FILE

ON

Research Project (BCOM 312)

Submitted in partial fulfillment of requirement of

Bachelor of Commerce (Hons.) (B.COM (H))

B.COM (H) VI Semester (Morning)

Batch 2018-2021

Submitted to: Submitted by:

Mrs. Shilpa lalwani Bibyan khalkho

Assistant Professor 00914188818

JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL, KALKAJI

1
 STUDENT UNDERTAKING

I hereby declare that this project report entitled “Study of performance

of Microfinance in India” Submitted by me for the partial fulfillment of
the degree of Bachelor of commerce, to my mentor Mrs. Shilpa lalwani
is an original work done by me.

I also hereby declare that this project report has not been submitted at
any time to any other university or institute.

Student Name

Bibyan khalkho
 CERTIFICATE BY SUPERVISOR

This is to certify that Mr. Bibyan khalkho of B.com (H) has completed
his/ her file on “Research Project” on his/her own. His / Her work is up
to my satisfaction.

Mrs. Shilpa lalwani

(Assistant Professor)
 ACKNOWLEGEMENT

The project on Study of performance of Microfinance in India would

not have seen the light of the day without the following people and
their priceless support and cooperation. Hence I extend my gratitude to
all of them.

As a student of Jagannath institute of management school, kalkaji. I

would first of all like to express my gratitude to Mrs. Shilpa lalwani for
granting me permission to undertake to project report in their
esteemed organization.

During the actual research work my research mentor who set the ball
rolling for my project. They had been a source of inspiration through
their constant guidance; personal interest; encouragement and help. I
convey my sincere thanks to them. In spite of their busy schedule they
always found time to guide me throughout the project. I am also
grateful to them foe reposing their invaluable help I would not have
been able to do justice to the project.

I express my sincere thanks to Mrs. Shilpa lalwani (assistant professor)

for the valuable suggestion & making this project successful.
 LIST OF TABLES ANF FIGURES
DESCRIPTION PAGE NO.

Student Undertaking 2

Certificate by Supervisor 3

Acknowledgement 4

List of Tables and Figures 5

Executive Summary 6

Introduction to the Topic 9

Company Profile 20

Objectives 24

Literature Review 26

Research Methodology 31

Analysis and Findings 36

Limitations 67

Recommendations and Conclusion 69

Bibliography 75

Appendices 77
EXECUTIVE SUMMARY
Microfinance sector has grown rapidly over the past few decades.
Nobel Laureate Muhammad Yunus is credited with laying the
foundation of the modern MFIs with establishment of Grameen Bank,
Bangladesh in 1976. Today it has evolved into a vibrant industry
exhibiting a variety of business models. Microfinance Institutions (MFIs)
in India exist as NGOs (registered as societies or trusts), Section 25
companies and Non-Banking Financial Companies (NBFCs). Commercial
Banks, Regional Rural Banks (RRBs), cooperative societies and other
large lenders have played an important role in providing refinance
facility to MFIs. Banks have also leveraged the Self-Help Group (SHGs)
channel to provide direct credit to group borrowers.

With financial inclusion emerging as a major policy objective in the

country, Microfinance has occupied center stage as a promising conduit
for extending financial services to unbanked sections of population. At
the same time, practices followed by certain lenders have subjected the
sector to greater scrutiny and need for stricter regulation.

This report, which contains only a part of the actual report is based on
the research work done as a part of the summer internship project at
Reserve Bank of India, Kanpur. The research involved study of the past
literatures about the microfinance sector, related online research
papers and journals. The study also involved survey of all MFIs in the
state of Uttar Pradesh through field visits and online survey. The annual
reports and the sector reports published by regulatory bodies, MFI
associations and major microfinance players facilitated the study,
especially in understanding the size, growth and past trends.
Interactions with some of the industry experts helped in understanding
and analyzing the emerging concerns in the microfinance sector and
also to look for some possible solutions.

Although the microfinance sector is having a healthy growth rate, there

have been a number of concerns related to the sector, like grey areas in
regulation, transparent pricing, low financial literacy etc. In addition to
these concerns there are a few emerging concerns like cluster
formation, insufficient funds, multiple lending and over-indebtedness
which are arising because of the increasing competition among the
MFIs. On a national level there has been a spate of actions taken to
strengthen the regulation of MF sector including, enactment of
microfinance regulation bill by the Government of Andhra Pradesh,
implementation of sector-specific regulation by Reserve Bank of India
and most recently, release of Draft Microfinance Institutions
(development and regulation) Bill, 2011 for comments.
INTRODUCTION TO THE TOPIC
 “Microfinance is the provision of financial services to low-
income clients or solidarity lending groups including consumers and
the self-employed, who traditionally lack access to banking and related
services.”
Microfinance is not just about giving micro credit to the poor rather it is
an economic development tool whose objective is to assist poor to
work their way out of poverty. It covers a wide range of services like
credit, savings, insurance, remittance and also non-financial services
like training, counseling etc.
Salient features of Microfinance:
 Borrowers are from the low income group
 Loans are of small amount – micro loans
 Short duration loans
 Loans are offered without collaterals
 High frequency of repayment
 Loans are generally taken for income generation purpose

According to international labor organization (ILO), “Microfinance is an

economic development approach that involves providing financial
services through institutions to low income clients”.

In India microfinance has been defined by “The National Microfinance

taskforce, 1999” as “provision of thrift, credit and other financial
services and products of very small amounts to the poor in rural, semi-
urban or urban areas for enabling them to raise their income levels and
improve living standards”.

“The poor stay poor, not because they are lazy but because they have
no access to capital.”

The dictionary meaning of ‘finance’ is management of money. The

management of money denotes acquiring & using money. Micro
finance is buzzing word, used when financing for micro entrepreneurs.
Concept of micro finance is buzzing word, used financing for micro
entrepreneurs. Concept of micro finance is emerged in need of meeting
special goal to empower underprivileged class of society, women, and
poor, downtrodden by natural reasons or men; caste, creed, religion or
otherwise. The principles of Micro Finance are founded on the
philosophy of cooperation and its central values of equality, and mutual
self-help. At the heart of these principles are the concept of human
development and the brotherhood of man expressed through people
working together to achieve a better life for themselves and their
children.

