Innovative Approaches to Delivering Microfinance Services: The Case of VSSU, West Bengal

Publication Date: Jul 2002
Published by: MicroSave
Document Type: Paper

View this Document   Email this Document

You cannot construct a good MFI from a kit of parts bought in an international microfinancial supermarket.

The paper examines Vivekananda Sevakendra O Shishu Uddyan - VSSU - an unconventional and imaginative microfinance institution with intelligent product design and delivery of savings and loan products. These are "imagined" by a dynamic individual possessing a strong instinctive understanding of the local microfinancial market and the charisma to motivate a small band of modestly-paid workers."

The report emphasises VSSUs operation in an area of widespread poverty and successes in loans and savings - it has always held more deposits than loans outstanding (in April 2002 the ratio was 1.02) and has been able to finance its portfolio entirely from deposits. Interests rates are 24% a year and with interest rates paid on savings held at a very low effective overall rate through fees and penalties, the actual yield on the microfinancial work taken as a whole has averaged 22% a year 1997-2002. This has generated enough income to cover VSSU?s modest costs (cost control is ferociously enforced) and still leave enough spare to finance social work of about $12,500 a year, and to re-invest in steady expansion

Report identifies weaknesses in management, accounting and information systems together with a slow down in growth and identifies solutions in a branch structure and computerisation. Recommends:

• outside assistance provided to VSSU be coordinated with the history and nature of the organisation
• modernisation of systems, supplementing of staff and otherwise should be aware of local tradition, the intuition of its present staff and preserving flows of locally mobilised funds
• conventional standards of capital adequacy should be installed and donors might ensure stability in the face of a crisis like a cyclone or flood with concessional debt subordinated to repayment of client deposits