After the successful rollout of its innovative Micro Recurring Deposit scheme this June in Kerala and the rest of the South, Thrissur-based ESAF Small Finance Bank is expanding it to Madhya Pradesh, Chhattisgarh and Maharashtra, said K Paul Thomas, Founder MD & CEO of the bank.

“We started the Micro RD scheme in June. The contribution for this scheme starts at Rs 50 per week. We have received good response for this product. Micro RD and Micro Savings put together have brought in Rs 151.56 crore till October 31, 2019,” said Thomas.

The plan aims at developing a regular savings habit among the bank’s low-income customers for their different life-cycle needs, such as children’s education and building homes, among others. ESAF's business correspondents (BCs) do doorstep collection of these amounts, said Thomas.

Big move

In a freewheeling conversation with BusinessLine , Thomas said: “If India has to achieve the Prime Minister’s dream of becoming a $5-trillion economy by 2024-25, micro-level entrepreneurs need to be supported; they will drive the growth. I strongly believe that micro-entrepreneurs will drive the India story. I say this out of my practical experience spanning 27 years.”

Of this, 18 years were spent at Nabard, where he gained understanding of India’s agriculture sector, and its low-income population.

According to Thomas, the low- and mid-income group comprises 60 crore people, of which 36 crore are economically active, that is, people who have the capacity to work / become an entrepreneur. “These are the people who need to be focussed on. Not just loans, they need capacity building and linkages with industry. ESAF, as a bank, is focussed on providing these,” he said.

With 95 per cent of ESAF’s assets in micro-finance, unsecured loans, its focus is clear. “We don’t want to lose focus on this customer segment. And my aim is to create more jobs,” he said.

Recently, ESAF invited 12 micro-entrepreneurs from across India whom it had funded, and honoured them for their achievements. “I will tell you one of these success stories,” said Thomas.

Success story

“This lady Sindhu, from Nelambur, Kerala, took a Rs 60,000 loan from us for making mats made from cotton waste sourced from Tiruppur (Tamil Nadu). These are low-cost use-and-throw mats, not the high-end ones. Initially, she stitched these mats herself. Now, within about five years, she is providing employment to about 20 people, each of whom is earning between Rs 400 and Rs 700 daily. This lady is now making a profit of about Rs 50,000 per month."

“Sindhu has now gone a step ahead ― she has taken a new loan of Rs 6 lakh and put up a factory shed,” said Thomas with a smile of satisfaction.

“So, we are supporting such type of people.”

ESAF has 30 lakh women in its self-help group (SHG), or Sangam, as it is called. At least 10 per cent of these people give jobs to at least two people each.

And their loan ticket-size is small, too. “It’s a maximum of Rs 1 lakh,” said Thomas.

Agri-lending plans

Thomas also said ESAF will be starting agri-lending from January.

“A separate vertical is being created. It is starting from Tamil Nadu, Karnataka and Andhra Pradesh. Our NGO (ESAF Society) , which is supported by Nabard and the Small Farmers Agri Consortium (SFAC), is involved in promoting farmer produce companies. We will be launching products for this segment. It will be for their working capital requirements. They will be used as our channel to start their input shops, procurement, etc.”

ESAF is also setting up an MSME team. “We will roll our products in the segment by January,” said Thomas.

He further said ESAF will slowly diversify, but “without losing focus on the low- and middle-income groups”.

General economy

On the general economic conditions, Thomas said the tight liquidity situation in the country has not affected ESAF, since it has benefited by the conversion from an MFI to a bank. “We are exposed to public deposits. That really helped us,” he said.

As for volatility in the financial markets, Thomas said most of the loans given out by ESAF are to low-income families/ bottom-of-the-pyramid customers, and fortunately, volatility has not reached that level. According to the SFB chief, it is the upper-middle sector that has been impacted, not the low- and middle-income ones. “In Kerala, we have 35 lakh migrant workers from Assam, Bengal and Odisha. They all have jobs,” he pointed out.

The monsoon has been good this season, he observed. “So agricultural productivity will be good this year. According to reports, rural demand has been good lately,” he added.

Thomas said it is good that India is not part of the RCEP. “Otherwise, it would have impacted the agri sector,” he said.

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