FinServe Pvt. Ltd. [SFPL] is a Non-Banking Financial Company [NBFC] that received registration to start operations from the Reserve Bank of India in May 2008. It is a Microfinance Institution that caters to the economically active urban poor. Swadhaar’s micro credit activity began with the inception of the non-profit entity, Swadhaar FinAccess (SFA), incorporated in 2005. With the Reserve Bank of India’s approval for SFPL to operate as an NBFC, the Company took over all of SFA’s micro-credit activity and its existing micro-credit portfolio of about Rs. 6 million in September 2008. The word “swadhaar” in Hindi means self-support, and is a reflection of the Company’s objective to provide the urban poor increased access to financial services, in an effort to improve their economic capacity, achieve selfreliance, and enable them to strive towards a brighter future.
Mission To make available regular, reliable and efficient financial services to the economically active urban poor, enabling them to overcome poverty and
CORE VALUES
meet their aspirations for a better and secure future.
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We give importance to: Clients and their aspirations Employees and their aspirations We work ethically with: Honesty and Integrity Efficiency Transparency We believe in innovation and adaptation
CONTENTS
WHY Urban MicrofinanCE? ............................................................ 3 Organisation Information............................................................ 8 GEOGRAPHIC OUTREACH.................................................................. 10 Director’s Report........................................................................ 15 Past year at a Glance.................................................................. 24 Associate Program...................................................................... 25 Client Profile.............................................................................. 26 BUSINESS INFORMATION................................................................. 27 Auditor’s Report......................................................................... 31
Swadhaar in the Devnagari script represents the base provided by the organisation to support the aspirations of our clients reflected in the orange symbol of the sun.
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Image Courtesy: John Rae for ACCION International 2
WHY URBAN MICROFINANCE?
Over the past few years the Microfinance Industry in India has emerged as one of the most dynamic and rapidly growing markets in the world. According to UN estimates, 350 million out of India’s 1.1 billion people live below the International Poverty line. The annual credit demand in the country in 2007, was estimated to be between USD 5.7 billion (INR 231.6 billion) and USD 19.08 billion (INR 773 billion)1. Despite a widespread awareness of this demand and the industry’s steep growth over the past few decades, the current supply of micro credit is estimated at only 7% of the potential demand2. Further, there is a major imbalance in both the depth and breadth of market penetration, with a higher incidence of rural microfinance providers concentrated in certain pockets of the country. More recently this trend has been changing, but it will take some time before the gaps in delivery and outreach are filled completely. Until then, they continue to remind us of the enormity of the task that lies ahead. Historically, Indian microfinance has been dominated by a rural focus. It had its beginnings in the government-initiated subsidised banking schemes of the 1960s that were geared towards providing the rural poor with access to credit. The success of these schemes was considerable in terms of outreach and credit volume, especially with the establishment of institutions such as NABARD [National Bank for Agriculture and Rural Development] and SIDBI [Small-scale Industries Development Bank of India]. NABARD was responsible for initiating the SHG [Self Help Group] – Bank Linkage program, which linked informal women’s groups to banks for access to credit. This model led to the integration of non-government organisations into microfinance and today, it still accounts for a majority of micro credit disbursements in the country. More recently,
1. This figure has been reached by taking into consideration the following estimates: The potential number of below poverty line (BPL) microfinance clients ranges from 57.9 million to 77.3 million, and the annual average loan size ranges between USD 98.8 (INR 4,000) and USD 246.9 (INR 10,000). Inverting the Pyramid: The Changing Face of Microfinance. Published by Intellecap & sponsored by International Finance Corporation [IFC], 2007. 2. Inverting the Pyramid: The Changing Face of Microfinance. Published by Intellecap & sponsored by International Finance Corporation [IFC], 2007.
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micro-finance supply channels have expanded to also
by landlords and usurious moneylenders, and an absolute
include NGO-MFIs (Microfinance Institutions) and Non-
lack of access to formal funds. The Grameen methodology
Banking Financial Companies (NBFC), which, according
has successfully addressed these issues by opening up
to 2007 estimates, had a market share of almost 47%3,
credit access to a population that is otherwise largely
growing rapidly compared to the SHG-Bank Linkage
deprived of alternate means of income generation. The
Model4. Regardless of the twin effects of the industry’s
urban market, in contrast, is less friendly to a standardised
evolution and the proliferation of MFIs, there remain
product and methodology as the urban poor are more
sections of the un-banked poor that continue to be
diverse in their incomes, occupations, places of origin,
excluded by microfinance service providers. Amongst
and also lack the intra-community linkages that form
these are the economically active urban poor who lack
such a major element of rural micro-lending models.
access to the formal banking system on the one hand,
As a result, they are far more resistant to forming groups
and remain excluded from microfinance due to lack of
that would require them to trust people with whom they
sufficient urban service providers on the other.
have no community ties. Cities present greater opportuni-
The reasons that the rural microfinance model has dominated the industry in India are three-fold: i. The size of the market promises tremendous potential ii. Government policies have been heavily focused on the priority sector and have dictated the growth trajectory of the industry iii. The Grameen JLG model is easily replicable across rural geographies The Grameen model offers a standardised methodology that can be replicated successfully without needing to tweak the product structure and delivery for different rural geographies. This model is low cost and ideal for the rural service provider, enabling the MFI to serve a homogeneous population and rapidly scale operations, reaching break-even relatively quickly. Its success in serving the rural poor in India can be attributed to characteristics of the target population, such as the homogeneity in source of income (primarily agriculture), strong community linkages developed over generations, history of exploitation
ties for both entrepreneurial businesses and employment than are available in rural areas where land-related occupations are the dominant source of income. The presence of a robust informal economy in cities also makes the urban poor far savvier regarding their finances than their rural counterparts and significantly more well-informed regarding the variety of services available through financial institutions. Unlike in rural areas, the diversity of the urban population and their needs requires greater product variations, in which case a standardised methodology is less effective. Due to the fundamental differences between the urban and rural markets, the inherent nature of urban poverty is also substantively different than that of rural poverty. In fact, characteristics of urban poverty differ drastically even between cities, due to discrepancies in population size, annual growth rate, infrastructure, health indicators, education levels, and so on. Poverty in urban areas is a multi-dimensional phenomenon, resulting from a host of interdependent and mutually inclusive factors that make the urban poor such a complex market to serve. In Mumbai, the urban poor live in unhygienic and over-
3. Inverting the Pyramid: The Changing Face of Microfinance. Published by Intellecap & sponsored by International Finance Corporation [IFC], 2007. 4. The number of new SHGs linked in 2007 represented an increase of about 11 percent, as compared to a 15% increase in SHGs linked in the previous year. In contrast, 2007 saw leading MFIs record growth rates of 80% per annum in terms of numbers of borrowers and around 40% per annum in terms of portfolio. State of the Sector Report, 2007.
