Social Issue

India’s huge population of households working in the informal sector has historically been left unattended by formal banking and financial institutions. With limited information available regarding these households, and a high cost of continuous engagement and transacting with them, a general perception existed that they could not be considered a market suitable for engagement with the formal sector.

Recent decades have seen the successful introduction of various models of microfinance service delivery. This has been key to generating opportunities for financial inclusion in Indian households, especially for low-income women. However, only a few entities remain with the mission of serving the most marginalised areas. Such entities face even greater challenges of mobilizing capital necessary for operations within a non-profit structure, or raising guarantees for leveraging banking correspondent relationships.

Our Response

We have provided a Guarantee to Samhita to support its operations in serving women from poor households with financial services. Samhita is a not-for-profit company headquartered in Bhopal, Madhya Pradesh, with the mission of reaching the women of poor households, especially in remote, underserved regions. Since starting in 2008, Samhita currently operates across 4 states  across central India – Madhya Pradesh, Uttar Pradesh, Chhattisgarh, and Bihar – in 38 districts, serving over 100.000 clients through a network of 90 branches. Through the community relationships established with microfinance, Samhita follows up with additional interventions in areas such as financial literacy, legal literacy, health education, livelihood training, and initiatives for the girl-child.

For microfinance, Samhita follows a group lending methodology and lends only to women of poor households. Loans are given to individual members with a group guarantee. Rural customers tend to use the loans for the purchase of livestock or managing small stores. Urban customers are slum dwellers that migrated from rural areas, and they use the loans mostly for working capital for small businesses in the service and trading sectors.

Expected Social Impact

Samhita is considered to be one of the more socially-driven microfinance operations in India, serving underserved geographies and women from poor households. The impact of this guarantee has a substantial catalytic effect – every 1 USD provided in guarantees allows Samhita to provide 20 USD in microloans to its clients via its arrangements with a local bank. In this context, this 350.000 USD guarantee provided by Netri will allow Samhita via their agreement with a local bank to provide the equivalent of 7 USD million of micro-loans to their customers.

Given the small loan sizes of the microloans and this catalytic effect of the guarantee, the number of microloans generated is expected to be over 12.000 over the investment period.