Registered as a Not-for-Profit Microfinance Institution on 15th February, 1995
Sanghamithra - A NBFC-ND-MFI with a Difference
Sanghamithra Rural Financial Services (SRFS) is a Microfinance Institution registered as a not-for-profit company under Sec. 8 of Companies Act, 2013. SRFS received its NBFC-ND-MFI certification on 14th August, 2023, focusing on empowering rural communities through sustainable financial solutions.
- We work with rural poor, especially women, to include them in growth beyond financial inclusion.
- We provide medium to long-term micro-credit in partnership with SHGs, CMRCs, FPOs, and NGOs.
- We promote a hybrid model combining digital platforms with personal relationships.
- We maintain a net interest margin (NIM) of 10%.
- We provide tailored loans with varied sizes, tenures, and interest rates.
- We promote loans for water, sanitation, and hygiene (WASH).
Vision
“Sanghamithra envisions an institutional structure that supports a sustainable and vibrant financial ecosystem in which the SHGs and people’s institutions of the poor gain confidence and skills to access credit at competitive terms and to overcome the hurdles to equal opportunities and sustained growth.”
Mission
“To make poor women bankable. To work in partnership with people’s institutions like Self Help Affinity Groups, Farmers Collectives, CMRC`s and Soukhya groups of Sex workers and Devadasis, organised and trained by NGOs and other institutions, which have demonstrated a degree of maturity with respect to regularity in meetings, savings, internal lending and recovery, democratic leadership and a transparent decision – making process in order to create a financial ecosystem that supports responsible lending and recovery together with inclusive and sustainable growth.”
Areas of Operation
Coverage
5
States
34
Districts
134
Branches
14,92,125
Households Reached (cumulative)
290.33 Cr
Loan Portfolio FY 2024-25
0.52%
Gross NPA FY 2024-25
20%
Staff Attrition FY 2024-25
251
Staff FY 2024-25
Diversity in Categories of Loans
SRFS resonds to the diversity of needs of the marginalised in the informal sector. SRFS does not believe in “One size fits all”. (Description of each category given in detail later)
| Product | Features | Average Size (₹) | Tenure | Moratorium | In Partnership with | Rate Of Interest (ROI) |
|---|---|---|---|---|---|---|
| General Purpose Loan | Support cash flows, agri-allied inputs & petty business | 50,000 | 2-3 Years | 30-60 days | SHGs/CMRCs/NGO | 22% |
| Water & Sanitation (WASH) Loan | Sanitation and clean water initiatives | 15,000 | 1-2 Years | 30-60 days | SRFS SUPPORT TEAM/CMRCs/NGO | 20% |
| Farmer Producer Organisation (FPO) Loan | Purchase of inputs in bulk | 5,00,000 | 2-3 Years | 30-60 days | SRFS SUPPORT TEAM | 16% |
| Tatkal Loan | Quick cash flow to small entrepreneurs & agripreneurs | 30,000 | 6-10 Weeks | 30-60 days | SRFS SUPPORT TEAM | 26% |
| TIREN Loan | Larger businesses, equipment & machinery | 2,50,000 | 2-3 Years | 30-60 days | SRFS (Specialised Vertical) | 22% |
| Loans to tribal communities | SRFS receives grants from donors | 20,000 | 2 Years | 30-60 days | SHGs/CMRCs | 9% |
*The interest is calculated on reducing balance method
*Net Interest Margin (NIM) does not exceed 10%
*Part of the interest is paid as incentives to SHGs, CMRCs, NGOs for services rendered.
Besides Interest Rates, What are the other charges levied?
| No | Particulars | Remarks |
|---|---|---|
| 1 | Loan processing fees* | 1% on loan disbursed + GST as applicable |
| 2 | Platform charges (Maintenance of applications and website etc) | Nil |
| 3 | Credit linked life insurance premium charges** | Rs. 2.70 per Rs. 1000 Sum Assured per annum |
| 4 | Prepayment Charges*/Loan Foreclosure charges | Nil |
| 5 | Documentation & Client Visit Charges | Nil |
| 6 | Stamp duty charges | Nil |
| 7 | Cheque/e-NACH bounce charges | Nil |
| 8 | Penal Charges for non-payment of interest/ charges/ instalments | Nil |
*Loan processing fees: The processing fees are exclusive of Goods & Services Tax (GST)
** Credit linked life insurance premium charges are exclusive of Goods & Services Tax (GST)
How did SRFS emerge in the microfinance ecosystem
Sanghamithra Rural Financial Services (SRFS) was incorporated as a “not-for-profit” Company on 15th February,1995. It was promoted by MYRADA, a NGO, in whose projects the Self Help Groups (SHGs) had emerged in 1984-85. They were not primarily micro credit institutions, but institutions that built the self-confidence of poor rural women to solve their problems unitedly. MYRADA encouraged them to save in order to meet their urgent needs for which they were compelled to borrow from big landlords which increased their dependency.
