Microfinance Interviews

Interview with Sunil Agarwal, MD, SE Investments

S E Investments is one of the few non-bank companies who are into microfinance. The company has more than 86,000 customers and a portfolio of Rs1.85bn. It has operations in Jaipur, Jodhpur, and Delhi among other places. The company has created over 500 Self Help Groups (SHGs) to reduce risk and ensure increased business returns. SEIL promotes microcredit to women and Self Help Groups (SHGs) in both urban and rural areas.

By enhancing the employability and income of women, SEIL is alleviating the poverty and living conditions of people at both macro and micro levels. To fund its operations, SEIL has tied up with leading financial institutions of the country. Credit facilities are enjoyed from Punjab National Bank, ICICI Bank, Small Industries Development Bank of India, IREDA and HDFC Bank.

Sunil Agarwal, Managing Director, SE Investments, is a Commerce graduate. He started his career in a financial services sector in the year 1989. He was chief executive of a financial services organisation and later on in 1992 promoted the company S.E. Investments Ltd and continues to be its Managing Director since inception.

Replying to Anurag More of India Infoline, Sunil Agarwal says, Typical microfinance clients are poor and low-income people that do not have access to other formal financial institutions.

Overview of the micro-credit industry.
“Microfinance” is often defined as financial services for poor and low-income clients. In practice, the term is often used more narrowly to refer to loans and other services from providers that identify themselves as “microfinance institutions” (MFIs). These institutions commonly tend to use new methods developed over the last 30 years to deliver very small loans to unsalaried borrowers, taking little or no collateral.

These methods include group lending and liability, pre-loan savings requirements, gradually increasing loan sizes, and an implicit guarantee of ready access to future loans if present loans are repaid fully and promptly. The microfinance industry in the country has over 2500 microfinance providers (Microfinance Institutions – MFIs) in the form of trusts, societies, cooperatives and NBFCs. Of these there are about 2% that cater to over100,000 borrowers. (source – microcredit summit)

What are the challenges currently faced?
The current challenges are in the form of “funds” – both capital and funds for on lending. Listing on the stock exchange ensures retail participation in the capital structure and regular funding from banks and financial institutionsis critical for smooth operations. In addition to funds, human capital and technology are areas of focus right now.

What is the estimated market for micro-credit in India?
According to a report called “Maturing of Indian Microfinance” by EDA Rural Systems and numbers published by the World Bank, the current estimated market for microcredit in India is Rs2,400bn. This is based on a calculation that there are 150 million poor household in the country (as per World Bank statistics for India) with an average credit demand on Rs20,000 per household. The credit demand is adjusted with a 20% upside for the urban poor households.

What is your share of the organized market? Any estimates of the unorganized market?
The organised market is about Rs200bn, according to NABARD, EDA Rural Systems Report – Maturing of Indian Microfinance

Who are your core competitors in this business?
This business is primarily supported by local money lenders – who charge a hefty interest rate based on the demand – supply conditions of finance in the poor household. Although the payments received by the money lenders is small in value but in percentage terms the annual rates are anywhere between 80-170%.

What are your expansion plans 2009? How would they be funded
2009 will see three schemes – Islamic microlending, microfinance for housing and a special scheme for rikshaw pullers scale up. They have been in the pilot stage during the current year and these are expected to create new opportunities for S.E. Investments in addition to the current lending through the income generation loans.By the end of 2010, S.E. Investments would like to support 400,000 households in the operating area.

Are you entering in any other financial vertical ?
S.E. Investments is in the business of microfinance primarily. It also caters to traders, businessmen and SMEs for funding their working capital and term loan requirements.

Has the market crash affected your business ?
With high inflation in the economy, the overall requirement of credit in the underserved low- income segment has gone up substantially. This is due to the increased costs of inputs and also an increase in overall volumes for the products manufactured by the microfinance clients.

What is the usual loan amount. What is the highest and lowest amount disbursed?
The average loan amount is ~Rs20,000. There are some loans in the Rs35000 value and some in Rs10,000 value.

How long is the repayment period?
The loans are typically repaid over a three year period. There are some loans which are annual too.

What is the interest rate charged by you?
The interest rate on the microfinance loans is 14% flat per annum.

You have some big plans for auto drivers. Which are the sections of society that usually avail your services?
We have launched a scheme for Rickshaw pullers. The scheme lets the riskshaw puller own the rikshaw paying a daily instalment of Rs 30 (same as the amount he paid for renting the rikshaw from local businessmen). The scheme also includes a life time prepaid mobile connection and insurance for the rikshaw puller and passenger. This scheme is expected to increase S.E. Investment’s outreach significantly.

Typical microfinance clients are poor and low-income people that do not have access to other formal financial institutions. Microfinance clients are usually self-employed, household-based entrepreneurs. Their diverse “microenterprises” include small retail shops, street vending, artisanal manufacture, and service provision. In rural areas, microentrepreneurs often have small income-generating activities such as food processing and trade; some but far from all are farmers.

Any plans to provide financial assistance to the Mumbai taxi drivers who have to upgrade their vehicles?
No plans for launch in Mumbai.

What is the latest shareholding pattern? Who are the large investors?

CategoryNo. of SharesPercentage
Public76964024.51%
Body Corporates129490041.25%
Directors & their relatives107546034.25%

Any plans to dilute or increase stake?
A private equity deal is in the pipeline.

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