Traditionally micro finance was focused on providing a very

standardized credit product. The poor, just like anyone else, (in fact
need like thirst) need a diverse range of financial instruments to be able
to build assets, stabilize consumption and protect themselves against
risks. Thus, we see a broadening of the concept of micro finance- our
current challenge is to find efficient and reliable ways of providing a
richer menu of micro finance products. Micro finance is not merely
extending credit, but extending credit, but extending credit to those
who require most for their and family’s survival. It cannot be measured
in term of quantity, but due weightage to quality measurement. How
credit availed is used to survive and grow with limited means.

Concept and features of Micro-finance

1. It is tool for empowerment of the poorest.

2. Delivery is normally through Self Help Groups (SHGs).
3. It is essentially for promoting self- employment, generally used
for:
a) Direct income generation
b) Rearrangement of assets and liabilities for the household to
participate in future opportunities and
c) Consumption smoothing.
4. It is not just a financing system, but a tool for social change,
especially for women.
 5. Because micro credit is aimed at the poorest, micro-finance
lending technology needs to mimic the informal lenders rather
than the formal lending. It has to:
a) Provide for seasonality
b) Allow repayment flexibility
c) Fix a ceiling on loan sizes.

Microfinance approach is based on certain proven truth which are not

always recognized. These are:

1. That the poor are bankable; successful initiatives in micro

demonstrate that there need not be a tradeoff between reaching
the poor and profitability – micro finance constitutes a statement
that the borrowers are not ‘weaker sections’ in need of charity,
but can be treated as responsible people on business terms for
mutual profit.
2. That almost all poor households need to save, have the inherent
capacity to save small amounts regularly and are willing to save
provided they are motivated and facilitated to do so.
3. That easy access to credit is more important than cheap
subsidized credit which involves lengthy bureaucratic procedures
– (some institutions in India are already leading to groups or SHGs
 at higher rates - this may prevent the groups from enjoying a
sufficient margin and rapidly accumulating their own funds, but
members continue to borrow at these high rates, even those who
can borrow individually from banks).
4. ‘Peer pressure’ in groups helps in improving recoveries.

The origin of microfinance

Although neither of the terms microcredit or microfinance were

used in the academic nor by development aid practitioners before
the 1980s or 1990s, respectively, the concept of providing financial
services to low income people is much older.

While the emergence of informal financial institutions in Nigeria

dates back to the 15th century, they were first established the
Europe during the 18th century as a response to the enormous
increase in poverty since the end of the extend European wars
(1618-1648). In 1720 the first loan fund targeting poor people was
founded in Ireland by the author Jonathan Swift. After a special law
was passed in 1823, which allowed charity institutions to become
formal financial intermediaries a loan fund board was established in
1836 and a big boom was initiated. Their outreach peaked just
before the government introduced a cap on interest rates in 1843. At
this time, they provided financial services to almost 20% of Irish
household. The credit cooperatives created in Germany in 1847 by
Friedrich Wilhelm Raiffeisen served 1.4 million people by 1910. He
stated that the main objectives of these cooperatives “should be to
control the use made of money for economic improvements, and to
improve the moral and physical values of people and also, their will
to act by themselves.”

In the 1880s the British government of madras in south India, tried

to use the German experience to address poverty which resulted in
more than nine million poor Indians belonging to credit cooperatives
by 1946. During this same time the Dutch colonial administrators
constructed cooperatives rural banking system in Indonesia based on
the Raiffersen model which eventually became Bank Rakyat
Indonesia (BRI), now known as the largest MFI in the world.

EVOLUTION OF MICROFINANCE IN INDIA

The evolution of Indian Microfinance sector can be broadly divided

into four distinct phases:

Phase 1: The Cooperative Movement (1900-1960)

 During this phase, credit cooperatives were vehicles to extend
subsidized credit to villages under government sponsorship.

Phase 2: Subsidized Social Banking (1960s - 1990)

With failure of cooperatives, the government focused on measures

such as nationalization of Banks, expansion of rural branch networks,
establishment of Regional Rural Banks (RRBs) and the setting up of apex
institutions such as the National Bank for Agriculture and Rural
Development (NABARD) and the Small Scale Industries Development
Bank of India (SIDBI), including initiation of a government sponsored
Integrated Rural Development Program (IRDP). While these steps led to
reaching a large population, the period was characterized by large-scale
misuse of credit, creating a negative perception about the credibility of
micro borrowers among bankers, thus further hindering access to
banking services for the low-income people.

Phase 3: SHG-Bank Linkage Program and Growth of NGO-MFIs (1990 -

2000)

The failure of subsidized social banking triggered a paradigm shift in

delivery of rural credit with NABARD initiating the Self Help Group
(SHG) Bank Linkage Program (SBLP), aiming to link informal women's
groups to formal banks. The program helped increase banking system
outreach to otherwise unreached people and initiate a change in the
bank's outlook towards low-income families from 'beneficiaries' to
'customers'. This period was thus marked by the extension of credit at
market rates. The model generated a lot of interest among newly
emerging Microfinance Institutions (MFIs), largely of nonprofit origin,
to collaborate with NABARD under this program. The macroeconomic
crisis in the early 1990s that led to introduction of the Economic
Reforms of 1991 resulted in greater autonomy to the financial sector.
This also led to emergence of new generation private sector banks that
would become important players in the microfinance sector a decade
later.

Phase 4: Commercialization of Microfinance

The First Decade of the New Millennium Post reforms, rural markets
emerged as the new growth drivers for MFIs and banks, the latter
taking interest in the sector not only as part of their corporate social
responsibility but also as a new business line. On the demand side,
NGO-MFIs increasingly began transforming themselves into more
regulated legal entities such as Non-Banking Finance Companies
(NBFCs) to attract commercial investment. The microfinance sector as it
exists today essentially consists of two predominant delivery models
the SBLP and MFIs. Four out of five microfinance clients in India are
women.

