What message can a tiny green shoot give to its shareholders, stakeholders, clients, well wishers and critics? A brief one: please continue your support and your questioning. But it can promise that it will strike roots at the bottom of the pyramid, not to extract surplus and high profits but – to use a simile in keeping with NABARD’s agricultural thrust - to replenish the soil at the base, to fix nitrogen, to support microbial growth and to let this rich diversity in turn promote NABFINS’ growth. It will not use artificial stimulants to achieve rapid growth and high profits as this will deplete the resources held by people at the base of the pyramid and offer them products and financial packages which in the short term may provide a boost to the FI’s revenue but which the poor may not find appropriate to support their livelihood strategies.
NABFINS was registered as NBFC in November 2008 and is a subsidiary of NABARD which will be the major promoter holding not less than 51% of the equity. NABFINS management is fully vested with NABARD. Other current shareholders are the Government of Karnataka, Canara Bank, Federal Bank and Dhanalakshmi bank. However an independent Board with representation of experts in micro finance, financial regulation and administration, banking and technology will be constituted to govern NABFINS, which has an all India jurisdiction. The Board of Directors during the process of restructuring the Karnataka Agri Development Finance Company Limited (KADFC) and renaming it NABARD Financial Services Limited (NABFINS) decided that it would set benchmarks and standards for the MFI Sector particularly in the fields of accounting and disclosure, transaction costs, diversification in products, rates of interest and practices related to repayments.
Our Managing Director C.P.Mohan, on deputation from NABARD took charge on June 5, 2009. The first loan was advanced on November 18, 2009. Following my stepping down as Executive Director of Myrada in September 2009, I accepted the offer to be the Chairperson of NABFINS effective January 2010. On 22nd March 2010 we started operating from our new office premises on R.V. Road, Bangalore 560004. NABARD had provided accommodation all these years for which NABFINS is grateful.
A useful and invigorating brainstorming event was organized chaired by Shri Kotaiah Rtd Chairman and MD of NABARD during whose tenure the Karnataka Agri Development Finance Company Limited, the first avatar of NABFINS was established. Participants were drawn from NABARD head Office, Commercial Banks, NBFCs, Cooperatives, Producer Companies, from Rabo Bank and Institutes of Management. This was followed by a meeting of NABFINS Board held on May 7, 2010.
Drawing from these two experiences the management of NABFINS built a foundation and a framework to guide future strategy and corporate governance.
In its governance and strategy NABFINS will try to balance Business with Inclusion. Its business plan will endeavor to cover all costs of maintenance and growth without raking in excessive profits; it will invest in under banked areas even if it means higher transaction costs. Elsewhere, it will also provide competition that may help to reduce the interest rates of moneylenders and financial institutions, which are not affordable by the poor. It intends to respect the diversity of several livelihood activities, which comprise a poor family’s livelihood strategy and not reduce this strategy to a single large so-called viable activity (which the family finds it cannot manage) or to a standardized product to fit into pre-designed software. It will endeavor to develop delivery systems and a salary structure that do not require a financial institution to charge 25% on a loan taken by a poor women to purchase a goat in order to meet its transaction costs, when the manager of the financial institution pays 8% on a loan to buy a flat. These may be construed as brave words of the un-initiated but at least they state our intention and if we do not succeed it will not be for want of trying.
Aloysius P. Fernandez