ESAF Small Finance Bank

The concept of microfinance that was incepted by Professor Yunus, was to provide micro loans to the poorer section of the society who otherwise have no access to standard bank loans, more specifically to the women of that community to help them to become self-sufficient and financially independent through their businesses and enterprises. They get small amount of loans, without any collateral for starting and expanding their small businesses and all these are done within close supervision of the microfinance companies that are lending. The loan payment is done on a weekly or monthly basis generally in small instalments and loans are approved for short or medium terms.

ESAF works towards creating opportunities and supporting the poor and underserved section of the society. Apart from creating opportunities for livelihood, ESAF also diversified its attention towards the improvement of health and education. The approach of ESAF towards its initiatives involves choosing right strategies, providing grants, evaluating the progress, impact and the final results. Based on the performance, the readjustment is done in the strategy and approach.

ESAF Microfinance diversified its span of action in many different areas by combining entrepreneurial activities with social causes. These are:

(1) Kids for Kids – It is an Integrated Children Development Program directed for creating a sustainable holistic environment for underprivileged children through supporting services like healthcare, education, social security to prevent form abuse, malnutrition, child marriage, trafficking, child labour, drug addiction and all such issues.
The future plan for ESAF in this regard includes opening 300 more centres to support 15,000 more kids. They want to establish library in each of the villages, start training centres for teachers and to develop value-based, all round development program for kids leading to the creation of value-based communities.

(2) Development of Micro-enterprise – This initiative of Micro Enterprise Development (MED), ESAF Microfinance and Investments (P) Ltd. (EMFIL), which was launched in 1995, is operational in 30 districts across 6 states of India through 105 branches. More than 2.5 Lakhs of clients are covered by these services that include financial as well as non-financial categories.
Microfinance activities are customised to meet the requirements of poor people. MED is done through creating Self Help Groups and developing local economy into modernised industrial level. Extending financial and business development support services promote developing micro-enterprises and economic self-sufficiency among poor people.

(3) The healthcare wing of ESAF, known as the ESAF Healthcare Services, extends healthcare through an array of clinics, pharmacies, hospitals and diagnostic laboratories. ESAF runs two hospitals and four clinics in Palakkad and Thrissur districts in Kerala. The Palakkad facility is a 150 bedded hospital and another location in Palakkad has a 50 bedded hospital. Poor patients get free treatment, medicines and diagnostic facilities. ‘Suraksha’ and ‘Pariraksha’ cards are distributed to all the members. ESAF provides healthcare services by organizing workshops, seminars, exhibitions and the medical camps on eye care and cataract operation, paediatric health, orthopaedic, gynaecology we well as on Ayurveda.  Seminars are done for HIV, Diabetes, Anti-tobacco, suicide, pain & palliative and abortion to assist people.

(4) Natural Resource Management (NRM) – ESAF works to facilitate the proper and sustainable use of natural resources and bring it within the reach of everybody. These include:

• Projects on Non-conventional Energy and Green Conservation – Encouraging bio-gas plants and incinerators for bio-degradable solid waste management and green conservation projects through natural weed control, safe disposal of waste and proper flow of drainage. ESAF projects promote vermicomposting where various worms are used to convert the biomass into manure
• Water supply in Rural Areas and Sanitation Projects – ESAF undertook different World Bank aided projects like Jalanidhi and Jeevandhara to ensure drinking water availability to the rural people.
• Engineering Services – Like planning, designing and undertaking new buildings, interior works and helping in tsunami relief works by building small budget affordable houses.
• Renewable and Micro Energy – ESAF promotes utilization of solar energy and other renewable energy as a cheap source of energy for the poor community.

(5) Human Resources Development – ESAF started ‘ESAF Centre for Excellence’ in the year 2005 for employee development, skill building and creating a highly efficient workforce. This was done by creating the training facility to upgrade capacity, attain and maintain required quality and standardize the process and products.

(6) Research and Development activities – ESAF conducts various R&D projects to validate the work. These include studies to assess the impact and efficiency of its microfinance products, monitoring social performance projects, developing benchmarks and indicators for social performance and developing and benchmarking other projects on health and livelihood issues of economically challenged people.

This is the Self Help Group (SHG) of ESAF that basically is a network of several SHGs from different geographical locations. The members of SHG support each other to achieve the economic and financial goals of each other and that as a group. This helps in capacity building and social empowerment of women members.  This trust is completely owned by members and they have the freedom to take decision collectively in the developmental activities.