Microfinance Channels

Microfinance in India operates primarily through two channels:

 SHG-Bank Linkage Program (SBLP) - This channel was initiated by

NABARD in the year 1992. This model encourages financially
backward women to come together to form groups of 10-15
members. They contribute their individual savings to the group at
regular intervals. Loans are provided to members of the group from
these contributions. SHGs are also offered bank loans at later stages,
and these loans can be used for funding income generating activities.
This model has achieved a lot of success in the past and it has also
gained a lot of popularity for contributing to the empowerment of
women in the country. Once these self-sustaining groups reach
stability, they function almost independently with minimal support
from NABARD, SIDBI, and NGOs.
 Microfinance Institutions (MFIs) - These institutions have
microfinance as their primary operation. These lend through the
concept of Joint Liability Group (JLG), i.e., an informal group that
consists of 5-10 members who seek loans either jointly or individually.
COMPANY PROFILE
Annapurna Finance Pvt. Ltd (AFPL) was established in 2009, and is now
one of the top ten non-banking company finance companies providing
microfinance (NBFC-MFIs) in India. It has its roots as a part of a not-for-
profit entity reaching the understand areas of the state of Odisha and
addressing the economic necessities of poor women. Odisha is still an
important part of Annapurna’s operations, and the company
headquarters is located Bhubaneswar.

In 2013 Annapurna registered itself with the Reserve Bank of India (RBI)
as an NBFC-MFI. The company offers mainly group loans to women
residing in rural areas of India. The gross loan portfolio of the company
reached to Rs.2354 crore (EUR 295 million) on December 18th, reaching
1.4 million clients.

Annapurna has a strong social mission. Main development impact

comes through increasing micro-lending to underserved women in rural
India, which enables women’s economic empowerment and increases
independence.
Annapurna Finance, over the years, has continued to innovate in its
products and delivery mechanisms, to make the whole product life
cycle of micro-credit as relevant as possible for its clients. The aim to
offer multiple need based products, which can serve specifically all the
customer life cycle needs of micro-credit.

Annapurna has a strong social mission. Main development impact

comes through increasing micro-lending to underserved women in rural
India, which enables women’s economic empowerment and increases
independence. The company strives to improve female participation to
workforce by paying attention on gender when recruiting and
promoting, following its own gender action plan.

Information

Website

www.annapurnafinance.com

Formerly known as

Acquired/Merged

(Operating Subsidiary)

Financing status

Private equity-backed
Primary industry

Consumer finance

Other Industries

Other financial services

Parent company

People forum

Primary office

1215/1401, khandagiri Bari, Khandagiri

Bhubaneswar, odisha 751030

India
OBJECTIVES
 To study the impact of micro finance in empowering the social
econ0omic status of women and developing of social
entrepreneurship.
 To know about the relationship between SHGs members, micro
finance banks and entrepreneur’s women.
 To clarify the limitation of microfinance programs as the tool for
women’s empowerment and the type of support service
necessary to maximize the contribution of microfinance service.
 To study potential hurdles in the development of women
entrepreneurship.
LITERATURE REVIEW
Kumar Vipin et. al. (2015) study concluded that the SHG’s and MFI’s
are playing a vital role in delivery of microfinance services which leads
development of poor and low income people in India. However, slow
progress of graduation of SHG members, poor quality of group
functioning, dropout of members from groups etc., have also been
reported various study findings in different parts of the country, which
need to be taken into account while designing the road map for the
next phase of the SHG program.

Nikita (2014) study concludes that first time in the year 2012-13 after
the launch of SHGs BLP there is a decline in the number of SHGs who’s
saving linked with banks. The study also finds out there was growth in
the loan outstanding of SHG and which was responsible for increases in
NPAs. At last it is found out that the major share belongs to commercial
banks when the agency wise loan issued to MFI. He suggested that
steps should be taken to improve the performances of programs
launched under Microfinance time to time.

Mahanta et. al. (2012) Study revealed that lending to the poor through
microcredit is not the end of the problem but beginning of a new era. If
effectively handled, it can create miracle in the field of poverty
alleviation. But it must be bundled with capacity building programs.
Government cannot abdicate its responsibility of social and economic
development of poor and downtrodden. The absence of any special
skills with the clients of microcredit, the fund is being used in
consumption and procurement of nonproductive assets.

Hence it is very important to provide skills development training

program like handicraft, weaving, carpentry, poultry, goat rearing,
masonry, bees farming, vegetable farming and many other agricultural
and non-agricultural training. Government has to play proactive role in
this case. People with some special skills have to be given priority in
lending microcredit. These clients should also be provided with
International Academic Journal of Accounting and Financial
Management, Vol. 5, No. 4, pp. 116-128. 118 post loan technical and
professional aid for success of their microenterprises. If government
and MFIs act together then microcredit can play a great role in poverty
alleviation.

Maruthi Ram Prasad, Sunitha and Laxmi Sunitha (2011) conducted a

study on Emergency and Impact of Micro-Finance on Indian Scenario.
After the pioneering efforts by Government, Banks, NGOs, etc the
microfinance scene in India has reached in take off stage. An attempt
could be initiated to promote a cadre of new generation micro-credit
leaders in order to strengthen the emergence of Micro-Finance
Institution (MFIs), so as to optimize their contribution towards the
growth of the sector and poverty alleviation. Each Indian state could
consider forming multi-party working group to meet with microfinance
leaders and have a dialogue with them about how the policy
environment could be made more supportive and to clear up
misperceptions. With one state leading the way, we need to build on a
successful model. By unleashing the entrepreneurial talent of the poor,
we will slowly but surely transform India in ways we can only begin.