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crowded slums that lack basic sanitary provisions such as clean air and water, increasing their susceptibility to diseases. Several occupations in the informal economy such as industrial and construction jobs further expose them to health risks. To make matters worse, they have
minimal access, if at all, to health care services. Their
The organisation began its micro credit activity with the
homes are often built or rented on private or public
objective of providing the urban poor increased access to
property, poorly constructed and not durable enough to
financial services, but more importantly, it aimed to help
sustain seasonal hazards. Many are unable to even afford
its clients improve their economic capacity and achieve
housing. Low-asset ownership among slum-dwellers
self-reliance. SFPL’s lending methodology, as a result,
increases their vulnerability to a variety of risks such
has been designed specifically to cater to the clients’
as environmental hazards, health and financial risks.
needs. Flexibility in product structure, delivery and
Further, due to lack of documentation, they are
service are key elements of the organisation’s policies.
compelled to resort to high cost debt and are also unable
Some examples of SFPL’s customer-centric approach
to avail of formal saving mechanisms as an insurance
include delivery of loans within 5 business days of the
measure. This vulnerability is compounded by the
application being completed, minimal paperwork require-
absence of community, lack of social security, and
ments and the ability for clients to prepay EMIs, the
general uncertainty that afflicts the urban slum-dweller.
provision of larger loan amounts for Individual Loan
The result is that s/he ends up being far more vulnerable
clients to be used towards business expansion, door-to-
and deprived, in some respects, than his/her rural coun-
door collections and a customer grievance and feedback
terpart. This is because while the urban environment
mechanism for clients to address concerns.
provides the facilities needed for security and financial and personal empowerment (health care, insurance, education, credit, savings, multiple sources of income, etc.), these remain beyond reach.
As on March 31 2009, SFPL had served over 8,000 active clients and had an outstanding portfolio of close to INR 55 million. The Company pays importance to creating social impact and meeting the needs of its
According to the UN’s World Habitat Report 2008-2009,
clients. For this reason it follows a business model that
this century has been coined as the urban century, with
enables growth in numbers whilst simultaneously ensur-
more than half of the world’s population living in urban
ing that products offer some degree of flexibility so that
areas. The developing world is responsible for 95% of the
client needs are given priority. SFPL believes that its
world’s urban population growth, and today, one out of
methodology and approach to urban microfinance repre-
every three people living in cities of the developing world
sent an effective, scaleable and sustainable solution to
lives in a slum . That 60% of the global population will
some of the problems that handicap the urban poor today.
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be urban dwellers within the next two decades is a glaring warning that efforts to ameliorate the challenges of urban poverty need to be prioritised and magnified. In India alone, over 80 million poor people live in urban areas, a population that is roughly equal to the population of Egypt6. In Mumbai, the meteoric rise in population over the past few decades has further widened the rift between the demand and supply of basic financial and livelihood development services. It is this gap that Swadhaar FinServe [SFPL] aims to fill.
5. United Nations World Habitat Report, 2008-2009 6. A Sourcebook for Poverty Reduction Strategies (Vol. 2 of 2): Macroeconomic and Sectoral approaches. Published by the World Bank, 2002
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Image Courtesy: Preeti Mankar for Swadhaar FinServe Pvt. Ltd. 6
ASHOKKUMAR KASARE COCONUT SELLER Ashokkumar owns a coconut stall in the Government Colony neighbourhood in Bandra (E). He heard about Swadhaar in early 2008 through one of the organisation’s Loan Officers and applied for a loan to help pay for his stock. Ashokkumar orders two varieties of coconuts – the locally sourced variety, and larger, higher quality coconuts that come from Kerala. Coconut vendors usually pre-pay for 6 months worth of stock, which allows them to then handpick the coconuts from their provider daily, at no charge. The volume of the purchase dictates the profit margin they are able to make, with a higher volume yielding a larger profit. With a first loan of Rs. 10,000 and subsequent loans of Rs. 20,000 and Rs. 30,000, Ashokkumar has been able to drastically increase the volume of his purchase, thereby improving his overall profit margins. After 5 years of running the coconut stall, Ashokkumar is still the only earner in his 6 person Image Courtesy: Preeti Mankar
household. As a direct result of Swadhaar’s loans, Ashokkumar’s profit margins
for Swadhaar FinServe Pvt. Ltd.
have significantly increased, allowing him to lead a more comfortable life. He has also been able to afford sending his four children, Atish, Ashutosh, Abhimanyu, and Saraswati aged 13, 12, 8 and 6 respectively, to school. “Prior to taking SFPL’s loans, I was always tense about not having enough money to make the payment. Now, thanks to SFPL I have no tension in running my business,” says Ashokkumar with a sigh of relief. *Loans taken before September 2008 were from the non-profit entity, Swadhaar FinAccess (SFA). Following SFPL’s takeover of the SFA portfolio, all clients migrated to the NBFC.
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ORGANISATION INFORMATION Board of DiRectors
Management
Lalita Gupte
Veena Mankar
Chairperson (Promoter’s nominee)
Managing Director
Veena Mankar
Kartik Mehta
Managing Director (Promoter)
Chief Operations Officer
Anita Ramachandran Nominee Director, Mauritius Unitus Corporation Siddhartha Hanumara Chowdri Nominee Director, ACCION Geeta Dutta Goel Nominee Director, Michael and Susan Dell Foundation Srinivas Bhaskar Rao Nominee Director, Indian Family Trust Pearl Tiwari Nominee Director, Indian Family Trust
(Seconded by ACCION International) Anjali Seth Legal Advisor Reena Sen Deputy Chief Financial Officer Urmee Mehta Mankar Chief Manager, Strategy Soju Annie George Chief Manager, Operations Shweta Pereira Chief Manager, Credit and Risk
SUPPORTING INSTITUTIONS ACCION International Boston, USA Michael and Susan Dell Foundation Austin, USA Unitus Seattle, USA
(Seconded by ACCION International) Nitin Manchanda Chief Manager, Information Technology Anil Dhekne
BANKERS/FINANCIAL INSTITUTIONS
Chief Manager, Internal Audit
HDFC Bank Limited
Jyoti Y. Gujaran
ICICI Bank Limited
Senior Manager, Human Resources
Friends of Women’s World Banking
Manish Kumar
AUDITORS
Area Manager, Mumbai
Haribhakti & Company
Nishant Gupta
REGISTERED OFFICE 451, Dindoshilla (G-1), 15th Road, Khar, Mumbai 400 052
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Area Manager, Expansion
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Image Courtesy: John Rae for ACCION International
Client: Sangita Achrekar Pg. 14
Occupation: Papad Maker
Vasai Creek Bhayander West
Mira Rd
Borivali GL Borivali
Sanjay Gandhi National Park
Manori Creek
Thane GL Kandivali West
Thane
Malad IL Malad GL Bhandup GL, IL Lokhandwala Complex
Meghwadi Andheri East
Powai
Juhu
Ghatkopar GL, IL
Mumbai Int’l Airport
Kherwadi GL, IL Mahim Creek
Chembur GL, IL
Wadala
Worli
GL = Group Loan
Byculla
IL = Individual Loan
South Mumbai Malabar Hill
Gateway of India Colaba
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Thane Creek
OUTLETS IN MUMBAI Bhandup GL, IL
Kherwadi GL, IL
Shop no.14 and 15, G Wing,
Above Maharashtra Shramik Sena,
Mayuresh Park, Gamdevi Road,
Opp. Bldg. # 35, Kherwadi,
Bhandup (W), Mumbai 400 078
Bandra (E), Mumbai 400 051
Chembur GL, IL
Borivali GL
Shop #1 Popular House, Plot
Shop #3/4, Shreeji Apartments,
#102/103, Pestom Sagar Scheme,
Opp. Shanidev Mandir, Savarpada,
Santosh Nagar, Nr. Shankaralayam
Borivali (E), Mumbai 400 066
Temple, P.L.Lokhande Marg, Chembur (W), Mumbai 400 089
Ghatkopar GL Shop # 2, Khanna Apts, N.S.S. Road,
Ghatkopar IL
Asalfa Village, Ghatkopar (W),
Shop # 1, Khanna Apts,
Mumbai 400 084
N.S.S. Road, Asalfa Village, Ghatkopar (W), Mumbai 400 084
Malad IL Shop # 1, Gr. Floor, Hill View,
Malad GL
Nr. Jyoti Hotel, Konkani Pada,
c/o Nivara Hakk
Kurar Village, Malad (E),
Plot #267, General A. K. Vaidya
Mumbai 400 097
Marg, Gokul Dham, Malad (E), Mumbai 400 097
Meghwadi Shop #4, Everest Bldg, 4-B,
Thane GL
MHADA Vasahat, Mahakali Caves Road,
Shree Saidham Co-Op. Housing
Andheri (E), Mumbai 400 093
Society Plot No. 39/D1, Veer Savarkar Nagar, Thane (W) 400 606 Wadala Shop #66-1/2, Barkat Ali Nagar, Saltpen Road, Wadala (E), Mumbai 400 037
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Image Courtesy: John Rae for ACCION International 13
Sangita Achrekar Papad Maker A mainstay of Indian diets, papads are usually made by hand at home– typically of lentils–and flavored with black pepper, garlic or green chilies. Sangita Achrekar, who makes papads for a living, has been receiving micro loans from SFPL for the past few years. She sells her papads to a National organisation called Lijjat Papad, which began 50 years ago as makers and distributors of papads. Originally started by 7 women making 4 packets of papads on a building terrace in Mumbai, Lijjat has since branched out into bakery products, masalas, rotis, detergent powders, etc and now boasts of annual revenues of about $80 million. It is an organisation solely for women, and its trademark product, the papad, has come to be associated with the empowerment of Indian women, with women producers generating regular income from minimal financial investment. The extra capital that Sangita gets from Swadhaar has helped her buy raw materiImage Courtesy: John Rae for ACCION International
als in bulk, something which she had been unable to do prior to becoming a client. The bulk purchases help her lower her costs, reduce the number of trips to her suppliers and also help her increase production. She also has more free time to invest in things other than Papad preparation, such as household work. *Loans taken before September 2008 were from the non-profit entity, Swadhaar FinAccess (SFA). Following SFPL’s takeover of the SFA portfolio, all clients migrated to the NBFC.
