Sanchetna Presentation

Sanchetna Financial Services Pvt. Ltd. March 2011 This Document is CONFIDENTIAL and its circulation and use are RESTRICTED

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Management of Sanchetna is run by young professionals and yet very experienced and qualified individuals. With over 31 years of combined relevant management experience, the mandate of the organization is to reach the poor unbanked clients in some of the poorer states of India. The organisation has so far reached out to over 8000 families in 5 districts of Central Uttar Pradesh. Currently, it provides micro-credit services bundled with loan cover insurance. In the very first year of its operations, it was rated  by M-CRIL. A year later (in 2010), it was upgraded to  + . Key Parameters as on 28 th Feb 2011 Particulars Detail Date of formation 8 th June 2008 Areas of Operation Uttar Pradesh Portfolio outstanding INR 45.7 Million No. of Members 8075 No. of Active Borrowers 6611 Number of branches 7 No. of Loan Officers 20 Portfolio At Risk > 30 days (%) 0.3%

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[object Object],[object Object],[object Object],[object Object],Source: Sa-Dhan Microfinance Report 2008 State Total Microfinance Clients Share of state to total clients (%) State Population % share of population Number of Poor (2004-05) % share of poor Microfinance Penetration Index Microfinance Poverty Penetration Index Uttar Pradesh 3,613,118 6.10 180,990,000 16.43 59,003,000 19.56 0.37 0.31 Uttarakhand 337,625 0.60 9,123,000 0.83 3,596,000 1.19 0.69 0.48 Rajasthan 2,335,369 3.90 61,525,000 5.59 13,489,000 4.47 0.70 0.88 Bihar 1,455,981 2.50 89,776,000 8.15 36,915,000 12.24 0.30 0.20 Madhya Pradesh 1,312,668 2.20 65,605,000 5.96 24,968,000 8.28 0.37 0.27 Total 15.30 36.96 45.74 Comparison Andhra Pradesh 13,061,436 22.00 80,147,000 7.28 12,610,000 4.18 3.03 5.27

[object Object],[object Object],[object Object],Source: Sa-Dhan Microfinance Report 2008 Proposed Expansion Area Current Area of Operation Microfinance Outreach in Uttar Pradesh Clients outreach 533,041 Portfolio outstanding Rs. 347 crore Number of districts served 36 Number of poorest districts 15

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Costs Stages % Margin (of Loan Portfolio) Current Target Ops. Expenses 15% 10% Financial Exp. 11% 13% Loss Provision 0% 1% Gross Margin 3% 4% Ass. Leverage of Debt/Equity – 5.67 ROE 6.67% 26.68% Revenue: Interest on loans; other financial income Costs: High operating costs due to door-step delivery, small ticket size, shorter repayment frequency Service : Financial Services – Micro-credit (large volume of small ticket loans to those not served by formal financial sector); Door step delivery; primarily weekly collections; Simple paperwork Funds : Investors’ money; leveraging this to raise debt funds from banks Risk Mitigation : Loans spread across large population (granular portfolio); Loan cover life insurance

Loan Purpose Design Group Loans Group based loan for providing working capital Rs. 2,000 – 15,000 @ 12.5% flat 45 weeks repayment Increasing by Rs. 2000 every loan cycle Top Up Loans To meet additional fund requirements after successful repayment for 23 weeks Upto Rs 6,000 Increasing by Rs 1,000 every loan cycle Individual After minimum two loan cycles to individuals for enterprise development Rs. 30,000 and above Monthly repayment @ 24% per annum Loan cover insurance Cover the client and spouse against death for the loan outstanding @ Rs. 7/1000 Rs. Among the best deals in the microfinance space

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Financial Year 2009-10 (Actual) 2010-11 (Provisional) 2011-12 (Projected) 2012-13 (Projected) 2013-14 (Projected) Outreach Number of Active clients 3245 7200 20,063 36,985 58,705 Gross Loan Portfolio (INR Mn) 20.32 50.00 147 291 506 Number Of Branches 4 7 13 23 33 Number of Loan Officers 12 19 46 82 122 Caseload per Loan Officer 270 379 436 451 481 Loan Outstanding per Loan Officer (INR Mn) 1.69 2.63 3.19 3.55 4.15 Financial Performance Personnel & Admin Cost Ratio (wrt Avg Portfolio) 41.6% 16.4% 15.4% 12.6% 9.9% Financial Cost Ratio 12.4% 8.8% 11.3% 12.3% 12.3% Net Profit before Tax (INR Mn) (-1) 1 7.04 13.55 39.2 Operational Self Sustainability (OSS) 76% 108% 149% 140% 157% Equity Infusion in the Year (INR Mn) 0 5.2 30 0 40 Total Equity, including Surplus (INR Mn) 5.01 11.1 59.9 68.0 131.5 Return on Equity (-37%) 11% 14.5% 16.5% 25.3% Capital Adequacy Ratio 23% 27% 41% 23% 26%

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[object Object],Recommendations Impact / Response ,[object Object],Positive as it opposes dual regulation. ,[object Object],As Sanchetna does only microfinance, it already complies with this. Capping gross margin at 10%, interest rates at 24% p.a. & processing fee at 1%; no other charges to be levied Sanchetna reduced interest rates in the past one year from 29.25% to 27.2%, which is lower vis-à-vis many competitors. It still generates surplus at these rates, mainly due to a tight control over the Admin costs. Proposed monthly repayments (currently, it is weekly) would further unlock staff productivity & drive down the costs.

Recommendations Impact / Response Tenor not less than 12 months for Loans upto Rs 15000; for higher loans, tenor not less than 24 months Currently, most of the loans carry a tenor of 45 weeks. Therefore, easy to abide by this. ,[object Object],Would be difficult to asses for most of the microfinance organizations. Even, the government does not have this data. However, a rough estimation would be done. ,[object Object],As most of the current loans are even less than Rs 15,000 only, this would not have any material impact on Sanchetna. ,[object Object],Unlike many other microfinance organizations, Sanchetna does not take any collateral / security for the loans. ,[object Object],All of Sanchetna’s loans are for income-generation purpose only. ,[object Object],As Sanchetna would also be experimenting with monthly repayments, it may shift all its loans to monthly repayments.

Sanchetna Financial Services Pvt. Ltd. (SFSPL) Catalyst for change 5/82, Vipul Khand, Gomtinagar Lucknow, Uttar Pradesh- 226010 Tel / Fax: + 91 522 4076 350 Website – www.sanchetnaindia.com For more information, contact: [email_address] Visit us: We welcome you to visit our field areas to witness the impact of our work. To schedule a visit, email us @ [email_address] with details of your visit. We shall be happy to host you at Sanchetna

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