SUBHEKHYA FINANCE CO.

LIMITED

Subhekhya finance co.ltd started in 2005 as a microfinance finance institution in Bhubaneswar ORISSA. Microfinance refers to small scale financial serv ices for both credits and deposits- that are provided to people who farm or fish or herd; operate small or micro enterprise where goods are produced, recycled, repaired, or traded; provide services; work for wages or commissions; gain income from renting out small amounts of land, vehicles, draft animals, or machinery and tools; and to other individuals and local groups in developing countries in both rural and urban areas.

The company started with 3cr investment with the help of NABARD, Union Bank, SIDBI & other bank. NABARD refinances the financial institutions engaged in micro finance, to the extent of actual disbursement.NABARD & SIDBI are the bulk financers who cleverly leverage resources obtained from a variety of sources(donors, government, market) for rural finance including micro finance. It expands its business through out the country. It was started by 5 members headed by Sanjeev Kumar with his 4 colleges with good education background. It has around 500 employees all around India & now in recent times the requirement in this company is decreasing year by year. It has its branches in different states of the country like Bihar, Jharkhand, Chhattisgarh, Assam, Andhra Pradesh & West Bengal. Further, the company is planning to expand its business in some other states also but due to some difficulties and circumstances they not been able to do so. This concept of MFI came into the mind of these 5 members is when they saw that

many peoples in rural areas especially the womens who faced problems when they visited to the banks for the purpose of getting loans. Sanjeev Kumar in his early job carrier was clerk at corporate bank. He worked there for 4 years and he founded that the rural people were not getting proper support in terms of loans and advances. He tried his best to help the rural people but due to bank policies, rules and norms he was bounded & couldnt do anything. The basic purpose of this company is to land money to the rural people and small scale industry in order to increase their economic condition and growth. Recently, in August, 2008 a incident occurred in Hyderabad where two women were harassed & killed by the Micro Finance employees because they were not being able to repay the loan amount that that they took,. this was because the rate of interest of the loan was very high which was around 12%-17%.so,most of the people found difficulties in this process. January, 2004 as per the (CIA world fact book) 25% of the population are below the national poverty line,and even among those above poverty line, very few can afford to pay these kind of interest rates. They may be able to only at a great cost and upto a limited time.one reason why high interest rate prevail is because timely availability of credit is more important than cost of credit per se.(A popular notion is that the poor constitute a huge market for FMCG products. While surveying the other observed that it is the upper crust of poor, the beneficiaries of microfinance and the bearer of these interest rates,who are the real consumers of FMCG goods). This, resulted where the chief minister of Andhra Pradesh announced not to give financial resources to the MFI. The micro-finance scene in India is dominated by Self Help Groups (SH Gs) - Banks linkage program for over a decade now . As the formal banking system already has a vast branch network in rural areas, it was perhaps wise to find

ways and means to improve the access of rural poor to the existing banking network. This was tried by routing financial. Under the microfinance programme, loans are extended to the Self Help Groups (SHG) who pools a part of their income into a common fund from which they can borrow. The members of the group decide on the minimum amount of deposit which ranges from Rs20 to Rs 100 per month depending upon the size of the group. The group funds are deposited with a Micro Finance Institution (MFI) against which they usually lend (The deposits are usually placed with a bank by the MFI) at a credit deposit ratio of 4:1 but the ratio improves with account performance record i.e. prompt repayment of loans. The group funds is the way micro savings are enforced ,though it may seem like a collateral The loan ticket sizes are usually Rs 2000/- to Rs 15,000/-(Source: Field Survey by).

A similar problem which also occurred later in 2009, where the MFI employees created false documents on behalf of the name of the rural womens. Some of the employees took money from the peoples in the form of investment into their company and assuring them to give a good rate of return with a high interest rate. Here the employees took the money from the peoples and escaped and didnt return back. This was a main security problem where the money of the rural peoples are not safe and where they did not have enough knowledge about the investments and did not knew to make proper decisions on investments as to where they want to invest. So there was a major concern over it as the MFI were not being able to run their business at a qualitative level. In the name of empowering the poor, this form of organized exploitation has given many reasons for businessmen to make money at the cost of the poor, who are often seen as fortune at the bottom of the pyramid. Previously, money lenders lent money at higher rates of interest because it was the individual who was lending money, but now, it

is an institution comprising of a group of individuals who are lending money and in turn, pocketing extra money from the poor in the name of interest rate. For example: In Andhra Pradesh, Reserve Bank of India (RBI) wanted to derecognize many MFIs that were indulged in compelling women from Khammam, Warangal, Mahbubnagar and several coastal Andhra districts to enroll themselves to be beneficiaries at MFIs. Caught in a debt trap, many borrowers committed suicide. In the name of loan recovery, human rights were grossly violated.When the policy makers say that MFIs are a medium of financial inclusion of the poor, one must read this example published in the Economic Times to know whether MFIs are including or isolating the poor from the society. A woman who takes Rs 10,000 loan from a microfinance institution has to pay Rs 225 every week. If she is unable to make this payment or has another emergency in the house, she will take a loan. The existing lender will not give you a fresh loan till the old one is at least 35 weeks old, so she will borrow from another MFI. Thats another Rs 225 every week. Weighed down, she will take a third loan in a matter of months. Now she has to pay Rs 675 every week! And so, a fourth loan. Such women are forever wondering where their next installment will come from. Some are working as far labour to repay loans. If they are unable to fully repay, they sell cattle, land or jewellery. While we analyze how MFIs are more or less like slow poison to these beneficiaries, what one has to look at is that the RBI allows MFIs to reach those places where banks cannot make their way. But, under certain norms, which are often changeable or overlooked at the cost of poor peoples lives, MFIs have set up shops. So, if financial inclusion of the poor is the main agenda, then increasing the flow of funds to the informal sector would be an advantage because the profits will

reach the low income group borrowers. Access to the flow of funds in the formal sector would facilitate competition within informal sector and increase the efficiency. Secondly, participatory budgeting model followed in Venezuela exemplifies how people participate in a communitys activities and plan the budget according to the requirements of the members in the community who are represented by elected leaders. Money lending is a part of this structured process in which a member of the community is appointed to check the flow of capital. This brings in transparency and gives power to the people to make decisions based on their needs and necessities and also to generate income. Finally, it all boils down to a question which tests the credibility of these suggested solutions. Corruption, lack of proper implementation and misuse of funds have dogged everything in our society till date, so why wouldnt these suggestions be victims of such cruelty? Transparency is the only way out.If we think that only the traditional money lenders are guilty of such heinous crime, so are the micro finance institutions. In June, the governments of Andhra Pradesh and Kerala asked MFIs to comply with local rules that regulate the money lending activity. A handful of MFIs are contesting this in court. And last week, Andhra Pradesh passed an ordinance to regulate MFIs, one which stops short of capping interest rates.

QUESTIONS 1. What are the safety measures that need to be taken into consideration to have a better look over the financial resources in MFIs? 2. What suggestions should be given in order to improve their quality level?

GROUP PERCEPTION

P.SUNIL KUMAR JEETENDRA TRIPATHY RAJAT KUMAR BISWAL MUKESH KUMAR CHYAUPATNAIK RUPESH JHA JYOTI RANJAN SAHU