Bank of Madura (BoM) began in 1943. Mr. K. M. Thiagarajan was the founder. He started the rural banking operations in 1995. The target was women, as they believe that involvement of women is instrumental in economic development of society as a whole. Also, Women are more responsible with money as their mobility is reduced due to family responsibilities. By, 2000 they had more than 1500 Self Help Groups. In 2000, BoM merged with ICICI Bank as they believed that merging with a nationalized bank will help them in higher growth possibilities.
In 2002, the partnership ended as ICICI wasn’t interested in the development of women and SHG’s, which led to the formation of Microcredit Foundation of India. By, 2003 number of groups had risen to 10000. They applied for NBFC license in 2005 and were declared an NBFC by RBI in early 2006. There are 9 regional offices – Madurai I, Madurai II, Trichy, Karaikudi, Sivagangi, Selam, Chidambaram, Tindyvanam and Chennai. The headquarters are also in Chennai. There are a total of 57 cluster managers in a total 108 cluster centers controlled by these 9 regional offices.
Each cluster center is a cash point. Under Chidambaram office alone, there are about 5000 SHG’s. Under each cluster centre, There are about 650- 700. Regional HR takes care of 6 cluster managers. There are about 16- 20 members per SHG. Rs. 7500 is given to each person in the beginning. Maximum amount given to each individual is Rs. 30000. Pre 2000, bank officials formed the groups. No short term consumption loans were given. A group’s activities and the tendency to save were reviewed for a year and only after that loans starting with Rs. 0000 were given.
The recovery rate was 100%, but due to completion from other MFI’s who were giving loans at a much shorter notice, Madura was also forced to change their ways. Presently, their recovery rate is over 90% and the interest rate that they charge is 19. 8% which among the lowest in the industry. The core asset in their own words is their genuine care for economic development of the society. Hierarchy in Madura Microfinance Limited Operations of Madura Microfinance Unsecured loan disbursement is the main activity.
There are four basic loans PLR (Pre Linkage Loan), ATL (Activity Term Loan) – I, II and III. After successfully paying back these loans, housing loans are also given. Housing loans are of two kinds:- 1. House renovation, maximum Rs. 50000 2. Construction, maximum Rs. 100000 Each cluster centre has one mentor. Mentor is assigned the task of identifying ways that people can pay. Mentor forms the group and looks for trustworthiness and repayment capacity. For each individual, he checks the identity and address proofs.
After screening of group by the mentor, their case goes to the Cluster centre, wherein they review the case and approve/ disapprove the loan. Cluster manager himself disburses the money. Each mentor has to form minimum of 240 groups, which translates to a business of 7 crores. Total time for a group to get the money is 30 days. Repayment schedule is given at the time of loan disbursement date. Group members pay Equal Monthly Installments by rotation. Madura Microfinance has created Member Welfare Association.
Their members are involved in group meetings. Each group has 2 roup meetings every month. First meeting is about collections and accounts. Second meeting focuses on awareness and information material provided by the MWA. The members of MWA are trained in Madurai for this purpose and is paid Rs. 100 per meeting. Each member can volunteer for upto 40 groups. The performance of the Mentor and the MWA is also regularly monitored. The groups are sensitized to understand the importance of MWA involvement. Cluster Manager also pays surprise visits to review the progress of the groups. Savings bank account is opened in the name of the group in commercial banks.
When the group has enough savings in the account, then it is transferred in the MFI account and then the group can qualify for higher amount loans. Most people start ventures like tea shop, petty shop, idli shop, etc. They organize trade shows from time to time where these ladies can display their products. They also distribute pamphlets to all SHG members wherein name, kind of business; phone no. etc is listed of the members. According to the RBI, an individual can borrow from upto 4 NBFC’s. NABARD has given jurisdiction that loans upto thrice the amount of term deposit can be given.
The changes in the operations are that they are trying to move towards a centralized database to reduce the defaulters. No legal clause can force repayment, so only peer pressure works. An incentive of Re. 1 per member is given to the MWA if repayment of the EMI is done within the month. Meeting with a SHG in Bhuvanagiri We attended a SHG meeting in Bhuvanagiri. This group was one of the best performing groups in the region. There were about 7 members who were present. These women weave silk saris as a profession. Each sari is sold for Rs. 2000.
They started with PLR and now slowly they have moved to an individual loan of Rs. 35000. Every month, they purchase raw materials worth Rs. 10000. Each sari takes about 4 days to be completed, so the average they make 6 saris a month which gives them a profit of Rs. 5000 per member. There is a pass book for a group and for each member as well. Now that they have been sanctioned a loan of higher amount, they can but more weaving machines and get other family members also involved in the business. Women from the SHG weaving a sari Passbook of the group Repayment schedule of the SHG