Idowu Friday Christopher (2010) conducted a study to find the Impact

of Microfinance on Small and Medium-Sized Enterprises in Nigeria. The
fundamental objective of this study is to assess the impact of
Microfinance on Small and Medium Enterprises (SMEs) in Nigeria.
Simple random sampling technique was employed in selecting the 100
SMEs that constituted the sample size of the research. Structured
questionnaire was designed to facilitate the acquisition of relevant data
which was used for analysis. Descriptive statistics which involves simple
percentage graphical charts and illustrations was tactically applied in
data presentations and analysis. The findings of the study reveal that
significant number of the SMEs benefitted from the MFIs loans even
though only few of them were capable enough to secure the required
amount needed. Interestingly, majority of the SMEs acknowledge
positive contributions of MFIs loans towards promoting their market
share, product innovation achieving market excellence and the overall
economic company competitive advantage. Other than tax incentives
and financial supports, it is recommended that Government should try
to provide sufficient infrastructural facilities such as electricity, good
road network and training institutions to support SMEs in Nigeria.
RESEARCH METHODOLOGY
Research methodology is a way to systematically solve the problem. It
is a plan for conducting research. In this we describe various steps that
are taken by the researcher.

“All progress is born of inquiry. Doubt is often better than

overconfidence, for it leads to inquiry and inquiry leads to invention.”

Research in a common parlance is a search for knowledge. Research is

an art of scientific and systematic investigation. Thus research
comprises defining and redefining problems, formulating hypothesis or
suggested solutions; collecting, organizing and evaluating data, making
deductions and reaching conclusions. Research methodology is the
arrangement of condition for collection and analysis of data in a
manner that aims to combine relevance the relevance to the research
purpose with economy in procedure. Research methodology is the
conceptual structure within which research is conducted. It constitutes
the blueprint for the collection measurement and analysis of the data.

Research methodology is a framework for the study and is used as a

guide in collecting and analyzing the data. It is a strategy specifying
which approach will be used for gathering and analyzing the data. It
also includes time and cost budget since most studies are done under
these two constraints. The research methodology includes overall
research design, the sampling procedure, the data collection method
and analysis procedure.

TYPE OF RESEARCH USED:-

In the study descriptive research design has been used. As descriptive

research design is the description of state of affairs, as it exists, at
present. It this type of research the researcher has no control over the
variables; he can only report what has happened or what is happening.

Descriptive research design which are concerned with describing the

characteristics of particular individual or the group. In descriptive and
diagnostic study the researcher must be able to define clearly what he
wants to measure and must find adequate method for measuring it.

METHOD OF DATA COLLECTION

After the research problem has been identified and selected the next
step is to gather the requisite data. While deciding about the method of
data collection to be used for the researcher should keep in mind two

Types of data:-
 1. Primary data
2. Secondary data

Primary data

The primary data are those, which are collected afresh and for the first
time, and thus happened to be original in character. We can obtain
primary data either through observation or through direct
communication with respondent in one form or another or through
personal interview.

Secondary data

The secondary data on the other hand, are those which have already
been collected by someone else and which already had been passed
through the statistical processes. When the researcher utilizes
secondary data then he has to look into various sources from where he
can obtain them. For e.g. books, magazine, newspaper, internet,
publications and report.

In this study data have been taken from various secondary sources like:

 Internet
 Books
 Magazines
 Newspaper
 Journals
ANALYSIS AND FINDINGS
Annapurna Microfinance provides to poor men and women the
following products and services.

SHG loan

Women, who are unable to access credit through formal banking

system, can get financial help through income generation loan. Poor
women, who are involved in micro businesses to support their family,
are identified and given credit assistance.

The loan provided under this scheme can be used for agriculture
purposes, purchase of agriculture related equipment, micro business
enterprise, handicraft and handloom. The loan amount could range
from INR 8000 to INR 25,000. The repayment tenure is up to 36
months.

Safe water and sanitation to households

Focusing on access to clean water, hygiene and sanitation, Annapurna

Microfinance provides loans to women to improve the living conditions.
The credit is provided at affordable interest rates for women to help
their family with a better sanitation. This project facilitates construction
of toilet, installation of water pipes; hand bore well, water purifier etc.

The loan amount could range between INR 2000 to INR 12,000. The
repayment tenure is up to 24 months.
Crop loan for vegetable cultivation

Both women and men can get a loan form Annapurna Microfinance for
up to INR 25,000 for cultivation purpose. The loan is provided
exclusively for cultivation purpose. The borrowers can repay the loan
within 24 months.

Microenterprise loan

People who are looking to start up a small business or improve the

existing micro enterprise can avail a loan for up to 20 lakhs under this
scheme. The loan can be availed individually or together as a group.
The repayment tenure is up to 36 months at the interest rate of 24%.

Dairy Development Loan

Dairy farming is one of the well-known occupations in the rural villages.

Individuals who are involved in dairy farming or want to set up a farm
can avail a dairy development loan for up to INR 1,50,000 at the
interest rate of 23%. The loan can be repaid in 36 months. The
preferred clients are who have prior experience in the industry and
have at least 2 cows.

Home Improvement Loan

The mission of this product to fund the poor people who want to repair
or extend their own house. Under this scheme, the customers can get
funding starting from INR 20,000 to up to INR 1.5 Lakhs. The loan can
be used to build a low-cost house for a comfortable living. The
repayment can be done up to 48 installments.

Loans for family Members of Leprosy Affected Patients

People who are affected with leprosy are often neglected in society.
What they deserve is a good opportunity to support their own life and
family. The family members of leprosy affected patients can get a loan
up to INR 1 Lakh to start a small enterprise to become self-supportive.
The loan can be repaid in 36 installments.

Loans for widows, Unmarried Women, Single Mothers

Women who have no support of their better-half get an opportunity to

avail a loan to become self-supportive under this scheme. The purpose
of the loan is to generate income through an occupation. The maximum
loan amount is up to INR 1 Lakh which can be repaid in 36 months.

Annapurna Student Education Loan

Students who have completed their higher secondary education can

avail a loan to gain financial support for further education. Maximum of
85% of the fee is provided as loan (subject to maximum of INR 1 Lakh).
The loan can be availed at an interest rate of 18% and repaid in 36
months.

Loans for Persons with Disability

Under this scheme, physically challenged individuals can get a loan for
up to INR 1 Lakh which can be repaid in 36 months. The purpose of the
loan is to generate a regular income with the loan amount.