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DIRECTORS’ REPORT
Dear Members: Your Directors are pleased to present before you the Second Annual Report on the business and operations of the Company, along with the audited Balance Sheet and Profit and Loss Account for the year ended March 31, 2009. Swadhaar FinServe Private Limited (SFPL) received registration from Reserve Bank of India to operate as a Non-Banking Financial Company (NBFC) with effect from May 9, 2008. The Company’s mission is to “make available regular, reliable and efficient financial services to the economically active urban poor enabling them to overcome poverty and meet their aspirations for a better and more secure future.” It commenced operations in July 2008, and in September 2008 after receipt of necessary approvals, including from the Central Government, it took over the current micro credit portfolio of Rs 6.06 million and 1,786 active clients from Swadhaar FinAccess (SFA), a non profit company sharing common promoters with SFPL. The year under report is the first year of operations of the Company.
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SFPL Credit and Risk Department with ACCION advisors Andres Calderon and Jorge Pineda SFPL Head Office, Mumbai
FINANCIALS Results
Rupees 2008-09
Operational Income
7,448,595
Other Income
4,392,603
(A) Total Income
11,841,198
Personnel Expenses
12,464,328
Administrative & FInancial Expenses
19,942,427
Depreciation (B) Total Expenses (C) Exceptional Items (D) Loss for the year (A – B – C) (E) Provision for Tax (FBT & Deferred Tax Adj. Profit After Tax (D – E) Balance brought forward from the previous year Balance carried to Balance Sheet
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1,731,483 34,138,238 3,343,178 (25,640,218) 403,468 (26,043,686) (921,081) (26,964,767)
Share Capital 9,439,000 equity shares of the Company were issued during the year under review raising the paid up capital of the Company to Rs. 120,000,000.
operations during the year Loan Products The Company offers two loan products to clients in the low income segment: Group Loans (SWAHIT)
Individual Loans (SWAYOG)
The Group loan product is offered to economically active
These are working capital loans offered to micro entrepre-
women who are either micro entrepreneurs, salaried, or
neurs, both men and women, for business purposes. This
piece workers. These are individual loans ranging from
loan does not require formation of any group and is given
Rs. 3,000 to Rs. 20,000 and are offered to women aged
only for business expansion. The target customers run
between 18 to 55 years. The women typically form Joint
micro businesses, and are engaged in activities such as
Liability Groups of 3–7 women, and stand guarantee for
running food stalls, small general stores, ‘tiffin’ services
each other’s loans. The purpose of such loans is primarily
for office goers, etc. These micro businesses are bigger
for income generation, repayment of high cost debt, and
than the home-based businesses that group clients are
consumption smoothening. They are used for important
typically involved in, and therefore these loans are for
personal purposes such as house repairs and education
larger amounts ranging from Rs. 8,000, up to a maximum
of children. In particular, education of children is
of Rs. 50,000. The Individual loan process follows a two-
encouraged.
step methodology with the appraisal function separated
This past year SFPL modified its Swahit repayment schedule in order to improve the efficiency of collections.
from client service and sales. This results in a higher efficiency of operations and objectivity in appraisal.
Repayments of Group loans now happen on fixed dates in a month, and are made by an appointed group leader as opposed to being made by individual clients. The loans remain individual loans and the amounts within a group vary according to the repayment capacity of the individual member and the purpose for which the loan is required.
Expansion and Outreach The Company started its loan activities from three locations in Mumbai, initially shared with SFA. New outlets were added during the year and by the close of the current year the total number of locations increased to nine. These are: Kherwadi, Malad, Chembur, Meghwadi, Wadala, Ghatkopar, Bhandup, Borivali and Thane. The Company has fourteen outlets in the above locations, seven Group loan branches, five Individual loan branches and two kiosks. The two products are operationally segregated and a branch is product specific. Kiosks are attached to product branches, and disbursement occurs on different days for the two products. Based on the business volumes, additional outlets will be added near the kiosks, and each of these upgraded to branches.
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Centralisation of Back Office Operations
Software and Management Information System (MIS)
The Company engaged a specialised Back Office Service
The Company uses Banker’s Realm (BR) from Craft
Provider, part of the Indecomm Group, to design and
Silicon as its loan accounting and MIS software. This
implement an optimal centralised back office solution
was purchased from SFA, with the approval of the vendor.
to enable the Company to handle high volume business.
The software is being upgraded to the higher version, i.e.
A central processing hub has been set up at Kherwadi
BR version 2.
branch premises. The test run was completed and the
As per the strategic plan in place, the Company will expand operations outside Mumbai. This will be implemented from the second quarter of the next financial year for both Group and Individual loans. The Company is currently exploring appropriate locations in Gujarat and Maharashtra.
process of migration of branches to the hub commenced in February 2008. Centralisation of back office will reduce the requirement of IT hardware, connectivity costs and skilled manpower at the branches. It will also improve operational efficiencies and controls. Miscellaneous costs such as stationery and printing are also expected to reduce, as a result of centralised back office processes. All client documents, legal agreements, receipts and registers are now prepared centrally at the hub and provided to the branches, thereby reducing the administrative work required in a branch. This is expected to result in increased productivity of branch staff in sales, collections and managing clients.