Shri SM Krishna CM, with Mrs. Rohini Nilekani & a Rep from CIDA, who believed in the mission of SRFS
With SHG clients and Shri Vijaynath Bhat, first CEO of SRFS
RBI and NABARD recognized the potential of these SHGs to be effective and appropriate instruments of financial inclusion. NABARD gave MYRADA a research grant in 1987 of Rs 1 million to promote and train SHGs and to match their savings. Feedback from this research program played a major role in policy changes initiated by RBI and NABARD -namely to allow Banks to lend one bulk loan to the SHGs even if they were not registered provided they kept records and accounts and functioned as “Association of Persons”.
The SHGs were free to decide on loans to individual members. These policy changes were due to Dr. C. Rangarajan Chairman of RBI and Shri P.R.Nayak, Shri P. Kotaiah and Shri Y.C. Nanda then Chairman of NABARD . MYRADA played a role all along. These policy changes provided the framework for the SHG Bank Linkage program which NABARD/RBI launched in 1992. Thanks to the support of NABARD which provided funds for training and mobilized hundreds of training programs for Govt., Bank and NGO staff, the program spread all over India. But it was largely recognized as a micro finance program.
Vanadhevathai irular SHG – Puthur ST colony,2 years old, Krishnagiri DT, TN 2
By 1995 MYRADA realized that in remote areas where it was working, the SHG Bank Linkage program did not function properly. Branches were too far away, transport poor and travel dangerous. MYRADA approached RBI for permission to start a MFI to fill this space. This is the genesis of Sanghamithra which was embedded in the SHG Bank Linkage program.
SRFS built on NABARD’s investment in institutional capacity training of SHGs, encouraged savings and internal lending before the SHG could access a loan from the Banks. This required upfront investment in time and money which many MFIs who came later were not willing to do.
Devadasi SHG Literacy Class
Disruptions:
The model dominated the micro finance eco-system till around 2005. However, NABARD’s involvement in the SHG -Bank Linkage program diminished gradually thereafter. Joint Liability Groups(JLGs) were promoted which were smaller with 5-6 members; they could be formed quickly, no group savings were required and loans extended without much training. The SHGs gradually weakened. This affected the program of Sanghamithra, as the quality and number of SHGs decreased by 2010. The microfinance institutions which emerged around this time, prioritised speed, profiteering and standardisation. Finally, as a result of the demand to trace individual loans from origin by regulators, the bulk loan to the SHG had to be given up and individual loans had to be advanced directly to individuals. This further weakened the SHGs.
SRFS initiatives to develop a new model
Sanghamithra took some time to cope with this ecosystem. Without a clear strategy of its own to manage the General Purpose Loan category (which comprises 90% of its portfolio), it adopted the JLG approach in some areas, the SHG approach in others and the direct approach without SHG support in new areas. But this could not continue. It was realised that a new strategy had to emerge which had elements of the SHG model (which had provided excellent repayment performance), together with appropriate technology (which had to be tested and integrated with the SHG approach), as well as which gave priority to the interests of the client. But this took time.
SHG Hybrid Model Training, Mysore
The process to form a hybrid model:
Briefly, the steps taken by SRFS to operationalise the SHG Hybrid model are the following:
- SRFS supports NGOs to form new SHGs or renew existing SHGs. SRFS provides funds from CSR. SRFS also trains NGO trainers.
- SHGs are trained for 3 to 4 months in ICB (4 models). During this period, a SHG group develops rules and regulations, opens an account in the bank, starts to save regularly, credits the savings to the account through UPI, and starts internal lending from savings.
- Decisions on loan (purpose, size, repayment schedule) are taken at SHG meetings and recorded in the minutes.
- Based on SHG decisions, SRFS transfers loans to individual SHG member’s accounts directly after 3–4 months.
- Repayment of loans is collected by SRFS on due dates from the group’s saving account through UPI/e-NACH mode, irrespective of whether all members repay or not. All transactions between SHGs and SRFS are conducted through suitable cashless mode.
- The SHG is encouraged to sanction members for late (wilful) repayments and for failures to abide by the rules; the penalty is credited to the group account.
SHG Hybrid Model Training, Gulbarga
The following are the advantages and features of this hybrid model to SRFS;
- It brings back basic features of SHGs as all transactions are discussed and proceedings are recorded at SHG meetings.
- It provides greater transparency and participation in decision making and accounting transactions.
- SHGs take greater ownership of the process and the lead in the recovery process.
- It is noticed that in many cases only a few members of a SHG take a loan; this approach will encourage all members to take the loan.
- It saves staff time spent for collections, allowing more time for business expansion.
- SRFS gives 1% incentive on the loan amount to SHG (0.5% on disbursement of loan amount and another 0.5% on prompt repayment to SHGs).
- Where NGOs are involved in forming and supporting SHGs, they get 2% incentive (1% on disbursement of loan amount and another 1% on prompt repayment of SHGs).