Loans for Persons Belonging to the Community of Eunuch/Third

Gender

It is a pity that third gender are often neglected a job opportunity in the
society. Hence it is our duty to create a friendly working atmosphere for
survival. Annapurna Microfinance provides exclusive loan for third
gender community for up to INR 1 Lakh which can be used to generate
income regularly through a small enterprise.
Growth Portfolio & Client Base

The year-on-year consistency growth of Annapurna highlights the

company competency and incomparable management. Annapurna has
always tried to diversify its portfolio concentration across various
districts and states.

GLP(in
5000 Cr)
4000
3000
2000 GLP(in
Cr)
1000
0
FY15FY16FY17FY18FY19FY20

Active clients
2000

1500

1000 Active clients

500

0
FY15FY16FY17FY18FY19FY20
Disbursement and branches

Debt funding and equity support from the investors help Annapurna to
create more loan and advances enabling them to maximize the
stakeholders value. In last 10 years, the continuous endeavor of tapping
to different geographical location has increased the number of
branches count to 718 and states to 18.

Disbursment
5000

4000

3000
Disbursment
2000
1000

0
FY15FY16FY17FY18FY19FY20

Branches
800
700
600
500
400
Branches
300
200
100
0
FY15FY16FY17FY18FY19FY20
Client management

Annapurna values its each individual client, is thankful to all the clients
for trusting them, and help them grow over the years. We have always
been in constant efforts to identify the needs of their clients and deliver
products to them at their doorstep in a hassle free manner.

Loan Officer
4000

3000

2000
Loan Officer
1000

0
FY16FY17FY18FY19FY20

Case Load
580
560
540
520
500
Case Load
480
460
440
420
FY16FY17FY18FY19FY20
Annapurna performance in terms of profitability

Annapurna’s income in FY20 stands at INR 790 crore and its expenses
and its expenses stands at INR 680 crore. Keeping in view the current
pandemic situation because of covid-19, Annapurna had made extra
provisioning of INR 36 crore.

800

700

600

500

400
Income (In cr)
Expenses (In
300 cr)

200

100

FY16 FY17 FY18 FY19 FY20 FY21

Revenue Vs. profit after tax

In FY 20, we booked a PAT of INR 83 crore and our revenue stood at

INR 780 crore. The additional provision of INR 36 crore due to Covid –
19 had squeezed the PAT by on additional amount.

Revenue (In Cr)

900
800
700
600
500
400 Revenue (In Cr)
300
200
100
0
FY15 FY16 FY17 FY18 FY19 FY20

PAT (In
90 Cr)
80
70
60
50
40 PAT (In Cr)
30
20
10
0
FY15FY16FY17FY18FY19FY20
Yield and cost of fund

To maximize the stakeholder benefits, the company always puts its

constant effort to reduce the cost. The company has successfully been
able to reduce the cost of funds by 44% basis points from FY 18. This
reduction in the cost of funds has helped Annapurna reduce its interest
rate charged to the clients.

Yield
25
20
15
10 Yield
5
0
FY18FY19FY20

Cost of fund
12.2

12.1

12

11.9
Cost of fund
11.8

11.7

11.6

11.5
Category 1 Category 2 Category 3
Industry vs. Annapurna Growth Comparison

This data shows the growth of Annapurna in comparison to the industry

growth. Annapurna has been able to surpass the growth levels in of
branches and portfolio. This is achieved by the robust business
practices and the core management team has always helped
Annapurna to grow at a higher pace.

35%

30%

25%

20%

15%
Industry Growth
Annapurna Grwoth

10%

5%

0%

Branches Client Amount GLP

Disbursed
The micro, small and medium Enterprise

MSME sector has emerged as highly vibrant and dynamic sector of the
Indian economy over the last five decades. By fostering
entrepreneurship and generating largest employment opportunities, it
contributes significantly in the economic and social development of the
country. Annapurna has reached to more than 14,000 individual
entrepreneurs across 11 states under MSME loan vertical who has
enhanced their business capacity as well as margin by availing business
loan from Annapurna.

MSME Finance

States Net POS in Cr.

Assam 51.26

Chhattisgarh 42.09

Jharkhand 14.45

Madhya Pradesh 3.49

Maharashtra 101.77

Odisha 5.82
Rajasthan 50.82

West Bengal 28.05

Tamil Nadu 9.62

Tripura 32.71

Total 353.02

A loan product for micro and small entrepreneurs was started in year
2016 as a pilot project with 5 MSME branches in Odisha. Post successful
completion of the pilot, the project was implemented in 6 states with
25 branches in January, 2018. Gradually the project has emerged as a
larger vertical of Annapurna and now the project is operating in 107
exclusive MSME branches with the team size of more than one
thousand in numbers.
Human resource

The true focus of human resource has always been towards recruiting,
training, motivating, and retaining the best. The department aspires to
help Annapurna achieve its strategic mission, while ensuring employees
are engaged and motivated to help the organization succeed.

HR has targeted its operational initiatives to align to the strategic plan

by initially identifying ways to leverage and develop technology as
means to minimize costs and improve internal efficiencies. This year,
HR has digitalized its resources and staff to become active & consulting
partner for the organizational development.

Like previous years, the FY 2019-20 has witnessed a tremendous

growth in terms of manpower which accounts to a Y-O-Y 17 % increase
of resources.

Talent Acquisition

Hiring a candidate having appropriate talent & skill set for any vacancy
has always been a challenging task. The HR team in Annapurna always
strives to acquire and retain the most deserving human resource who
can contribute towards the growth of the organization.
In FY’19-20, the team has been more focused to enrich the HR
technologically, sourcing in new technologies to make our productive
and efficient.

 4953 employees during FY 2018-2019

 5947 employees during FY 2019-2020

Training and development

Annapurna as an organization looks at training and development as an

integral part of human resource development activity. Over a period of
time, our organization has increased its focus on the same & has
mandated training hours per year for employees. This is being done to
keep up the recent development in the sector as well as develop
necessary on-the-job skills.