SWADHAAR IN NUMBERS July 1, 2008 to March 31, 2009
Number of loans disbursed
Group
Individual
Total
7,858
1,301
9,159
Rs.53.19
Rs.24.36
Rs.77.55
7,097
1,137
8,234
Rs.40.11
Rs.16.53
Rs.56.64
30
20
50
7
5
14**
Amount of loans disbursed (Rupees in million) Number of active clients Outstanding loan portfolio (Rupees in millions) Number of Loan Officers* Number of outlets
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*Applies only to Loan Officers assigned their own zones. (Excludes Team Leaders) **Including two kiosks, each servicing both Group and Individual loan
Staff SFPL believes that human resources are the Company’s most valuable asset. As at March 31, 2008 it had a staff
storage and leave management, among other functions. It will be especially useful in enhancing efficiency with future expansion into new areas.
of 176, including 140 branch staff members and a head office staff of 36. SFPL absorbed 76 employees from SFA, who were associated with the lending operations.
Technical Assistance ACCION International has been associated with SFA as a
Importance is given to providing training for all of SFPL’s
technical partner since its inception and has been closely
staff, both on the field and in the classroom. All staff
involved in setting up the operating procedures and prod-
positions have clear career paths and employees are
uct methodology that are now followed by SFPL. The
well-informed regarding training/experience required for
Company has now entered into a three year contract with
promotions. They are encouraged to enhance their knowl-
ACCION Technical Advisors India, effective July 1, 2008,
edge and skills by attending external training courses and
for the provision of technical services including strategic
pursuing higher education. During the year, in-house
advice, product development, and, credit and risk
training was conducted for Loan Officers, administrative
management and training.
staff, collection staff, Loan Analysts and Team Leaders. Middle-level Managers attended training courses conducted by well-known institutions such as MicroSave, Lucknow and EDA Rural, Gurgaon. Our Chief Manager,
The Chief Operating Officer, Mr Kartik Mehta, and the Credit and Risk Head, Shweta Pereira, at SFPL are on deputation from ACCION.
Operations was selected for, and attended the ACCION Leadership Course for Microfinance at Harvard Business School, USA. Further, an HR Package was implemented with the aim of centralising all HR functions and synchronising the various departments in the Company. The package enables in-house payroll capabilities, employee data
Senior Management with ACCION Project Manager Valerie Kindt SFPL Head Office, Mumbai
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Bankers SFPL has drawn facilities for on-lending purposes from Friends of Women’s World Banking India (FWWB-I).
that the lending methodology followed by the Company, even for the Group loan is an individual one, taking into account the characteristics and requirements of the urban client. The urban client does not display the homo-
The Company has accounts with HDFC Bank Limited and
geneity and stability that is found in a rural environment.
ICICI Bank Limited. HDFC Bank Limited has sanctioned
As a result of this, SFPL’s products incorporate flexibility
a term loan for on-lending, which will be drawn in the next
and individual characteristics, as compared to stan-
financial year.
dardised Group loans, thereby increasing the cost of the operations. Over time, this is sought to be countered, through increased case load, possible because of concen-
CRISIL Grading CRISIL undertook a grading exercise for the Company in
tration of urban population. The Company will also proactively deploy technology to improve efficiencies.
December 2008. CRISIL’s grading system follows an eight-point scale with mfR1 being the highest, and mfR8 the lowest. The grading is a measure of the overall perfor-
Statutory Disclosures
mance of an MFI, based on a broad range of parameters,
The information required under Section 217 (2A) of the
including management, institutional arrangement, capital
Companies Act, 1956 read with Companies (Particulars
adequacy and asset quality, resources and asset-liability
of Employees) Rules 1975 is not annexed, as there are
management, operational effectiveness, and scalability
no employees under the same.
and sustainability.
The Companies (Disclosures of particulars in Report of
CRISIL awarded SFPL a grading of mfR5, which reflects
Board of Directors) Rules 1988 require the disclosure of
the following strengths and weaknesses:
particulars regarding conservation of energy in Form A and Technology Absorption in Form B prescribed by the
STRENGTHS
Rules. Your Company not being a Manufacturing Company
• Strong governing board
is advised that Forms A&B are not applicable.
• Adequate capitalisation levels and
shareholder support
• Strong technical and managerial
support from ACCION International WEAKNESSES
• Short operating track record • Asset quality and credit risks
untested over a period of time
• Low efficiency, leading to weak
earnings profile
The Company recognises the need to improve its operating efficiencies and has already taken some steps in this regard such as centralisation of back office operations, fixed date repayments and a two-step methodology for Individual loans. However, it should be borne in mind
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Board of Directors
Directors’ Responsibility Statement
The Board of Directors of the Company met ten times
The Directors confirm:
during the year.
(i) that in the preparation of the annual accounts,
During the year under review Mrs. Haseena Vahanvaty,
the applicable accounting standards have been
promoter Director resigned from the Board and the
followed along with proper explanation relating
following Directors were appointed as Nominee Directors
to material departures;
to the Company Board:
(ii) that the Directors have selected such accounting
Mr. Siddhartha Chowdri
policies and applied them consistently and made
Nominee Director for ACCION
judgments and estimates that are reasonable and
Mrs. Geeta Dutta Goel
prudent so as to give a true and fair view of the
Nominee Director for Michael and Susan
state of affairs of the Company at the end of the
Dell Foundation
financial year and of the profit or loss of the
Mrs. Anita Ramachandran Nominee Director for Mauritius
Company for that period; (iii) that the Directors have taken proper and sufficient
Unitus Corporation
care for the maintenance of adequate accounting
Mr. Srinivas Rao
records in accordance with the provisions of this Act
Nominee Director for Padmini Benefit Trust
for safeguarding the assets of the Company and for
Mrs. Pearl Tiwari
preventing and detecting fraud and other irregularities;
Nominee Director for Padmini Benefit Trust Mrs. Lalita D Gupte
(iv) that the Directors have prepared the annual accounts on a going concern basis.
Nominee Director for Promoter Group Mrs. Veena Mankar was appointed as the Managing Director of the Company. As one of the promoters of
Auditors
both SFA and this Company, she has been involved
The Company’s auditors, M/s. Haribhakti & Co.
since inception, in the micro credit operations.
Chartered Accountants, hold office until the conclusion
The Board has constituted a committee, titled Finance Committee to the Board, to handle matters related to bank accounts, borrowings, investments and general
of the ensuing Annual General Meeting and are eligible for re-appointment. Your Directors recommend their re-appointment.
matters relating to funds management. The Board records its appreciation of the invaluable contribution of Mrs. Haseena Vahanvaty as one of the promoters of the Company and for her role in SFA, which has afforded a valuable base to the Company to take its operations forward.
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Acknowledgements The Directors wish to thank all the staff for their commitment and hard work. The Directors would also like to record their deep appreciation for the un-stinted support and assistance during the past financial year of the shareholders, institutions and bankers that have helped the Company become what it is today. For and on behalf of the Board, Veena Mankar
Lalita D .Gupte
Managing Director
Chairperson
Registered Office: G-1, Dindoshilla, 15th Road, Khar (West), Mumbai 400 052 May 13, 2009
22
Client: Suhasini Nevalkar Occupation: General Store Owner Pg. 30
23
Image Courtesy: Preeti Mankar for Swadhaar FinServe Pvt. Ltd.
23
PAST YEAR AT A GLANCE
The Company’s milestones and activities over the past year are highlighted below:
Company Picnic: The Company strongly believes in nurturing an inclusive and employee-friendly work culture that pays importance to open communication between all levels of the organisation. To this end, SFPL organised a day-long picnic for all employees at the Srushti Farms in Vasind in February this past year. The retreat was an opportunity for SFPL’s employees to interact with one another in a non-professional setting, and was a huge success with field and managerial staff participating in team-oriented games and activities.
