Country: India
Organization: Saathi
2) Sector of activity: Financial Services
3) Description of your products or services: This program provides an income stream and financial education to low income individuals in several parts. Assistance is lent in obtaining basic documentation of identity and in opening formal bank accounts. A loan is given via the group fund for the entrant to take part in investment opportunities, guided by professional financial advisors. As a financial decision is made, the NGO as a facilitating organization assists in carrying out the financial transaction (ie, submitting a bid for an Initial Public Offering). Financial education through Open Houses, small group and individual discussions takes place with participants encouraged to take part in the decision making processes.
Quality of life is impacted through education of basic financial tools and increased understanding of their role within an economic context. With documentation as individuals and formal bank accounts, other facilities become available. A financial security net is created as they are encouraged to save the earnings/gains made in the program and invest it back into the program so that it continues to grow. Being treated as equal participants on a topic such as financial decision making has led to increased confidence.
Capital Markets tend to be reserved for upper classes due to the lack of knowledge and seed funds among the lower class. This program provides seed funds, day-to-day advisement, and overall education of financial tools thus allowing them to benefit from positive economic conditions.
4) Description of the operational model: The NGO, acting as a facilitator in the program, sources the consulting professionals such as Financial Advisors and the initial seed fund lenders, as well as assists in all documentation and technical aspects of the program. Most low income individuals do not have even the most basic documentation to prove who they are for purpose of formal applications. The NGO assists the individual in gathering the paper-trails needed to obtain their proper documentation and avail of formal accounts and procedures. The organization then holds the majority of the accounting and accounts information obtained from the financial institutions to share with the participants and explain movement, growth, and implications viz a viz financial awareness. The NGO acts essentially as a nodal point, liaising with all project participants, financial advisors, and institutions while ensuring the individual relationships are built separately (ie, all moneys are held with the individuals, not the organization).
Marketing is done via word of mouth and referrals. All participants have entered the program through invitation and Guarantee of other participants. As the program is finance-centered, this lends an added security aspect akin to the peer pressure aspects of Self Help Groups.
The innovation is in an NGO linking typically upper class resources (funds and professionals) with lower class communities.
5) Description of the financial model: Participants pay the basic fees associated with filing for formal documents and opening bank accounts. A portion of their earnings over the course of the year pay for the Financial Advisor fees, administrative costs, and repayment of the initial loan with interest. As the end of year expenses are done as a portion of income accrued, it is not an out of pocket expense which needs mitigated. If a participant is not able to cover the initial documents and account opening fees (app. Rs 800), they may pay in installments or defer until the final income is determined at which time it is deducted.
The portfolio held by the group resembles a mutual fund to mitigate risk, thus preserving the base capital. Majority of new investments are made via the gains already accrued in the program, thus preserving and adding longevity to the basic funding. Participants are required to preserve a minimum of 50% of the income generated, adding it back into the fund and are encouraged to save up to 100% (after paying the aforementioned expenses) for use in the group funds pool.
The program is already profitable, having seen a 16% profit in its first year.
Client fees represent this approximate percentage of operational budget: 35%
6) Key operational partnership: Partnerships have not been formed, rather an array of consultants and service providers are part of the program in various capacities. Financial advisors are in place to provide the necessary professional financial guidance. Relationships have been built with account hosting banks to ensure they understand the project and its objectives. Assorted consultants assist in ensuring all legalities are met, documentation is in place, and provide additional perspectives. These include accountants, lawyers, and veteran development sector professionals. This multi- faceted group allows for a comprehensive spectrum of thought ensuring all systems are efficient and strong.
7) Current outreach:
We are at the Scaling Up stage. This program spent a full year as a Pilot project as all legalities were researched, operational systems examined and implemented, consulting professionals approached, and first round of seed capital raised. In addition to these technical aspects, the first groups of participants were developed. The difficulties surrounding documentation available for individuals, working with banks to understand the overall program, and building rapport with each individual taught us a great deal. Framing the education component in a way that captured the participants’ interest and also started at the appropriate level (ie, what is the Capital Market and why do companies sell stock) evolved over the course of that year. It was also important to develop initial orientations that were thorough to ensure each individual understands what they are joining and why.