Gone are the days of traditional approach, where training was viewed
as a costly affair. The training system in Annapurna has built a smart
workforce, yielding the best of retention. In the FY, A total of 326
training programs were organized in which 4900 employees were
trained. For MSME vertical, a whooping number of 10,106 employees
were trained.
INDUCTION TRAINING

 MFI – No of training 94
Employees trained 1349
 MSME – No of training 38
Employees trained 720

REFRESER & OTHER TRAINING

 MFI – No of trainings 241

Employees trained 3024
 MSME – No of trainings 67
Employees trained 499

Young leadership development program & CARVAN

YLDP is an annual program of Annapurna, designed for our future

leaders having high potential & have demonstrated consistency in their
commitment towards organizational growth. It was conducted for all
energetic and promising leaders who have paved the path as leading
skills of young leaders to excel in their career growth.

A two – day workshop, Carvan, was organized for management

associated and trainees to retrospect on their journey at AFPL. Along
with sharing experiences and learning’s, the group was also addressed
by the CMD, about their future prospects in the organization.

Annual leadership & change management program

In the month of January, an annual leadership & change management

program was organized for zonal managers and state heads. Experts
from training industry conducted the program highlighting on various
aspects of mental health like compassion fatigue, emotional
intelligence etc.

Promoting gender sensitivity

The department believes in creating robust gender sensitization

training programs to promote an egalitarian organizational culture.
Such trainings encourage positive and gender-intelligent organizational
culture, growth and progress of women leaders, and also lower the
levels of gender conflict and harassment. Additional benefits include
the ability to employ more female candidates, leading to a balanced
male-female ratio, and higher morale and retention.

The following initiatives were taken by Annapurna in this FY:

 Informing and guiding employees an appropriate ways of

addressing and interacting with female colleagues & customers.
  Facilitating discussions between male and female employees, with
the goal of highlight positive as well as discriminatory workplace
practices and policies.
 Empowering women by facilitating access to mentorship and
professional guidance on harassment and workplace
discrimination.
 Inauguration of all- female operational branch in some of the
major cities.

Employee engagement

Engaging employees is critical for retaining valuable talent and is an

important piece of the employee satisfaction puzzle. It has always been
observed that though people work for financial security, yet they like to
go on extra mile to get recognized, praised & rewarded. In Annapurna,
outstanding performance has always been acknowledged and
appreciated.

Motivational initiatives like enrolment in Pradhan Mantri Rojgar

Prostsahan Yojana (PMRPY) have generated INR 1,99,56,501 to
incentive the employers. A group health insurance scheme was also
introduced and has been availed by 77 employees, along with 41
registrations under the employee’s state insurance corporation.
Provision of emergency loan for our employees without any ROI, is also
in the pipeline.

SPM & CSR

Social performance management

In order to uphold sustainable growth and impact, the organization has

a dedicated department for social performance. Annapurna
demonstrates its commitment and respect towards all stakeholders
that include employees, clients, and their families by functioning
ethically and transparently. Its mission and vision are aligned towards
social and financial development of communities, while being
environmentally conscious in its operational activities.

Awards and rating

 Client protection certified by the smart campaign

 A+ social rating by MicroFinanza rating
 MFRI rating by CRISIL
 Platinum rating by the global impact investing rating system
(GIIRS)
 Organizational member of special performance task force (SPTF)
Customer outcome

Client mix

Annapurna’s social outreach strategy focuses on the target group

criteria. Monitoring the client mix is to ensure that the operation
doesn’t deviate from the social characteristics of the target group.

Sales

RURAL
URBAN

Sales

OBC SC ST
GENERAL
Progress out of poverty

Large segments of Annapurna’s customers belong to a diverse rural

demographic. The caste composition of the customers include 16%
belonging to the general category, and 84% belong to scheduled caste
and tribe and other backward classes.

The poverty study used data from more than 100.000 customers, which
is a representative’s sample of overall customer base of Annapurna. On
poverty trend, almost one fourth of Annapurna customers are from
below daily income level of 4.00 US dollar. A positive visible trend in PPI
scoring was observed in clients spending more time with AFPL, as
compared to clients with a lower cycle.

160

140

120

100 Series 6
Series 5
80
Series 4
60 Series 3

40 Series 2
Series 1
20

0
Below 3.1 $ Below 3.8$Below 4$ 10.0% 15.0%20.0%
National Nationalnational
rangarajan rangaranjan rangaranjan
Financial and operational position

Particulars FY20 FY19 (YOY)%

Interest income on portfolio 632.03 411.66 53.53%

loans

Other income 147.59 106.30 38.84%

total income 779.62 517.96 50.52%

Interest expense in borrowing 356.34 216.99 64.22%

Provision expense 52.70 15.74 234.82%

Total expense 627.01 407.78 53.76%

PAT 82.89 62.50 32.62%

Total debt outstanding 3907.34 2746.70 42.26%

Total equity 765.55 618.48 23.78%

GLP 4008.81 2002.25 33.53%

Manage portfolio 503.97 291.39 72.95%

During the financial year, the revenue from operation increased by Rs.
265.3 Crores and related to Rs. 775.50 Crores as compared to
previous financial year and registered a net profit of Rs. 82.89 Crores.
Total equity comprises of equity in nature of Rs. 3 Crore and other
equity of Rs. 693.85 Crore.

Operational position

Particular FY19 FY20 (YOY)%

No of borrowers 1481287 176532 19.17

No of districts 232 292 25.86

No of branches 570 718 25.97

Disbursement (on-book) (Rs 3136.21 3969.12 26.56

Cr)

Gross loan portfolio (Rs Cr) 3002.25 4029.88 34.23

Off Book 493.39 563.04 14.12

Total Employees 4953 5947 20.07

Field officers 2784 3550 27.51

GLP/Active borrower 20268 22829 12.64

Funding position

In terms of fundraising, the company has mobilized funds amounting to

Rs. 3,330.05 crore in financial year 2019-20 out of which Rs. 1982.00
crore was raised through term loan, Rs 260.11 crore in the form of ECB,
Rs. 156.52 crore in the form of secularization, Rs. 670.32 in the form of
district assignment and Rs. 261.10 crore in the form of NCDs.