Lucky Draw Scheme for Clients: At the time of loan disbursement, Loan Officers explain to their clients SFPL’s collection policies, the importance of timely repayments, and how to optimise the use of their loans. In an effort to reward clients for good repayment behavior, Swadhaar introduced a Lucky Draw contest for those of its clients and groups with a 100% on-time repayment rate (0 days late) during a 4 month period (Sep – Dec ’08). All eligible clients were entered into the contest and a list of their names was generated from the system. Managing Director Veena Mankar randomly picked the winners of the Lucky Draw Contest and held a prize distribution at the clients’ respective branches. Cash prizes ranging from Rs. 500 to Rs.1,500 were presented to recognise, and offer incentives to clients with good repayment history. The prize distribution was a proud moment for those clients who won, as they were publicly rewarded for their strong repayment history. It demonstrated the benefits of and incentives for maintaining a good repayment record and served as a motivating factor for other clients to follow in their footsteps.
24
ASSOCIATE PROGRAMME The Swadhaar Associate Programme [SAP] was first introduced in the non-profit to provide young, motivated individuals interested in the field of microfinance, an opportunity to work at a dynamic, fast-growing MFI. SFPL adopted the programme last year, and Associates now have the option of working at either the NBFC or the NGO, subject to the organisation’s needs. The SAP represents the Company’s commitment to develop a diverse staff and provide a hands-on experience to young individuals dedicated to working in urban microfinance, as well as the development sector. The programme has been designed for a period of 1 year in order to ensure a gainful and worthwhile experience for both the Associate, as well as the organisation. Its flexibility allows the Associate to work with a variety of departments within the organisation, ranging from Operations, to Finance, IT, Product Development, Strategy and Marketing. The Programme is a great opportunity to experience working in a grass-roots organisation, especially for individuals interested in gaining first-hand exposure to the industry. Some of our alumni from the SAP have the following to say about their experiences: “Working at Swadhaar was a stimulating and formative experience. Every member of the head office team invested time in me and was incredibly keen to teach and guide me in my work. The exposure I gained to microfinance through challenging and real responsibilities far surpassed my expectations. The time I spent there has definitely stuck with me, and is the motivating force behind my plans to pursue a career in microfinance.”
—LARA GIDVANI ASSOCIATE AT THE NGO SWADHAAR FINACCESS, 2006-2007 “On realising I wanted to switch careers into the field of international development, I quit my job as a technology analyst in a financial services bank and moved back to India. However, I knew I wanted to work with a legitimate company which had a clear view of its mission. I also wanted to work with smart, talented people who were passionate about their work and truly believed in their cause. I found all of this and more at Swadhaar. The entire team is constantly trying to provide the best possible solution to issues raised - from creating innovative products which are sought by our clients to providing a healthy work environment. I am currently working as a research analyst on back office operations and expansion plans. While I am learning and enjoying this mix of operations and research, I hope to get some field experience as well.”
—YAQUTA KANCHWALA ASSOCIATE AT THE NBFC SWADHAAR FINSERVE, 2008–2009
25
CLIENT PROFILE Swahit The target segment for SFPL’s Group Loan product comprises of women aged between 18 and 55 years. These women are usually the secondary earners in the household, with their spouses providing the primary income. Household incomes of these clients range between approximately Rs. 5,000–Rs. 7,000 per month. The women are typically engaged in one of the following three activities: 1. Micro-businesses – such as tea stalls, general stores, convenience stores, tailoring, etc. 2. Salaried work – such as working as a house maid 3. Commission-based or piece work – such as making imitation jewellery, stitching garments, etc. All Swahit clients have been employed or running their business for a minimum of one year.
GL Client Distribution by Age: 46-55 Yrs 15% 18-25 Yrs 11%
36-45 Yrs 39% 26-35 Yrs 35%
Self Employed/Micro Entrepreneurs to Salaried GL Client Ratio: Business 64%
Salaried 36%
26
Swayog SFPL’s Individual Loan product is targeted at male or female micro-business owners, aged between 21 and 60 years. These clients run businesses that are larger in size than the home-based businesses that the Group Loan clients run. The most common micro-enterprise owners SFPL serves include: 1. General Store owners 2. STD-PCO Shop owners 3. Tailors (Stitching clothes) 4. Milk Shop owners 5. Vegetable Sellers
Male to Female IL Client Ratio: Female 17%
IL Client Distribution by Age: 55+ Yrs 2%
7% 21-25 Yrs
36-45 Yrs 22%
46-55 Yrs 36% Male 83% 33% 26-35 Yrs
BUSINESS INFORMATION As at March 31, 2009 the ratio of Swayog to Swahit (by number of clients) was 14% to 86%, and the ratio of Swayog to Swahit (by amount disbursed) was 31% to 69%.
OUTSTANDING PORTFOLIO
OUTSTANDING PORTFOLIO
No. of Clients (As at March 31, 2009)
Amount Disbursed (As at March 31, 2009)
86% Swahit (Group Loan)
69% Swahit (Group Loan)
14% Swayog (Individual Loan)
31% Swayog (Individual Loan)
27
28
Image Courtesy: John Rae for ACCION International 29
SUHASINI NEVALKAR STORE OWNER Suhasini has owned and run a small general store in Kherwadi, Bandra (E) for the past 20 years. She took her first loan of Rs. 8,000 from SFPL in December 2007, after being approached by one of the organisation’s Loan Officers. Her first loan was used to buy a fridge for her store. Realising the benefits and enhanced flexibility in cash management that the loan had allowed Suhasini, she applied for a subsequent loan to pay for her store inventory. Now she is in her third cycle loan of Rs. 25,000. SFPL’s loans have helped Suhasini manage her working capital better, and have also resulted in an increase in her monthly profit from about Rs. 5,000 – Rs. 6,500 per month at the time of her first loan, to Rs. 10,000 – Rs. 12,000 per month with her current loan cycle. The loans have increased her income-generating capacity and have also enabled her to improve her family’s livelihood. She can now afford expenses such as her son, Atmaram’s tuition of Rs. 18,000 per year for a College Banking and Image Courtesy: Preeti Mankar for Swadhaar FinServe Pvt. Ltd.
Insurance Course, and her daughter Rupa’s wedding costs. With the help of SFPL’s loans, Suhasini has seen a significant increase in her profits and has also gained more flexibility in income management and allocation. *Loans taken before September 2008 were from the non-profit entity, Swadhaar FinAccess (SFA). Following SFPL’s takeover of the SFA portfolio, all clients migrated to the NBFC.
30
30
AUDITORS’ REPORT
SWADHAAR FINSERVE PRIVATE LIMITED BALANCE SHEET AS AT 31st MARCH, 2009
As at 31-Mar-09
As at 31-Mar-08
Schedule
(Rupees)
(Rupees)
1
120,000,000
25,610,000
2
2,500,000
-
122,500,000
25,610,000
Gross Block
8,643,979
-
Less: Depreciation/Amortization
1,731,483
-
Net Block
6,912,496
-
678,509
630,000
7,591,005
630,000
140,816
474,284
SOURCES OF FUNDS Shareholders Funds Share Capital Loan Funds Secured Loans TOTAL
APPLICATION OF FUNDS Fixed Assets
Capital Work in Progress
Deferred Tax Asset
3
31
As at 31-Mar-09
As at 31-Mar-08
(Rupees)
(Rupees)
36,293,478
23,373,271
Other Current Assets
6,430,641
360,607
Loans and Advances
56,343,899
-
99,068,018
23,733,878
10,924,289
149,243
340,317
-
(ii)
11,264,606
149,243
(i)-(ii)
87,803,412
23,584,635
26,964,767
921,081
122,500,000
25,610,000
Schedule Current Assets Loans and Advances
4
Cash and Bank Balances
(i) Less : Current Liabilities and Provisions
5
Current Liabilitiies Provisions
Net Current Assets Profit and Loss Account TOTAL Significant Accounting Policies &
11
Notes to Accounts Schedules referred to above form an integral part of financial statements As per Our Attached Report of Even Date
For and on behalf of the Board of
For Haribhakti & Co.
