Sustainable, Local and Organic Microfinance – Cashpor Microcredit

By Shakespeare Walla

The author of this article can be contacted by email at : shakespeare.walla@gmail.com

Abstract: Recently inducted  microfinance  (MFI)  entrepreneurs  with  an eagle’s eye focus on  “exits”  sitting  in  MFI  cockpits,  fuelled  by  global  capital,  zooming  at stratospheric heights over  developing countries(or states), carpet bombing microcredit loans (sometimes forcefully bundled with other non-financial products like $50 water filters and $40  solar lanterns) in fiercely competitive territories, disturbing small local microfinance  programs,   creating  highly  leveraged  balance  sheets   and  obviously, absolutely  unaligned  with  government   financial  inclusion  programs,  irking  local governments and communities in the process is passé.

SLO (Sustainable, Local and Organic) Microfinance is the mantra i.e. Development professionals leading small programs, chugging at ground level, focused on organic growth, employing locals as managers and field officers, availing funding from local sources, working in virgin territories, within a fixed radius of the MFI head office, focused on sustainability and cent percent aligned with government vision and financial inclusion initiatives.

micro loan carpet bombing

Micro LoanCarpet Bombing in Andhra Pradesh . Is the ‘eagle’s eye focus’ on ‘exits’ microcredit any different? Is it sustainable?

SLO Microfinance is about building a microfinance institution which is sustainable, local and organic. An MFI which is built to last; which aint only good but great.

Sustainable, Local and Organic – SLO Microfinance

Sustainable : means reasonable surplus from operations. Return ratio’s that respect Newton’s law of universal gravitation and not Sir Richard Branson’s law of universal gravitation.
Local : means human capital and financial capital sourced locally for conducting business locally, say in a certain radius of the MFI head office.
Organic : means to operate in virgin territories. Engage in healthy competition. Abstain from poaching employees and clients.

Prof David Gibbons. Img-credit:cashpor.in

The DNA of SLO Microfinance was built by Prof David Gibbons, the Founder of Cashpor Micro Credit Program in the Indo-Gangetic Plains, erstwhile United Provinces of India, an area which produced a quarter of a dozen Prime Ministers for India, innumerable civil servants, central bankers but still remains unindustrialized, largely agrarian with primary occupation being running stores selling Milk products or Paan (betel leaf crepe laced with secret spices, natural fragrances, manually crushed betel nuts, organic jaggery, mashobra forest honey and wild fermented tobacco).

Many term this region as India’s Wild West, where also the Ganges flows and the Indo Gangetic dolphins swim. Septuagenarian, Professor David Gibbons began Cashpor Micro Credit in the summer of 1997 at the same time; the current large five MFIs (Hereafter referred as, “The Famous Five”) were starting in the Southern part of India.

The institution Professor David Gibbons built began as non-profit and remains non-profit. The famous five began as non-profit and are now for-profit. In a decade the famous five are wilting, all reeling under severe financial and operational stress; newspaper reports confirm that most are undergoing corporate debt restructuring plans etc. Cashpor remains strong and sustainable with a member base of  around half a million (~ 500,000) women in concentrated geography of the erstwhile United Provinces, where the Ganges flows.

Good things happen to good people and here’s why !

Cashpor works in a strictly defined radius of it head office. It has not given in to the temptation to spread ala Tom Cruise and Nicole Kidman in their lovely film “far and away“.

It uses a poverty measurement tool, the Cashpor Housing Index. Potential clients are measured on this index before they are enrolled in the Cashpor program. Repeat loans are never forced or insisted upon. In case a client graduates on the Cashpor Housing Index, the member is pulled off the program. Cashpor does not give fish to its clients; it strives to teach them how to fish.

cashpor operations

Red Circle: Cashpor’s Area of Work - SLO Blue Circle: Where the Famous Five Began - SLO Blue Square: Where the Famous five expanded.Sad

Cashpor hires local talent. In both letter and spirit, the institution is professionally managed. Professor David Gibbons clocks flying hours between Malaysia and India, spending half part of the year in each country. The professor enjoys strictly one goblet of red wine post a day‟s work accompanied by western instrumental music and pun unintended, is generally high, on the positive socio-economic impact Cashpor makes on the lives of ~500,000 women members. In his presence or while he is away in Malaysia, Cashpor Micro Credit, with sincerity and sensitivity to all stakeholders including the local community chugs along.

In 2009, A Mix Market global study ranked Cashpor number four in the world and furlongs ahead of the famous five, in the world on composite parameters, both operational & hold your breath, financial parameters including profitability. Cashpor has built relationships with over three dozen banks and financial institutions. It has diligently diversified its funding across institutions and across facility types. As a non-profit, it cannot distribute dividend and hence it fails to attract commercial venture capital without losing it soul to the devil.

Cashpor has chosen to take the subordinated debt route for the essential capital injections required to maintain the required gearing for its growth. The founder of Sun Microsystems; the Midas touch venture capitalist, Vinod Khosla visited Cashpor and provided some funding. In its decade and a half of existence, never has the institution ever delayed any repayment of any amount due to any financial institution or bank. Cashpor is an institution; its alumni now occupy real leadership positions in several MFI’s and other enterprises.

Cashpor works. Non-Profit microfinance runs. SLO microfinance rocks.

To sum up: Big isn’t always better or good.  No  point  spreading  MFIs  like coffee chains  or hamburger joints ala USA selling artery choking greasy food to unsuspecting highway  travelers. It’s good to remain concentrated in a small geography and strive for sustainability. It’s good to build  the  institution  via organic growth.  Work in alignment with the  half  a   century  aged government financial programs; they have been around much much longer than the half a decade aged famous five MFI’s.  Take the community along, build friends not foes.

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