Objective of the SHG Federation

• To facilitate connections between SHGs with Local organizations, banks, govt. agencies
• To help SHG to attain sustainability
• To get better access towards development and marketing information
• To strengthen the capacity of member-SHGs by providing information, training, on-site support in the fields of accounting, bookkeeping, financial management, marketing, advocacy, accessing government schemes, bank-linkage and so on
• To provide loans, more specifically multiple credit lines
• To provide voluntary savings facilities
• To assume marketing of the products and services of the SHG members
• To provide insurance services
• To create the socio-political environment for women to enable them to live their lives to the best possible extent as they wish to

Major Activities of SHG Federation

SHG members not only participate in the loan program but involved in many important activities like:

• Training the women to become entrepreneurs
• Promoting activities to generate income
• Promoting Activities for business development
• Leadership building among clients
• Extending various financial services and financing
• Capacity building
• Counselling
• Education

The main products of ESAF Microfinance are:

(1) Microcredit – Micro loans are provided for specific purposes to create employment or business opportunity to its members. The different need based loans include: (a) Income Generating Loans which has term of 50 to 75 weeks (b) General Loan given for a term of 50 weeks, (c) Housing Loans with terms typically 4 to 7 years, (d) Vyapar Vikas Yojana Loans for a period of 4 months and (e) Nirmal Loan (for clean water and sanitation) given for a period of 2 years.

(2) Insurance – ESAF offers Life Insurance products at highly competitive rates. This service is there for both normal and accidental deaths. For Insurance sector, ESAF has alliance with Star Union Dai-ichi Life Insurance Company and United India Insurance.

(3) Business Development Services are offered by ESAF to the poor people in the form of training for skill development as well as for the market access so that they are able to develop their own businesses. These assistances are for starting own business or to expand their existing businesses.

(4) Other Miscellaneous Services — There are several other value added services by ESAF apart from microfinance and skill development. These services aim for an overall benefit and development of the clients. Strategic alliances are made by ESAF with different Central and State Governments, Agencies and Corporations in order to extend several services to its clients. These are:

Swalambhan Yojana (NPS) — ESAF provides Swalambhan Yojana (under National Pension Scheme) services to the client. This is done in alliance with the Government of India. This is the social security scheme that will enable the poor section to earn some fixed income, the same way Government servants earn after the retirement.

Vyapar Sewa (also called Sanchar Sakthi) – ESAF provides marketing services to its clients. These services are enabled by mobile phones and available through the scheme of Central Government called Sanchar Sakthi.

Jeevan Shudh – Under this service, ESAF provides ‘Pureit’ – a table top device for multi-stage water purification. This is ESAF’s initiative to provide healthy lifestyle for its clients by arranging purified water. ESAF, in alliance with Hindustan Unilever, provides it in an easy purchase scheme by instalment payments. ‘Pureit’ gives the safety same as the boiling water and requires no electricity or running water to operate. When the efficiency reduces below the drinkable quality, its ‘Auto shut’ mechanism prevents the flow of water and stops functioning till the parts are changed.

Money Transfer—ESAF offers money transferring service to its clients for overseas payments and receipts. This is done in collaboration with Western Union Money Transfer.

Micro Energy – In an effort to promote clean energy, ESAF collaborated with Micro Energy Credit, USA. Products operated by green energy and energy saving devices like solar lights, water purifiers and cooking stoves are being provided to the people for a healthy life.

Apart from the Microfinance loans for IGL, ESAF has introduced a couple of more loan products to improve the living of its clients. These are:

ESAF Vidya Jyoti Loan – For educational purpose of its clients’ children, ESAF has introduced this loan program. ESAF believes that through proper education, families can come out of the poverty and lead a more productive life. Vidya Jyoti loan is given to ESAF members’ children for both tuition and non-tuition requirements. At places where primary education is free, these loans are given also to support the cost of buying books, examination fees, transport, uniforms, etc.
Features of the loan include:

Loan Amount:

Up to 10^th Standard — Rs 8,000
11^th and 12^th Standard — Rs15,000
College level and above — Rs16,000 to Rs50,000
Interest Rate: 22.99% and it is on diminishing basis
Processing Fee is 1% of loan amount plus service tax. The loan term is of 1 year or 2 years based on the loan amount. The repayment frequency is either weekly, fortnightly or monthly. Members need to be at least 1 year in the Income Generating Loan (IGL) cycle with ESAF to avail this loan.

ESAF House Improvement Loans (HIL):

Under this scheme, ESAF has reached out to its clients and extended loans for improvement of the dwellings. About 45% of the clients had inadequate housing like mud wall, no proper roofing or no toilet facility. ESAF introduced HIL of a maximum of Rs 75,000, to be repaid on a monthly basis. Strict Credit Bureau check, completing minimum one loan cycle with ESAF and being resident of the same house for over three years are the eligibility criteria for the loan. ESAF has created a big impact across the states through this successful initiative.