Swadhaar Finserve Pvt. Ltd.
Chartered Accountants Rakesh Rathi
Anshu Mundhra
Lalita D. Gupte
Veena Mankar
Partner
Company Secretary
Chairperson
Managing Director
Place : Mumbai Place : Mumbai Date :13- May-09 Date :13- May-09
32
SWADHAAR FINSERVE PRIVATE LIMITED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2009
Year ended
Period ended
Schedule
31-Mar-09 (Rs.)
31-Mar-08 (Rs.)
Operating Income
6
7,448,595
-
Other Income
7
4,392,603
294,207
11,841,198
294,207
INCOME
TOTAL EXPENDITURE Personnel Expenses
8
12,464,328
-
Administrative & Financial Expenses
9
19,942,427
1,689,572
32,406,755
1,689,572
(20,565,557)
(1,395,365)
1,731,483
-
(22,297,040)
(1,395,365)
3,343,178
-
(25,640,218)
(1,395,365)
-
-
70,000
-
333,468
(474,284)
403,468
(474,284)
TOTAL Profit/(Loss) Before Depreciation, Taxation and Exceptional Items Depreciation Profit/(Loss) before Exceptional Items and Taxation Exceptional Items PROFIT BEFORE TAX
10
Less: Provision for Tax Current Tax Fringe Benefit Tax Deferred Tax Adjustments
33
Schedule PROFIT AFTER TAX Balance brought Forward from Previous Year BALANCE CARRIED TO BALANCE SHEET
Year ended
Period ended
31-Mar-09 (Rs.)
31-Mar-08 (Rs.)
(26,043,686)
(921,081)
(921,081)
-
(26,964,767)
(921,081)
(3.39)
(1.33)
Earning per share of Rs.10 each (Basic & Diluted) Notes to Accounts
11
As per Our Attached Report of Even Date
For and on behalf of the Board of
For Haribhakti & Co.
Swadhaar Finserve Pvt. Ltd.
Chartered Accountants Rakesh Rathi
Anshu Mundhra
Lalita D. Gupte
Veena Mankar
Partner
Company Secretary
Chairperson
Managing Director
Place : Mumbai Place : Mumbai Date :13- May-09 Date :13- May-09
34
SWADHAAR FINSERVE PRIVATE LIMITED SCHEDULES ANNEXED TO AND FORMING PART OF BALANCE SHEET
As at 31-Mar-09
As at 31-Mar-08
(Rupees)
(Rupees)
SCHEDULE 1: SHARE CAPITAL Authorised: 15,000,000 equity shares of Rs.10/- each
150,000,000
150,000,000
150,000,000
150,000,000
120,000,000
25,610,000
120,000,000
25,610,000
2,500,000
-
2,500,000
-
Issued, Subscribed and Paid up: 12,000,000 (P.Y. 2,561,000) equity shares of Rs.10/- each fully paid up [Out of above 9,439,000 shares were issued during the year]
SCHEDULE 2: SECURED LOAN Loan from FWWB (Secured against Book Debts)
35
SCHEDULE 3: FIXED ASSETS
In Rupees
during
Additions the year
during
Deletions
1,618,485
31-Mar-09
As on
-
-
1-April-08
As on
380,779
90,169
462,218
the year
During
-
-
-
-
Deduction
499,934
380,779
90,169
462,218
31-Mar-09
1,446,829
999,869
2,825,815
483,716
1,156,267
-
-
-
-
-
-
NET BLOCK
the year -
573,885
-
499,934
298,383
6,912,496
-
DEPRECIATION / AMORTIZATION
1-April-08 1,618,485 -
3,206,594
-
-
1,731,483
-
GROSS BLOCK
573,885
-
1,499,803
298,383
-
-
7,591,005
678,509
630,000
630,000
-
31-Mar-09 31-Mar-08
As on
Furniture and Fixtures 3,206,594
-
-
1,731,483
-
As on
Office Equipment 1,499,803
1,745,212
-
-
As on
Computers -
-
8,643,979
-
As on
Lease hold improvement -
1,745,212
-
-
PART I C U LAR S
Intangible Assets -
8,643,979
-
-
Computer Software
-
-
-
TOTAL
-
-
Previous Year
CAPITAL WORK IN PROGRESS (EXPENDITURE ON DEVELOPMENT OF SOFTWARE (INTANGIBLE)) GRAND TOTAL
As at 31-Mar-09
As at 31-Mar-08
(Rupees)
(Rupees)
SCHEDULE 4: CURRENT ASSETS, LOANS AND ADVANCES (A) CURRENT ASSETS Cash and Bank Balances Cash on Hand
1,313,495
3,990
Bank accounts
1,129,983
53,578
Fixed Deposits
33,850,000
23,315,703
36,293,478
23,373,271
136,666
-
Security Deposit for Premises
2,530,000
300,000
Interest Accrued on Fixed Deposits
2,061,853
-
15,000
-
Advance Tax & Tax Deducted at Source
875,174
60,607
Other Assets
739,040
-
72,908
-
6,430,641
360,607
56,285,972
-
57,927
-
Bank Balances in Scheduled Banks
(i) Other Current Assets Telephone and Internet Deposits
Stamp Paper in Hand
Prepaid Expense (ii) (B) LOANS AND ADVANCES (UNSECURED, CONSIDERED GOOD) Loans given to customers Less: Provsions for doubtful Debts*
56,638,507 352,535
Interest Due but not received
(iii)
56,343,899
-
(i+ii+iii)
99,068,018
23,733,878
* Refer to Note 12 of Significant Accountant Policies
37
As at 31-Mar-09
As at 31-Mar-08
(Rupees)
(Rupees)
SCHEDULE 5: CURRENT LIABILITIES AND PROVISIONS (A) CURRENT LIABILITIES Sundry Creditor for expenses (Refer note no.13 of Notes to Accounts) Dues to Micro, Small and Medium Enterprises
-
-
2,174,577
124,925
Margin Money
5,256,648
-
Statutory dues payable
1,045,187
24,318
Other Liabilities
2,447,877
-
10,924,289
149,243
270,317
-
70,000
-
(ii)
340,317
-
(i+ii)
11,264,606
149,243
Dues to Others
(i) (B) PROVISIONS Provisions for Gratuity Provisions for FBT
38
For Year ended
For Period ended
31-Mar-09 (Rs.)
31-Mar-08 (Rs.)
SCHEDULE 6: OPERATING INCOME Interest on Loans
4,742,151
-
Loan Processing Fee
1,928,765
-
691,000
-
86,679
-
7,448,595
-
4,203,836
294,207
123,750
-
65,017
-
4,392,603
294,207
362,974
-
Salaries,Allowances and other Emoluments
9,033,959
-
Managing Directors Remuneration
2,066,667
-
Contribution to PF and Statutory funds
701,688
-
Gratuity
165,482
-
Staff Welfare
133,558
-
12,464,328
-
Collection Charges Application Fees
SCHEDULE 7: OTHER INCOME Interest on Deposits with Bank Interest on Deposits Miscellaneous Income
SCHEDULE 8 : PERSONNEL EXPENSES Training and recruitment costs
39
For Year ended
For Period ended
31-Mar-09 (Rs.)
31-Mar-08 (Rs.)