The company has added DBS bank, Asian development bank, equitas
small finance bank, Sumitomo Mitsui Banking Corporation (SMBC),
Finnfund, Credit Africole, Federal Bank, United Bank of Maharashtra to
its list of funders in the FY 2019-20.

Dividend

To maintain a healthy net worth & capital adequacy ratio, the board
proposed to retain profits into the business itself and does not offer to
declare a dividend on the equity shares of the company.

Further, directors recommend a preference dividend at the rate of

0.001% per annum on compulsory convertible preference shares of
AATO (aids awareness trust of Orissa) for the financial year ended as on
31st March.
Reserves

As per the statutory requirement under section 45-IC of the reserve

bank of India act, 1934 an amount not less than 20% of the profit after
tax to be transferred to statutory reserve. The company has transferred
Rs. 18.74 Crores to statutory Reserve.

Share Capital (As on March 31, 2020)

 The authorized share capital of the company was Rs. 86.00

Crores consisting of 8, 30,00,000 equity shares of Rs. 10 each
and 30,00,000 preference shares of Rs. 10 each.
 The issued, subscribed and paid-up capital was Rs. 71.69 Crores
consisting of 6,86,99,648 equity shares of Rs. 10 each and
30,00,000 preference shares of Rs.10 Each, both as fully paid-
up.
 The company has only one class of equity shares, i.e. equity
shares of the face value of Rs. 10 each/- each.
 The shareholding pattern of the company has not been altered
in the financial year 2019-20.
CSR activities during the year 2019-20

Annapurna Finance is working diligently towards its social objective. In

this process of making the social goals a reality, the organization not
only has adopted customer centric approach in its operation but also
the organization is creating a socially responsible image through the
social activities taken up for the benefit of bigger stakeholders which is
community.

Average NET profit of the company for last three financial years

INR 43, 80, 44,081/-

Prescribed CSR Expenditure (2% of the amount as in item 3 above)

INR 87, 60,882/-

Details of CSR spent during the financial year.

A) Total amount to be spent for the financial year: INR 87,60,882/-

B) Details of amount spent during the financial year
S.no. CSR project Sector of Areas of Amount Actual
project project outlay(INR) amt. spent

1 Donation to Contribution Khorda, 25,00,000 35,00,000

CM’s Disaster to govt. odisha
fund relief fund

2 Amma Ghara Child welfare Khorda, 44,40,000 44,40,000

and odisha
development
3 Tree plantation Environment Bihar Nil 41,660
on Gandhi
Jayanti
4 Installation of Child welfare Khorda, 10,00,000 9,57,023
play equipment and odisha
at school development

5 Mobile Health care Khorda, 34,20,285 19,18,717

medical unit odisha
Customer satisfaction & feedback

Through the customer satisfaction survey, Annapurna tries to

understand the contentment level of the clients about the products and
services being offered to them. This helps in maintaining an interactive
approach in addressing the needs of the clients. The following info
graphic draws a comparison of data of the current FY from previous
two FYs.

1. Satisfaction with loan size

 78% of the customers had expressed satisfaction compared to
65% in previous year.
 Dissatisfied customer proportion has decreased to 19% from
35% in previous year.
2. Satisfaction with recovery method
 Reached 100% compared to 95% previous year.
3. Satisfaction with installment amount
 Remained same at 99%
4. Satisfaction with interest rate
 Decreased to 95% from 97% previous year
5. Satisfaction with staff behavior
 Reached 100% from 97% previous year
6. Perception of turnaround time
 Satisfied customer proportion decreased to 88% from
previous year mark 94%.

Fund Raise performance

The company always keeps its fund source diversified for meeting
the unforeseen situations and making the liquidity available. The
company has increased its fund raised by 28% in comparison to
the previous year. In FY19 Q1 and Q4, the company has raised INR
155.2 crore from Asian development bank respectively in terms
of equity investment.
This year the company has drawn 1982 Cr in terms of term loans
from different private banks, public banks and NBFC space. It has
also drawn INR 261 Cr in terms of NCD, INR 260 Crore in terms of
ECB & INR 826.84 crore in terms of securitization and DA
transaction.
1400

1200

1000

800
Fund Raised FY19
600 Fund raise FY20

400

200

0
Q1 Q2 Q3 Q4

Fund raised FY20 Fund raised FY19

Term loan Term loan

Securitisatio
Securitisatio n/DA
n/DA
ECB
ECB

NCD
NCD

Eqcapital
LIMITATIONS
 Time constraint

Shortage of time was a very big constraint due to which some

area of micro finance has been included in the study.

 Resource constraint

Availability of data was a constraint due to which only

secondary data is considered, which is available, and also there
are some MFIs whose data was not available.

 Secondary data

All the information available was from secondary sources and

data was very vast to analyze properly & accurately.

 Wide area to study

Study being conducted was very wide & analysis require

expertise knowledge & skills which was lacking

 No direct source of information available

The information is collected from indirect sources so in some

information data is not available

 Future analysis

The whole study was based on historical data which was not
much useful in analysis of present and prediction of time
RECOMMENDATION AND CONCLUSION
 RECOMMENDATION

