Milaap - Field Report on GUARDIAN, MFI

Field Research Report on GUARDIAN – written and compiled by Milaap Microfunds

Milaap Field Report – Gramalaya Urban and Rural Development Initiatives (GUARDIAN)

Tiruchirapalli – 20 March, 2010

The Milaap team made its first field trip to GUARDIAN at Tiruchirapalli, an MFI focused on water and

sanitation (watsan) financing. This is the first of the series of field reports that Milaap will prepare as a

part of the ongoing partnership visits.

The office GUARDIAN, located in a quiet neighbourhood at Trichy, brims with activity on a Saturday – loan

officers who come from the field with daily reports, people working on computers to update the

database, others addressing concerns of borrowers; the regular activities of a Microfinance Institution

(MFI). An MFI making to the headlines is hardly a surprise these days given the attention Indian MFIs have

been eliciting from investors and the media alike. However, GUARDIAN stands apart from the rest, it is

the only MFI in the country solely dedicated to water and sanitation (watsan). It may sound odd to many

at present but that is true for any innovation in its nascent stage.

Today, MFIs have created the first level of social innovation by establishing delivery channels for credit,

but social development goes beyond credit to other fundamental needs like education, health, water as

well. Developing robust delivery channels for these needs would entail another generation of social

innovation. No doubt, it would gain immensely from the MFI experience, but the focused approach to

each of the services is essential to devise sustainable mechanisms. We reckon, from that small office in

Trichy, GUARDIAN is scripting a very important chapter in social innovation. The title of it – Water &

Sanitation for All!

The Organisation

GUARDIAN was incorporated in 2007 to cater for

watsan financing in the region. “Though

Gramalaya has been involved in water

development for two decades, the specialized

requirements for watsan financing led to the

incorporation of a separate MFI in the form of

GUARDIAN”, says Mr. Paul Sathianathan, the

Executive Director of GUARDIAN is his neatly

arranged office.

Mr. Sathianathan has been leading GUARDIAN

for the past two years post a five year stint with

Gramalya. An ex-Government employee, Mr.

Sathianathan stresses on the importance of

developing financial products adapted to needs

of the borrowers. Getting the right repayment

period is even more critical as it depends on the

difficult variables time for construction of the

facility, income levels etc. Naturally, close

connect with the community is essential to

operations at GUARDIAN. Equally important is

training the people at GUARDAIN and the

organization has been sending its people to

leading MFIs like BASIX, Grammen Koota,

Bandhan. Over the two years, GUARDIAN has

created resources trained in field operations,


loan process and management of back-end systems; all with a focus on watsan loans.

Processes at the back-end are being developed simultaneously. Detailed financial data, at the borrower

level, necessary not only to generate financial reports but also to monitor the entire business is being

managed by software provided by one of the best MFIs in the country. “We can generate reports as

required depending on the business scenario. For example, you can adjust the PAR values and check for

the risk associated with the portfolio or you could see the recoveries or group history”, says Mr. Senthil

Kumar, credit manager at the unit office, while enthusiastically explaining the features of the system.

The organization has gradually put the basics in place through small operations catering for nine blocks in

the Trichy district. Today, it understands the needs of the people, can design relevant financing structures,

has trained people and has systems to monitor and report – all ingredients in place for replicating and

scaling up.

Strong Connection with the Community

This report needs a special mention for Mr. Senthil and his colleage Mr. Selvan, who were with the Milaap

team throughout the day; explaining the operations, showing the systems, helping interact with credit

officers and finally accompanying to the

community visit to Gorimedu and

Wannarapettai, two nearby slum areas.

GUARDIAN has done extensive sanitation

financing programmes, of loan sizes of INR

10,000, in Gorimedu. The satisfaction of

people was evident in the warm reception

given to us by Janaki, the group leader of the

area. The presence of Mr. Senthil ensured an

easy interaction with most of the other

members, reflecting the high level of trust

GUARDIAN has developed over the years.

Janaki manages details of every loan in the

group – origination, disbursement, utilization

and repayment. A sense of pride beams across Janaki as she explains the book-keeping methods and

browses through separate files managed for each JLG. Mr. Selvan was there all the time – doing the

translations, taking to new borrowers, explaining how people have come up with solutions under

constraints. The urge amongst people to improve their lives was strong and it reflected in the

surroundings; that “slum” could easily be categorized as a developed colony in many of the Indian cities.

Standardisation is the key

The MFI industry in India has thrived under tough conditions – no credit information, illiteracy,

inaccessibility and a society resistant to change. Among the many social innovations this sector has

fostered, standardisation lies at the core of its success story. It’s entrenched in the very lifeline of an MFI –

the working of a loan officer, reporting, loan products, back-end systems, people management; it’s

omnipresent. Years of arduous efforts in standardization are at the root of rapid scale-up that has

catapulted this sector into mainstream investments.

