Community at the Core: A Study of Sarvodaya Nano Finance Limited

The paper traces the evolution of Sarvodaya Nano Finance Limited (SNFL). At the outset we explore the background of SNFL, the motivation for the promoters to set up the organisation and how it has grown from the time it was taken over by the community trusts promoted by ASSEFA. As a part of the study, we examine the unique legal structure set up for federating the small SHGs that were widely spread out in the areas of its operation. The idea of federating the SHGs was to leverage the dispersed savings and interest earned on the initial donor resources that were made available to the SHGs at their early stages. The aggregation of these dispersed resources into SNFL enables the women SHGs to mobilise funds from commercial banks and specialised MFI lenders, for an accelerated growth of the movement. The paper examines the rationale for having this structure, its vulnerabilities and the possibilities for growth within the given structure. We argue that this is not a structure that can be replicated easily. We also argue that it cannot grow aggressively in the long run, unless some basic design changes are made. The paper also discusses the basic question on how to structure resources that are given by the donor community for the larger benefit of the poor; and when to bring in the individual stakes of the beneficiaries if one were to promote long lasting institutions. The paper also raises critical questions on governance and management. While appreciating the impressive result achieved by ASSEFA and BASIX in getting a community owned professionally managed institution into being, it also raises questions on whether there are inbuilt mechanisms of carrying forward this effectively in future – given the structuring of capital and rights of each of the constituents.