How many clients have benefited from your product/service in total? Over the last year? 75 Individuals are currently enrolled in the program and directly benefit with significant expansion planned. All systems have been implemented with the intention of being able to facilitate high numbers of participants as well as be easily replicated by other facilitating organizations.
What percentage of your clients is below the poverty line ($2 per day)? 0% No client is below the poverty line being used by this
competition. This is due to two main reasons: those living
fully below poverty line in a high cost metro city where
this pilot was run often have no residence nor any proof
of even being born. This severe documentation limitation
prevents the necessary accounts. Also, at the pilot stage,
focus was on implementation and testing, so all system
related administration and legal requirements got primary
focus. The core vision is to connect with the “Needy” and
a profile of this group and their peculiar situations is
being defined and solutions sought. As this program is
rolled out to other cities and especially rural settings,
technical BPL will be more relevant, and more clients will
fit that profile. As it is, approximately 47% are housed,
with no savings, minimal furniture/assets, and 31% are
housed with minimal savings, some assets.
What is the order of magnitude of the potential demand for your products or services? Which
other low-income groups, countries or regions could benefit from it? Try to quantify (number
of clients, market size in currency):
One of the most exciting aspects of this project is that it has few limitations in which it can be utilized. As long as the necessary components are there, including a facilitating organization, reputed financial advisors, and a strong economy, it is not bound by cultural constraints, though legalities would need to be re-researched if taken to another country to ensure open markets, accounting practices, and reporting requirements are met. Through replication, this program could affect millions and with the fact that money is being used as seed capital instead of being spent, the financial sustainability is also strong. The caveat is that financial markets and the local economy must be sufficient to allow for overall gains, again recognizing that some risk is mitigated through diversification of the overall group portfolio.
8) Scale-up strategy:
How many low-income individuals do you plan to benefit in three years from now? How are you planning to scale up or replicate your solution? What are the major constraints to scale up?
Current targets for 3 years’ growth are currently 5,000 individuals. The program grows exponentially as individuals introduce further participants through the system mentioned previously. Replication will require more organizations implementing the program. There are also evolutions in the structure of the program currently being researched that would allow for easier growth using current systems. A guide or manual is being designed to act as a foundation for handing the program over to other institutions. Major constraints to scale up include the difficulty of documentation which is time and energy intensive, ensuring referrals and introductions are solid, and ensuring new participants truly understand the project and its objectives, including participation from all individuals.
Which specific areas - and why - in your field would benefit most from investment by corporations, foundations, and other investors:
A second exciting aspect of this program is that it does not “spend” funds, but rather uses the funds it has access to with the goal to increase them. Further, the funds are treated as loans to the individual participants with repayment occurring annually (assuming the program sees an overall gain in the year) and with interest. It does not need further infusion of funds except to meet a growing roster of individuals. Therefore, the term “investment” into the program is exactly that – it can be repaid with interest to the investing entity. The specific are that would benefit most, then, is contribution to the seed capital being used as the foundation of all activity. Investors and Foundations are needed for seed capital and institutions are needed to assist in upscaling particular functions, ie account administration.
9) The organization: How does the initiative fit with your overall organization's strategic goals and priorities? How did the initiative start?
The initiative started as the organization sought to develop a program the provides an alternate supplementary source of income to the staff, their families, the community, and the world at large, while covering its own costs as well as create an income stream to the organization for various project support. The program has achieved all of the above with over half of the organization’s social workers taking part as participants and building a savings they would not otherwise have resources for, reaching out to “our world” as well as recovering the administrative costs through the fees paid at the end of the year by participants out of income attributed to them.
-
10) On the mosaic diagram, which of these factors is the primary focus of your work?
- Factor: High volume business based on small (even tiny) individual transactions
- Principle: Change radically the logic behind your business model
Contact Information:
Name: Valerie Tripp - Coordinator
Organization: Saathi
Mailing address: Agripada Municipal School, 1st Floor, Opp YMCA Swimming Pool, Farooque Umarbhouy Lane, Agripada, Mumbai 400011
Country: India
Email: info@saathi.org
Tel: +91 (22) 2300 9117
Fax: n/a
Website: www.saathi.org
Organization's legal status: Registered Society
Number of Employees: 32
Return to Home Page