This is exactly where GUARDIAN holds the promise. Over the years, the organization has gained

knowledge to standardize watsan loans and create a pool of trained staff. “People need to be educated

on need for clean water and sanitation. You need to be aware of their living conditions and needs before

pushing for a loan. Then processes and cross checks have to be strictly followed” says Ramya, one of the

credit officers, with a bubbly smile. Her training and experience in watsan requirements and knowledge of


the processes evident in the discussion. Educating the community on sanitation requirements is essential

to generate demand for loans. Standardisation is hence essential to rapidly train the JLG members and

also assist them whenever required. Ramya remarks, “Initially, the first briefing, took nearly an hour and a

half; but now I can explain new JLGs everything in half the time because I know what’s most relevant to

them” – this learning curve is fundamental to achieve scale. Presence of trained staff at the ground level is

essential to manage cost of operations and eventually develop a

robust replicable business model.

It also helps GUARDIAN build the knowledge base to acclimatize

quickly to local conditions or assist its borrowers to think of

innovative solutions. For example, low pressure of water supply in

Wannarapettai, the second area of field visit, makes taps redundant

above the ground level.

The solution comes in the form of a concrete tank dug near the water

connection for every household. The connections are five feet below

the ground level with a concrete staircase leading to the base. The

structure acts an open storage tank as well. Even the people

constructing them are acquainted with the structure, leading to

reduction in planning time and eventually the costs. It immediately

translates to demand for more loans, proper utilization, faster

recovery periods and zero defaults for GUARDIAN.

The Story So Far

The Self Help Groups (SHGs) nurtured by Gramalaya formed the first consumer base for GUARDIAN. The

organization has started following the Joint Liability Group (JLG) model to scale up rapidly. Since it’s

inception in 2007, the cumulative disbursement has been approximately INR 54 million benefiting over

8000 borrowers of 1400 groups. Capacity building – training of staff, setting up IT systems and managing

the initial phase of operations, has been supported by Water.org. A credit facility of approximately INR 35

million from Indian Overseas Bank is the main source of funds.

Currently the loan programme has five loan products ranging from INR 3000, for water purifiers, to INR

10,000, for construction of sanitation facilities. It currently has three branches serving nine blocks of

Tiruchirapalli district. Till now GUARDIAN has controlled operations to a small scale and within a focus

area to learn and develop robust processes. The current interest rate of 18% diminishing is better than

industry standards and has contributed to consolidation of its member base. Steady source of funds is one

of the major requirements for the organization. “We have enough fund absorption capacity in the existing

unit offices. A steady flow of funds to essential to smoothen the lending process and that’s our top

priority for now. Initiatives like Milaap can really help us stabilize the fund flow and eventually expand to

other districts” marks Mr. Sathianathan. No doubt, innovative models take time to get attention of

bankers or investors. Hence, we at Milaap, were

convinced that organisations like GUARDIAN provide the

perfect scope utilizing retail capital for social innovation.

Water.org and World Water Day Celebrations

An eventful afternoon awaited us after a after a

sumptuous Chettinad lunch with the GUARDIAN team. For

the unfortunate, who callously limit the Tamil cuisine to

dosai, idli, vada and vada-sambar, Chettinad dishes will

come as a nice spicy surprise. Discussions with Mr.


Damodaran, Country Director, and Mr. Jose, Manager of MFI Programmes, at the water.org office were

eye-openers on the number of different models that are being tried to help MFIs and NGOs build

sustainable watsan initiatives. Mr. Damodaran, a twenty year veteran in the social water sector and the

founder of Gramalya, heads water.org operations in India and has been instrumental in identifying

opportunities with big and small partners. The portfolio includes BASIX, BISWA, Grameen Koota,

GUARDIAN and many other NGOs. “We are aiming at best utilization of water.org funds and develop

funding programmes attuned to the requirements of the communities. We have specialists for watsan

loans of MFIs and revolving loan funds for NGO. The models are innovative and it will need patience. I am

happy that organization like Milaap is stepping forward to foster such grass root innovations”, remarks a

confident Damodaran, years of experience reflecting in the talk.

Participation in the Longest-toilet-queue initiative was

another remarkable event for the Milaap team.

Volunteers braved the heat to gather at the Cauvery

Bridge with immense enthusiasm. A gathering of five-

hundred people without clogging the road beside – the

discipline was exemplary. An equally disciplined

gathering in the local community hall marked the end of

the brilliant day. It also provided the opportunity to

interact with Arnie Heather, who leads the International

Programmes at water.org. Her international experience

and on her optimism with India, on harbingering the

social innovation in water and sanitation, were great to

know about.

The Milaap team thanks all involved for the fantastic day. It was visible to us that clean water and

sanitation has finally made beyond school text books and is well on its way to become a reality. Watch out

for GUARDIAN as it leads the change!


Photographs from the filed trip

Mr. Damodaran, Country Director, Water.org Mr. Sathianathan, ED, GUARDIAN

Mr. Senthil & Mr. Selvan of GUARDIAN JLG operations explained to the Milaap team

One of the sanitation facilities in Gorimendu Water connection in Wannarapettai


Water day celebrations – the longest toilet queue initiative

Economy & Finance

Milaap - Field Report on GUARDIAN, MFI