Insurance
31,199
-
Postage and Courier
25,068
-
Service Tax
305,916
-
Electricity Charges
339,711
-
Telephone Charges
342,454
-
Security Charges
230,267
-
Brokerage (Lease of Premises)
232,749
-
Printing and Stationery
749,360
3,630
Computer & Web-related expenses
975,111
-
5,928,842
97,110
500,765
10,980
2,196,576
90,663
-
1,183,500
56,729
-
6,370,518
226,667
Travelling and Conveyance
731,366
15,000
Statutory audit fees
330,900
60,000
Bad Debts written off
227,131
-
Provision for doubtful debts
352,535
-
15,230
2,022
19,942,427
1,689,572
2,691,490
-
651,688
-
3,343,178
-
SCHEDULE 9: ADMINISTRATIVE AND FINANCIAL EXPENSES
Professional and Legal Fees Office Expenses Premises lease rent Prelimenary Expenses w/off Bank Charges Retainership Charges
Other Miscellaneous Expenses
SCHEDULE 10: EXCEPTIONAL INCOME Staff Recruitment & Training Costs Market Development Cost
40
Swadhaar Finserve Private Limited Schedule 11: Significant Accounting Policies and Notes to Accounts for the year ended March 31, 2009:
I. NATURE OF BUSINESS: The Company is Non-banking Financial Company (NBFC) registered with the Reserve Bank of India (“RBI”) under section 45-IA of the Reserve Bank of India Act, 1934 and primarily engaged in lending and related activities. The Company received the Certificate of Registration from the RBI on 9th May 2008, enabling the Company to carry on business as a Non-banking Financial Company. As the Company has incurred losses during the year, there has been no transfer to the Reserve Fund in accor-
used in the accompanying financial statements are based upon management’s evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying financial statements. Any differences of actual results to such estimates are recognized in the period in which the results are known/materialized. 3. Revenue Recognition: a) Interest income is recognized and accounted on
dance with the provisions of Section 45-IC of the RBI
accrual basis as per the agreed terms except in
Act, 1934.
case of Non Performing Assets outstanding for more than 90 days, which is recognized on receipt
(A) Significant Accounting Policies:
basis, as per NBFC Prudential Norms. b) Application fees and loan processing fees are
1. Basis of Preparation of Financial Statements: The accompanying financial statements are consistently prepared under the historical cost convention, on the accrual basis of accounting and comply with the accounting standards issued by the Institute of Chartered Accountants of India (to the extent applicable) and in accordance with the generally accepted accounting principles, the provisions of the Companies Act, 1956
recognised when loans are disbursed. c) Collection charges are recognised on date of installment. d) All other incomes are recognised on accrual basis. 4. Fixed assets & Depreciation:
and regulations of Reserve Bank of India, to the extent
Fixed Assets are stated at cost less accumulated
applicable.
depreciation thereon. The cost of fixed assets comprises purchase price and any other incidental cost of bring-
2. Use of Estimates:
ing the asset to its working condition for its intended
The preparation of the financial statements in conformity
use. The Company provides pro-rata depreciation from
with the generally accepted accounting principles
the date on which asset is acquired/ put to use. On all
requires the management to make estimates and assump-
assets, except as mentioned below, depreciation has
tions that affect the reported amount of assets, liabilities,
been provided using the Straight line method at the rates
revenues and expenses and disclosure of contingent
specified in Schedule XIV to the Companies Act, 1956:
assets and liabilities. The estimates and assumptions
41
a) Assets costing Rs. 5,000/- or less are fully depreciated in the year of purchase. b) Improvements to Leased Assets are depreciated over the initial period of lease. c) Fixed Assets purchased from Swadhaar FinAccess are depreciated over a period of 4 years. 5. Intangible Assets & Amortization:
Deferred Tax Expense: Deferred tax expense or benefits is recognised on timing differences being the difference between taxable and accounting income and are capable of reversal in one or more future periods. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the asset can be
Expenses incurred on Computer Software having
realised in future; however, where there is unabsorbed
enduring benefits are capitalized and will be amortized
depreciation or carried forward loss under taxation laws,
over a period of 3 years on a pro rata basis from the
deferred tax assets are recognised only if there is a virtual
date of purchase.
certainty of realisation of the assets. Deferred tax assets
6. Employee Benefits: Provident Fund: Contribution payable to the recognised provident fund, which is a defined contribution scheme, is charged to the profit and loss account in the period in which they occur.
are reviewed as at each balance sheet date and written down or written-up to reflect the amount that is reasonable/virtually certain (as the case may be) to be realised. Fringe Benefit Tax: Provision for Fringe Benefit Tax (‘FBT’) is made on the basis of applicable FBT rates on the taxable value of
Gratuity:
chargeable expenditure of the Company as prescribed
Gratuity is post employment benefit and is in the nature
under the Income Tax Act, 1961.
of Defined Benefit Plan. The Liability recognised in the
8. Operating Leases:
balance sheet in respect of gratuity is the present value of defined benefit obligation at the balance sheet date, together with the adjustments for unrecognized actuarial gain or losses and the past service costs. The defined benefit obligation is calculated at or near the balance sheet date by an independent actuary. 7. Taxation: Income-tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the income-tax law), deferred tax charge or credit (reflecting the tax effect of timing differences between accounting income and taxable income for the period) and fringe benefit tax. Current Tax:
Lease payments in respect of operating lease are recognized as an expense in the statement of profit and loss account on a straight-line basis over the lease term. 9. Provision and Contingencies: The Company creates a provision when there is present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
Provision for current tax is made on the basis of estimated taxable income for the accounting year in accordance
Provisions are reviewed at each balance sheet date and
with the Income Tax Act, 1961. However, for the current
adjusted to reflect the current best estimate. If it is no
year, no provision for tax has been made since the
longer probable that the outflow of resources would be
Company has incurred losses.
required to settle the obligation, the provision is reversed.
42
Contingent assets are not recognised in the financial
12. Provision for doubtful debts:
statements. However, contingent assets are assessed
The provisioning norms followed by the Company are
continually and if it is virtually certain that an economic
more stringent than those prescribed by the Reserve
benefit will arise, the asset and related income are recog-
Bank of India and are as follows:
nised in the period in which the change occurs.
No. of days
Provision
10. Impairment of Assets:
portfolio outstanding
(% on outstanding
The Company assesses at each balance sheet date whether
overdue (days)
principal)
there is any indication that an asset may be impaired.
0-30
0%
31-60
10%
amount of the asset or the recoverable amount of the cash
61-120
30%
generating unit which the asset belongs to, is less than
121-180
60%
If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable
its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the profit and loss account.
Overdue debts outstanding for more than 180 days are written off.
If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost. 11. Foreign Currency Transactions: Foreign currency transactions are recorded at the rates of exchange prevailing on the date of the transaction. Exchange differences, if any arising out of transactions settled during the year are recognised in the profit and loss account. Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the closing exchange rate on that date. The exchange differences, if any, are recognised in the profit and loss account and related assets and liabilities are accordingly restated in the balance sheet except those related to acquisition of fixed assets which are adjusted in the carrying amount of the related fixed assets.