- Risk is reduced due to decreasing handling of cash and increasing ownership of SHGs.
Pilot program to test model
3 Regions have been selected i.e., Kalaburagi, Mysore, Kolar.
SHG Hybrid Model Training
SRFS RESPECTS DIVERSITY AND FOSTERS FLEXIBILITY
(i) The General Purpose Loan:
The clients of SRFS live and work in the informal sector which is diverse. The General purpose loan which constitutes about 90% of the loan portfolio supports a number of agri and farm/home based activities.Experience shows that SRFS’s response cannot be standardized since one size does not fit all.
General Purpose Loan
(ii) The TATKAL vertical:
An analysis of the General Purpose Loan vertical showed that it does indeed meet diverse needs but that the time required to process these loans, and the tenure for repayment, is the same for all. For example loans for agri and on farm activities are not urgently required and have longer tenures, whereas loans for businesses, services and tiny manufacturing units are required quickly and the turnover is brief. Yet the time to process loans and other features is the same for both categories.
Food cart- needs a quick loan with short tenure
It was decided to pilot a new vertical to respond to loans required quickly and with short tenures. What emerged was that a large category of people required small loans of Rs10,000 to Rs 40,000, but they required them within a few days and were prepared to repay in 5 to 10 weeks either in equal weekly installments or as bullet at the end. However, these clients are not members of SHGs; they also did not have any family member who is a SHG member whose credit performance in the SHG would provide insights into the family’s credit worthiness and overall credibility. To mitigate risk, SRFS adopted external credit scoring, relying in agencies such as CRIF Highmark, to assess clients credit standing. Also, staff visited the client’s business. This is called the TATKAL vertical.
Implementing it required a strategic overhaul. Processes were streamlined to ensure rapid loan approval and disbursal. Staff were appointed to manage only the TATKAL vertical and were trained to address both the need to deliver loans speedily as well as to address the associated risks effectively. The TATKAL vertical enables SRFS to respond in an appropriate way to the diverse needs of our clients. By March 31, 2025, over 1000 TATKAL loans have been extended. A significant feature of the TATKAL vertical is that clients have returned for loans many times, many over 10. This helps to establish their credit history and build a long-term relationship. The Harvard pilot project in association with SRFS has taken the lead in this vertical. This gives better insights into the model.
(iii) The TIREN (Tiny Rural Entrepreneurs) vertical:
Stall fed goats and sheep
During the past two years, SRFS received several enquires for start-ups in rural areas. These came from people who had worked in the city for several years in construction, manufacturing and services. They could not afford to live in cities any longer and accommodation was available only in areas where water and sanitation was difficult to get. They decided to return to their villages where they had a home and land. Realizing that self-employment is their best option, they decided to start small units using the skills they had acquired. There is another group who had not left the village but had acquired knowledge and training and desired to add value to farm produce; these are the agripreneurs.
Both categories require larger loans than SHGs were accustomed to extend. Many of them, however, belong to families in which there is a SHG member. SRFS decided to start a pilot program with these clients as it had the credit history of the family member in the SHG which indicates the family culture and credit worthiness of the family. The pilot has so far extended loans to 135 clients. The repayment in every case is made digitally. The TIREN vertical provides large loans (Rs.2 to 3 lakhs) direct to individuals without partnering with any institution, but with preference to those individuals in whose family there is an SHG member.
Equipment for centering in construction
Mini-flour mill
This vertical focuses on non-traditional activities, or innovations in traditional ones. It provides space for flexible repayment rates (choice of client) in a Joint Support Group (3-4 clients). Finally, it supports the client with pre and post loan services like training in skills, links with markets etc. All costs are paid from CSR. This is critical for inclusion in growth in a sustained manner.
(iv) Water, Sanitation & Health (WASH) Vertical:
Toilet with water
Govt. and NGO programs had generated awareness about the need for safe drinking water and sanitation facilities, but implementation required technical support and funds. The members of SHGs approached SRFS to fill this space. SRFS in partnership with Water.Org an international NGO, which provided grants worked together to implement the WASH program between 2011 and 2021. SRFS set up a dedicated team of a Project Director, 2 Engineers, 6 managers with support staff to manage accounts and MIS.
Under the Water.org program 1,03,302 families benefitted; they were provided with toilets, water connectivity, filters, storage tanks, etc. After Water.Org program ended, SRFS approached NABSAMRUDDHI which provided loans at 12% interest to SRFS for WASH program. This program started in 2021. During FY 24-25, 3728 families of 689 SHGs availed loans.
Drinking water tank connection
(v) Loans to Farmer Producer Organisations (FPOs):
Although SRFS advanced a loan of Rs 5 lakh to two FPOs a few years ago, it did not follow up this initiative till 2025 when it advanced loans to 10 FPOs. SRFS is studying the implications especially related to the risks involved.
FPO