Microfinance Focus March 28, 2011: Swarna Pragati Housing Microfinance Pvt. Ltd. (Swarna Pragati), a New Delhi based company recently became the country’s first housing finance company to launch a dedicated Housing Microfinance product.

The company targeted its first batch of loans in the suicide prone district of Yavatmal in
Maharashtra, where it plans to disburse Rs 50 million (5 Crores) to over 250 Self Help Groups (SHGs) consisting of more than 1000 beneficiaries by the end of April this year.

Launched on International Women’s Day, the scheme is focused on women beneficiaries
particularly those belonging to Low Income Groups (LIG) and Below Poverty Line (BPL)
families in underserved rural areas including landless laborers and small and marginalized
farmers. The company proposes to use the huge network of Self Help Groups in the villages to identify clients and monitor the loans.

The entire loan delivery process including identification, sanction, disbursement, monitoring and follow up will be handled by them with the support of grassroots NGOs. The company is already providing training in handholding skills and capacity building to empower SHG members in playing a wider role in the socio-economic environment in their village.

It plans to make them vehicles for delivery of financial services and livelihood intervention. The bulk of the loans have been disbursed in the remote villages of Pandarkawda tehsil which is a highly backward, tribal and Naxal infested area that drew international attention on account of farmers suicide.

According to the company, low income households, particularly in rural areas, seldom have clear legal land titles, though they often have para-legal rights of some sort, which are not accepted as collateral by the banks and financial institutions. Many of them may not have a full land title but possess a documentary right to ownership, such as tax receipts and a legal protection from eviction. Swarna Pragati has tried to overcome this challenge by placing greater reliance on social collateral.

It does not require a title to guarantee the loan and accepts less formal types of collateral and collateral substitutes making financing more accessible. It has used the traditional community based strength of grassroots people’s institutions like Gram Sabha and Gram Vikas Samiti to overcome arcane legal complications and necessity of elaborate documents.

The company has also done away with legal scrutiny which entails high costs and cumbersome procedures for borrowers. It is considered in housing industry circles as a path breaking initiative as it was a major hassle for microfinance borrowers.

Swarna Pragati is the first company to implement the concept of productive housing being
propagated by National Housing Bank. It is headed by A Ramesh Kumar who was the Chairman of NABARD’s Committee on Rural Habitat. The company has undertaken several research studies in Yavatmal viz., women empowerment through microfinance, need for housing and gap analysis on present products and product delivery channels available to the borrowers for a better understanding of the ground realities and needs, and improvements essential for serving the rural borrowers in a better and cost effective way.