43
(B) Notes to the Accounts: 1. Equity Share Capital raised during the year: During the year, the Company has raised a capital of Rs. 94,390,000/by way of issue of 9,439,000 equity shares of Rs. 10/- each. 2. Payment towards Business Transfer: During the year, the Company took over the current micro credit portfolio of Rs. 6,065,313/- and 1,786 active clients from Swadhaar FinAccess (SFA), a non profit company sharing common promoters with the Company. In addition, the Company has acquired assets worth Rs.3,609,296/-. The necessary approval from the Central Government was taken for the aforementioned transfer of micro credit portfolio and assets from SFA. Extraordinary Item: The Company has absorbed 76 employees of SFA at a cost of Rs. 2,691,490/as staff recruitment and training costs. SFA had incurred costs in recruiting and training these employees in the past and therefore SFPL compensated SFA for the cost incurred in recruiting and training these employees at three month’s cost to SFA. The Company has also paid Rs. 651,688/- as market development costs to SFA. SFA had undertaken considerable efforts to bring the clientele in its books. Hence SFA has been paid @ Rs. 200/- for every loan client transferred from SFA to the Company. 3. Gratuity: The detailed actuarial working as required under AS-15 is attached as an annexure to the accounting policies. 4. Auditor’s Remuneration (Inclusive of Service Tax): Particulars
Current Year
Previous Year
Rupees
Rupees
264,720
56,180
66,180
NIL
172,190
11,236
859
NIL
503,949
67,416
As Auditors Statutory Audit Fees Tax Audit Fees Any other (including Certification) Out of pocket expenses Total
44
5. Managing Director’s Remuneration: Particulars
Current Year (Rs.) Previous Year (Rs.)
Salary
2,066,667
NIL
Bonus
NIL
NIL
Company’s contributions to P.F.
NIL
NIL
Monetary Value of other Perquisities/Benefits
NIL
NIL
6. Deferred Tax Assets/(Liability) for the year comprise timing differences on account of: Particulars
Current Year (Rs.) Previous Year (Rs.)
Opening balance Deferred Tax Liability Depreciation Preliminary Expenses
474,284
NIL
(389,715)
NIL
309,261
NIL
80,454
NIL
Unabsorbed Losses
NIL
NIL
Deferred Tax Asset
56,247
474,284
Preliminary Expenses
NIL
321,817
Unabsorbed Losses
NIL
152,467
56,247
NIL
1,40,816
474,284
Provision for Gratuity Net Deferred Tax Asset/(Liability)
7. Basic & Diluted Earnings/(Loss) per share: Particulars
Current Year
Previous Year
(26,043,686)
(921,081)
7,687,534
690,927
(3.39)
(1.33)
Net Profit/(Loss) attributable to equity shareholders [A] (Rs.) Weighted Average of equity shares issued [B] Basic & Diluted Earnings/(Loss) per share (Annualized EPS) [A/B] (Rs.)
7A. A schedule as required in terms of Paragraph 13 of Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007) is attached as Annexure 2 to the accounting policies.
45
8. Related Party Disclosure Name of Related Parties:
Name of the Key Managerial Personnel
Ms. Veena Mankar
Name of the enterprise in which the Key Managerial Personnel exercises significant influence R A Net India Private Limited
Mena Factors LLC, Dubai
Egypt Factors S.A.E., Cairo
Swadhaar FinAccess
India Consult
Mr. Srinivas Bhaskar Rao
Kanhaiya Holdings Private Limited
Gopi Vallabh Holdings Private Limited
Nilyam Holdings Private Limited
Madhav Reality Holdings Private Limited
DCA Holdings Private Limited
Madhurima International Private Limited
Brijraj Holdings Private Limited
Ms. Pearl Tiwari
Ambuja Cement Foundation
Ms. Geeta Dutta Goel
Arohan Financial Services
Ms. Anita Ramachandran
Cerebrus Consultants Private Limited
Connexus Consultant Private Limited
HCL Infosystem Geometric Limited
Force Motors Limited
Godrej & Boyce Mfg Company Limited
UTI AMC Private Limited
Mr. Siddhartha Chowdri
ACCION Technical Advisors India
Ms. Lalita D Gupte
ICICI Venture Fund Management Company Limited
Bharat Forge Limited
Firstsource Solutions Limited
Kirloskar Brothers Limited
Nokia Corporation
HPCL – Mittal Energy Limited
Godrej Properties Limited
G.S.Mhaskar Private Limited
East West Ethnic Foods Private Limited
B) Key Management Personnel: Ms. Lalita D Gupte – Chairperson
Ms. Pearl Tiwari – Nominee Director
Ms. Veena Mankar – Managing Director
Mr. Srinivas Bhaskar Rao – Nominee Director
Ms. Geeta Dutta Goel – Nominee Director
Mr. Siddhartha Chowdri – Nominee Director
Ms. Anita Ramachandran – Nominee Director 46
Transactions with related parties for the year ended 31.03.2009: Enterprise in which the Key Managerial Personnel exerTransaction
cises significant influence
Managerial Remuneration:
Key Management Personnel 2,066,667
Swadhaar FinAccess Purchase of Fixed Assets
2,101,296
Purchase of Computer Software
1,508,000
Staff Training & Recruitment Cost
2,691,490
Market Development Costs
651,688
Purchase of Loan Portfolio
6,065,313
Loans
3,000,000
Reimbursement of Expenses (Sharing of Kiosk)
931,348
Interest on Loan
(123,750)
ACCION Professional Charges
1,993,877
Note: Income/Receipts figures are shown in brackets 9. Segment Reporting: The Company is engaged in single segment and there are no separate reportable segments as defined in AS – 17. 10. Foreign Currency Transactions: Expenditure in Foreign Currency (on accrual basis): Particulars
Current year(Rs)
Previous Year (Rs)
Travel
48,896/-
NIL
Total
48,896/-
NIL
11. Foreign Exchange gain/loss: The Company did not have any foreign exchange/ currency on hand as on the date of Balance Sheet.
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12. Capital work in progress: This includes the following: a) Amount paid for the up gradation of micro finance portfolio accounting software (Bankers Realm) Rs. 576,694/b) Amount paid for the payroll software (Greytip Software Pvt. Ltd) Rs.101,815/13. MSMED Act, 2006: The Company is in process of receiving intimations from “Suppliers” regarding their status under Micro, Small and Medium Enterprise Development Act, 2006 and hence disclosures, if any, relating to amounts unpaid as at the year end together with interest paid / payable as required under the said Act have not been given. 14. Previous Period Comparatives: Previous period figures have been regrouped and rearranged to the extent considered necessary. Schedule 1 to 8 to the Balance Sheet and Profit and Loss account form an integral part of these accounts As per Our Attached Report of Even Date
For and on behalf of the Board of
For Haribhakti & Co.
Swadhaar Finserve Pvt. Ltd.
Chartered Accountants Rakesh Rathi
Anshu Mundhra
Lalita D. Gupte
Veena Mankar
Partner
Company Secretary
Chairperson
Managing Director
Place : Mumbai Place : Mumbai Date :13- May-09 Date :13- May-09
48
Design and Layout: Amishi Parekh Printed at: Jak Printers Pvt. Ltd. Photo Credits: John Rae for ACCION International Preeti Mankar for Swadhaar FinServe Pvt. Ltd.
Swadhaar FinServe Pvt. Ltd. 5/39 Shree Om Co-op Housing Society, Anand Nagar, Guru Narayan Road, Off Nehru Road, Santacruz [E], Mumbai 400 055 Tel: +91 22 2613 8700 • F: +91 22 2613 8797/98 • E-mail:
[email protected] • www.swadhaar.com
Swadhaar FinServe Pvt. Ltd.
Tel: +91 22 2613 8700 • F: +91 22 2613 8797/98 • E-mail:
[email protected] • www.swadhaar.com
5/39 Shree Om Co-op Housing Society, Anand Nagar, Guru Narayan Road, Off Nehru Road, Santacruz [E], Mumbai 400 055
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