Microfinance plus: promoting best practice

Ging Ledesma on 16‑09‑2011

Today we concluded the field work relating to the assessment of Janalaksmi Financial Services Private Ltd (JFSPL) and its compliance with the Client Protection Principles presenting our preliminary report to the Executive Team. In December 2010, Oikocredit had approved INR 75 million (€ 1,127,560) for the expansion of the portfolio of this urban-focused MFI.

Over the past three days, Madhavi Potay, Jesu Thomas, Martin Emmanuel, Hema Bansal from SMART Campaign and I formed two groups. Together, we visited four branches (SR Nagar, KB Sandra, Penniya, HSR Layout) and observed group training processes, sat in on group confirmation and verification meetings. We interviewed clients to find out whether or not they understood loan terms and conditions, knew about grievance procedures and were aware of other products and services offered by the organization. We interviewed Janalaksmi’s Customer Relations Executives – Sales and Collections, Area Heads, Branch Managers and the entire executive team looking into all areas of operations – from strategic planning marketing and branch expansion, recruitment and training, product development, internal audit and IT. We went through forms, manuals, policy circulars, brochures and reports to management and board.

Following the SMART assessment framework, we reviewed operations at all levels in relation to avoidance of over-indebtedness, transparency on products and services, ethical staff behavior and avoidance of coercive collection practices, grievance procedures and systems to ensure privacy of client data. We were struck by the organization’s high level of customer orientation - products and services have been designed with the needs and aspirations of clients in mind as well as business potential.

“The highest aspiration of many poor people is to be able to send their child to school. That is why we now offer educational loans,” says CEO Mr. Srinivasan.

Janalaksmi also promotes savings being a correspondent bank. Micro Pensions are offered on a voluntary basis to all clients and, at the higher end of the market, JFPSL offers enterprise loans and housing loans. Technology is a focus of the organization and it has a strong Management Information System (MIS) platform for growth. Smart cards and related technology enable efficient and timely monitoring of operations serving over 200,000 clients spread out over 66 branches in nine states in south, north, west and central India. The organization has a solid internal audit system and the audit team addresses issues of client protection in the course of audit inspections.

In the course of our review, we identified a number of best practices within the organization relating to product development and training in the management and collection of difficult accounts. JFSPL’s marketing and branch expansion strategy takes market saturation, existing competition and demographic information provided by secondary and primary research into careful consideration; it can be a model approach for other MFIs. Manaveeya/Oikocredit will be discussing with JFSPL ways of promoting these best practices with other partner MFIs and with the global microfinance community.

The assessment team also presented a number of areas for improvement and was heartened by the openness with which these suggestions were received by the executive team during today’s debriefing session. A final report will be made available to JFSPL within a month.

India, 16 September

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