Keya Sarkar: From banking to micro-finance

OUT OF FOCUS

Of the new breed of micro finance institutions in India that are growing at a scorching pace, the KAS Foundation is particularly low-profile. Unlike SKS in the South or Bandhan in the East, information on KAS is difficult to come by. Despite a portfolio outstanding of almost Rs 300 crore, KAS has no web site, has a board which reads like friends and family, and in fact, it depends largely on S Kathiresan, founder and CEO, for disseminating information.

Incorporated in September 2003, KAS, together with sister concern Kathir Foundation, currently has 57 branches, employing nearly 2,000 people. It operates in all the 30 districts of Orissa, seven of Chhattisgarh, 12 of Tamil Nadu, and three districts of Andhra Pradesh and is now active also in Maharashtra (two districts), West Bengal (three districts), Madhya Pradesh and Pondicherry. Working with over 25,000 self-help groups with an average of 18 members per SHG and 43,000 joint liability groups (JLG) with an average of five members per JLG, the KAS Foundation is touching the lives of 700,000 people.

But a lot of what KAS has achieved within a short time can be attributed to its origins and its historical relationship with ICICI Bank. Kathiresan was a general manager with the Bank of Madura when it merged with ICICI Bank in 2001. So when he opted for voluntary retirement as DGM, ICICI Bank, in 2003, it was the bank which encouraged him to start KAS. Kathiresan himself was familiar with rural banking or a form of it popular then. He recalls how of the 103 rural branches that the Bank of Madura had, 70 were loss-making. It was in 1994 that 15 or 16 departments dealing with aspects of rural finance were consolidated under a Rural Development Department and then chairman K M Thiagarajan forced mangers to work with self-help groups and link over 2,500 groups.

So with first-hand knowledge of what not do in rural finance, the backing of ICICI Bank, Rs 20 lakh of VRS money and another Rs 45 lakh in grant, Kathiresan started KAS. Luckily for KAS, it was born at a time when KV Kamath, MD and CEO of ICICI Bank, together with Nachiket Mor, deputy managing director, put special emphasis on financing the rural poor. KAS gained from its close association with ICICI Bank in becoming a business correspondent which allowed it to offer savings products, health insurance products of ICICI Lombard, from ICICI's research in technology for financial products for rural areas through ICICI Prudential's launch of a micro systematic investment plan and of course through the academic and empirical research conducted by ICICI funded Centre for Micro Finance Research.

KAS was chosen as the first business correspondent when the RBI allowed MFIs/NGOs to take rural savings which would actually be on the books of the bank. In a little over a year KAS has facilitated 115,000 savings accounts with ICICI Bank, which can be operated through bio-metric smart cards.

With ICICI Lombard and other insurance companies, KAS is offering its members hospitalisation insurance, cattle insurance, life insurance, shopkeepers' policy and weather insurance.

KAS is handling the Micro SIP of Prudential ICICI AMC. Launched in April this year, KAS has enrolled 850 clients who can pay as low as Rs 50 a month to participate in the mainstream financial market.

Several impact studies undertaken of intervention in general and diary and fishery sub sectors in particular by CMFR.

The fact is that its NGO origins when it was established in 2003 and later registration as a Community Development Financial Institution (a section 25 company) are what have helped KAS in making the most of its association with ICICI Bank. Kathiresan is aware of the fact that times are changing and a lot of venture capital finance is now available to run well NBFCs engaged in micro finance. KAS has already started an NBFC named Jaggannatha Financial Services with a capital of Rs 2 crore to operate in Orissa, Tamil Nadu, Andhra Pradesh and Pondicherry.

So while the ministry of finance swings between favouring Sec 25 companies and NBFCs in taking India's vision of financial inclusion forward, the KAS group has ensured that in terms of organisation structure it is well equipped to handle any regulatory situation.

It is certainly a matter of pride for KAS that in less than four years it has become the largest organiser of SHGs and JLGs among MFIs and that it is among the top five in terms of disbursement despite starting operations in the East. In its articulation of its vision for 2010, KAS hopes it "will become a Micro Finance Bank with branches all over India to enable the poorest of the poor to have banking facility at their respective villages/slums". Hopefully the ministry of finance and the RBI are listening.