1. Proper regulation – the regulation was not a major concern when

the microfinance was in its nascent stage and individual
institutions were free to bring in innovative operational models.
However, as the sector completes almost two decades of age with
a high growth trajectory, an enabling regulatory environment that
protects interest of stakeholders as well as promotes growth, is
needed.
2. Field supervision – in addition to proper regulation of the
microfinance sector, field visits can be adopted as medium for
monitoring the conditions on ground staff of various MFIs and
their recovery practices. This will also encourage MFIs to abide by
proper code of conduct and work more efficiently. However, the
problem of feasibility and cost involved in physical monitoring of
this vast sector remains an issue in this regard.
3. Encourage rural penetration – it has been seen that in lieu of
reducing the initial cost,, MFIs are opening their branches in
places which already have a few MFIs operating. Encouraging
MFIs for opening new branches in areas of low microfinance
penetration by providing financial assistance will increase the
 outreach of the microfinance in the state and check multiple
lending. This will also increase rural penetration of microfinance
in the state.
4. Complete range of products – MFIs should provide complete
range of products including credit, savings, remittance, financial
advice and also non-financial services like training and support. As
MFIs are acting as substitute to banks in areas where people don’t
have access to banks, providing a complete range of products will
enable the poor to avail all services.
5. Transparency of interest rates – as it has been observed that,
MFIs are employing different patterns of charging interest rates
and a few are also charging additional charges and interest free
deposits ( a part of the loan amount is kept as deposit on which
no interest is paid). All this make the pricing very confusing and
hence the borrower feels incompetent in terms of bargaining
power. So a common practice for charging interest should be
followed by all MFIs so that it makes the sector more competitive
and the beneficiary gets the freedom to compare different
financial products before buying.
6. Technology sources to reduce operating cost – MFIs should use
new technologies and IT tools & applications to reduce their
operating costs. Though most NBFCs are adopting such cost
cutting measures, which is clearly evident from the low cost per
unit money lent (9%-10%) of such institutions. NGOs and section
25 companies are having a very high value of cost per unit money
lent i.e. 15-35 percent and hence such institutions should be
encouraged to adopt cost-cutting measures to reduce their
operating costs. Also initiatives like development of common MIS
and other software for all MFIs can be taken to make the
operation more transparent and efficient.

72
 CONCLUSION

The importance of microfinance in the developing countries like India

cannot be undermined it play a vital role for socio-economic upliftment
of poor and low income peoples. Since 1990s, poverty reduction has
taken priority at both national and international development levels.
Within this framework, various initiatives have been taken by
government. Microfinance has caught the attention as an effective tool
for poverty reduction and socio – economic development.

Hence Microfinance can play a vital role for improving the standard of
living of poor. The economic development of any country is severely
influenced by the availability of financial services. Microfinance is the
form of a broad range of financial services such as deposits, loans
payment services, money transfers, insurance, savings, micro-credit etc.
to the poor and low income individuals. A well-developed financial
system promotes investment opportunities in an economy. Therefore it
is necessary that govt. of India have to focus on extending financial
services to both rural and urban to ensure sustainable and inclusive
growth. The functioning of microfinance institutions in India is playing
an important role in rural areas since last two decades. The central
government and RBI should take necessary measurements to sustain

73
the growth of the microfinance sector in India. The concern state
governments also take necessary measurements to create awareness
among people to use the services of microfinance institutions to
strengthen their economic status and improve their livelihood.
BIBLIOGRAPHY
1. https://annapurnafinance.in
2. https://bankbazaar.com
3. https://finnfund.fi
4. https://creditmantri.com
5. https://in.linkdin.com
6. https://pitchbook.com
7. https://researchgate.net
8. Aaglave Pradip research methodology and technique, vidya
prakashan, Nagpur (Journal)
9. Baas, Stephen and john rouse, “poverty Alleviation: The role of
Rural Institutions and participation”, National bank news review,
Vol. 13(4), pp, 22-32. (Journal)
10. Benerjee N.K. : “Indian Women in a Changing Industrial Scenario”,
Sage publication, New Delhi.(Journal)
APPENDICES
 Questionnaire for microfinance Institutions

(A) PERSONAL

DETAILS NAME:

GENDER:

 MALE
 FEMALE

AGE:

 Below 20 years
 21-40 years
 41-50 years
 Above 51 years

What is your job?

 Dress maker
 Carpenter
 Crafter
 Factory owner
 Other

78
INCOME LEVEL

 Below Rs. 10,000

 Rs.10,000-Rs.20,000
 Rs.20,000-Rs.30,000
 Above Rs. 30,000

Do you know how to read?

 Yes
 No

(B) RESEARCH RELATED DATA

Please answer the following questions by putting a tick on the

appropriate option(s)

Q. How many people have income in the household?

1. 1
2. 2
3. 3
4. More than 3

Q. what was your last job?

1. Maid

79
 2. Govt. worker
3. Trader
4. Farmer
5. Other

Q. is this your first loan?

1. Yes
2. No

Q. what is the value of loan taken?

Q why did you take this loan?

1. Expanding an ongoing business

2. Financial needs
3. Starting a new business
4. Others

Q. for how long are you taking loans from this institutions?

1. Less than 1 year

2. 1-3 years
3. 3-5 years
4. More than 5 years
Q. Have you faced any problem in repaying the installments?

1. Yes
2. No

Q. Are there any condition for getting the loan?

1. Yes
2. No

Q. have you been asked to attend a training program?

1. Yes
2. No

Q. what kind of training program was beneficial for you?

1. Lectures on marketing
2. Lectures on usage of the loans
3. Lectures on investment
4. Others

Q. what is the type of your business?

1. Trade
2. Industry
3. Services
4. Agriculture
 5. Others

(C) THE IMPACT ON ECONOMY

Q. where do you market your products?

1. shop
2. mediators
3. streets
4. enterprise
5. others

Q. does your business make profits?

1. No profits
2. Lose
3. Make profits

Q. what do you do with business profits?

1. Use in daily expense

2. Save it
3. Reinvest in business
4. Other
Q. how many people are working with you?

1. 1-3
2. 3-5
3. 5- more
4. 0

Q. How many hours do you spend daily?

1. Less than 5
hours 2. 5
3. 6
4. More than 7 hours

(D) THE IMPACT ON HOUSEHOLD

Q. who is the head of household?

1. Father
2. Mother
3. Wife
4. Husband
5. Other
Q. what is the source of income for the household?

1. People in the household working in business

2. People in the household working outside the business
3. Interests
4. Rents
5. Others

Q. On average monthly income of the household?

Q. By how much do you spend for family budget?

(E) Satisfaction with the program

Q. Are you satisfied with the program?

1. Yes
2. No
3. If not mention
Q. Are you satisfied with repayment procedures?
1. Yes
2. No
3. If not mention
Q. Are you satisfied with loan conditions?
1. Yes
2. No
3. If not mention
Q. what are you going to do with the loan?
1. Expand the business
2. Start a new business
3. Meeting family needs
4. Other

Q. Do you like to say anything else?

1. Yes
2. No

What do you like to say?