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Genesis
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An urge to pursue a strong idea - Startup
team of Spandana used to work for a Non-Government Organisation (NGO) in planning,
implementation and monitoring of development projects that were funded predominantly
by Grants. These activities had reasonably good impact, however, the team was keen
to develop a sustainable community development model focused at low-income community
– which is financially viable, non-grant based and scalable.
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An opportunity in sight - One such
demonstration came out of a soft loan spandana gave to a poor push cart rentee woman[the story].Spandana team realised such requirements had a potential
to scale up to a gigantic proportions. Exploring options of viability spandana team
evaluated global models in microfinance and evaluated models that would work in
localised geography.
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The birth of Spandana -
Spandana team gathered some money, a few likeminded friends and family members who
also bought their idea and loads and loads of courage. Spandana team started operating
under their own NGO in 1998 and called it Spandana. Spandana stands for Responsiveness,
and in this context, responsiveness to the needs of low-income clients
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The courage of conviction -
In the initial roll out, getting funding from banks was challenging as the model
had to be tested and validated locally. Spandana continued alternative developmental
programmes like Healthcare, Nutrition, Sanitation etc.
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Challenging the conventional - As the operations picked up, Spandana questioned the logic of every
conventional method, therefore addressing the bottlenecks and building efficiencies
– which at that time all seemed like common sense.
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Break-even surprise -
As the financials of the first formal year of operations were compiled, Spandana
team was surprised that they had achieved break-even. This was not by design but
by default since the efficiencies was becoming a culture for Spandana to build on.
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Initial Growth - In
the first two years (1998-2000), around the turn of the century, Spandana crossed
its first milestone of Rs.1 crore (10 million) disbursement and about 2,000 clients.
Funds were difficult to raise. Bankers were wary of this client segment since the
state directed credit given by Bankers had dismal repayment rates. It took months
of demonstrated repayment performance and conviction of Spandana team, initial support
of FWWB and support of friends to lead to trickling-in of loan funds.
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Achieving critical mass -
By the year 2002, Spandana reached out to about 15,000 clients. Around the same
time, Bankers started looking at MFIs as a reliable and Bankable entity. Rating
agencies like M-CRIL and CRISIL and many sector resource organizations also played
a critical role in critiquing and therefore helping in institutionalization of the
whole microfinance sector.
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The fillip from Bankers -
The performance of Spandana gave confidence to Bankers to increase their exposure
levels. FWWB with its loans and capacity building support, SIDBI through its IFAD
supported Foundation for Microcredit and ICICI Bank with its partnership model helped
Spandana grow rapidly. Between 2001 to 2004, Spandana grew by over 250% compounded
annual growth rate. By end of 2004, Spandana had reached out to over 1 lakh (0.1
mn) clients and a Gross Loan Portfolio of over Rs.5.5 mn.
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Transformation into NBFC -
With scale, it became increasingly clear that it is prudent to transform into a
regulated entity and the most suitable model available under the Indian regulatory
environment is Non-Banking Finance Company (NBFC). Spandana transformed itself into
an NBFC and started originated new loans under the NBFC structure.
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Strong fundamentals -
Our operating costs are much lower than comparable costs of Banks and STPL NBFCs.
The delinquency levels are nowhere comparable – our < 1% to their over 5% historical
average. The differentiator is that we strongly believe that there is no good
or bad client, it all depends on how we treat them. We maintain a very high degree
of client connect and therefore ensure that our delinquencies are negligible.
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Encouraging success stories -
Every client household that improves its economic condition, every smile that an
improved meal brings on the face of Spandana’s borrower, every opportunity to avail
health service that was beyond their reach and every new educated child is our award
and our recognition is the support and faith of our clients and our employees.
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Guntur Town, Andhra Pradesh, India.
During a hot summer afternoon of 1997, when most of the women
would prefer a siesta, Spandana team saw a rag-picker woman on the street buying
household reject items on a push cart. Their entrepreneurship made Spandana team
curious. Speaking to her, Spandana team realized that the lady was working very
hard but not getting commensurate returns. Despite her efforts, she was able to
provide only one meal to her family. This was mainly because the lady was paying
an exploitative daily rent for the cart that cumulatively far exceeded the cost
of buying scores of such carts. The lack of access to affordable and serviceable
capital was leaving little alternative options for her. While a bank would never
provide credit to her on many accounts, the money-lender was far too exploitative.
Spandana team decided to lend her a little money, enough to buy the cart. The money
was given with a promise of timely and reasonable repayments. The hard working woman
started using her new self-owned push cart, she could save on the rent cost and
repaid the money conveniently from her increased returns. Now this women could afford
better meals for herself and her children. She also spread the word that there was
a Micro Finance company named SPANDANA which was helping economically active women
with loans. It seemed to strike the right chord with several low-income people,
and soon there were many waiting to meet Spandana team at their doorstep.It is but seldom that an everyday experience is so profound
and timely that it stirs in a person the courage to set things right.
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