Microfinance Focus, July 26, 2010: The state of Bihar is one of India’s poorest and grossly underserved regions in terms of access to financial services. According to a report by NABARD (National Bank for Agriculture and Rural Development), the state has over 7 million Below Poverty Line (BPL) households, and a credit demand-supply gap of 96%. As against the total credit demand of more than Rs 48, 000 million for all BPL households per annum during 2007-2008, the total annual credit supply from Banks and microfinance institutions during the same period was little more than Rs. 2, 000 million.
Addressing this acute credit shortage, Saija Finance Private Limited, a Non Banking Finance Company (NBFC) formed in April 2008 is serving the region with a focus on providing microfinance services for the urban and rural poor, as well as micro and small businessmen in Bihar and other underserved regions like Jharkhand, Delhi, Rajasthan, Chhattisgarh, parts of Uttar Pradesh and Madhya Pradesh. It is now serving a customer base of more than 9, 000 clients.
In an interview with Microfinance Focus, Mr. S. R. Sinha, Saija’s founder and CEO, who has a longstanding experience in banking, housing finance and insurance, discussed the ground realities of microfinance in Bihar and the future road map for Saija to expand its reach in one of the least penetrated regions of Indian territories in terms of financial services.
Microfinance Focus: What was the motivation behind establishing Saija in Bihar?
S.R. Sinha: We belong to Bihar and always wanted to give something back to our state with whatever experience we have gathered, working with corporate world over. When we were prompted to start working for the under privileged, the first thing that came to our mind was that our state has the largest number of under privileged in the country and that was the key reason why despite of the visible challenges of starting an institution from the state of Bihar, we decided to jump in.
About three years ago when we first came here with a vision to start a NBFC dedicated to microfinance and the first of its kind in the state, we ourselves and our acquaintances were bit sceptical about its success. The biggest confidence that we got at that time was when ACCION decided not only to invest but invest their largest percentage of share in any company in their 32 relationships across the globe. Their current stake is 49.5% which is the largest stake held by ACCION globally. With this happening we were able to take the first step in our vision to ensure that Bihar has in the shape of Saija, its first truly national level microfinance institution and maybe going forward, its first bank headquartered out of Bihar.
Microfinance Focus: Can you discuss with us the performance of Saija in the fields?
S.R. Sinha: Our first experience has been beyond our expectations. We were cautioned by larger player that early stage MFIs do experience problems in terms of hitting ‘so-called’ bad pockets, having difficulty collecting premiums keeping in view that they don’t have strong controls, systems and processes in place. But to our great surprise and happiness we have found our customers to be behaving in an excellent fashion. Our customer attendance record is above 80-85%, they are currently at par to the national data. If we look at the timely collection, we are again being marked the highest. We have got a cash collection facility with Axis bank currently running across all our four branches and the cash collecting for the day happen at a particular time band. All our collections have to come before that so that when the bank people visit the branch, the collection happens. Till date we did not have a single day default.
My field staffs have their collection sheets drawn up and they have not experienced delays of more than 2 hrs in any collection. There has been no case reported of delay out of my nine thousand customer base, where a collection has been delayed even by a single day of any group. It is an exhilarating experience.
Microfinance Focus: What is the roadmap for Saija in years to come?
S.R. Sinha: Our roadmap is to first consolidate in terms of our systems, processes and structures and that we have achieved for the first level. We have a great investor supporting us and we are going to have state of the art software to support our lending operations in place within two months. We have tied up with Infrasoft Tech for that. Credit Suisse have supported training schemes running in the company whereby we recruit our field executives. We have our in-house training running in our company where by when we recruit we have training for them. Our centre at Danapur is churning out our own field executives. They go through an extensive in-classroom and field training before they are deployed for a function. All that having in place and with first round of capital already raised and the second round about to happen we plan that in 2010-11 we will have 20 branches and 60, 000 clients.
Microfinance Focus: Any message you want to send out to the investors about the prospect of microfinance in the region you are operating?
S.R. Sinha: The poor people in Bihar are as simple and as excited to grow and develop as poor people across the globe. Leading microfinance institution SKS has more than 5 lakhs Bihar clients on their books and their experience has been reported to be better than any other place.