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Case study basix

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BASIX Case Study
1
Ashley Hubka
25 August 2004 v2
BASIX: A new generation rural livelihood promotion institution in India
Risk Mitigation
Customer selection and lending methodologies
Partnerships with other institutions
Helping customers to reduce their own risks
Insurance, including life, livestock and weather
Cost Reduction
Staff productivity enhancements
IT initiatives, including an ERP system, data mining, and a mobile computing solution
Culture
New hire training program
Learning and sharing mechanisms
Performance pay
Executive Summary
Established in 1996, BASIX has emerged as one of the leading microfinance institutions in India.
It is cited for its scale, creativity, commercial orientation, and collaborative philosophy in a
sector often marked by limited operations, routine approaches, donor dependence, and
territoriality. More specifically, BASIX has systematically addressed the twin issues of risk
mitigation and cost reduction with an eye to attracting investment from the mainstream capital
markets. At the same time, these actions have enabled the organization to maintain and expand
its lending in rural areas, including lending for agriculture in drought-prone geographies.
Context
BASIX is the name used to denote a group of companies, related to each other through the
following corporate structure:
Bhartiya Samruddhi Investments and Consulting Services, Ltd. (BASICS Ltd): “the
holding company, through which equity and debit investments are made in the group
companies”;
2
1
This case study is based on a July 2004 visit to BASIX that included meetings with Vijay Mahajan, Managing
Director; D. Sattaiah, Associate Vice President; V.Chandar Rao, Manager, IT Initiatives; and P. Narsaiah, Manager,
Livelihood Initiatives; as well as field visits to three villages in Mahaboobnagar District, Andhra Pradesh, and
attendance at BASIX’ Quarterly Review Meeting. The author is grateful to BASIX for their collaboration and
guidance; any errors remain the fault of the author.
2
www.basixindia.com.

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Bhartiya Samruddhi Finance Ltd. (Samruddhi): Launched in 1998, Samruddhi is the
the “flagship” company of the group. It is “an RBI [Reserve Bank of India] registered
NBFC [non-bank financial company], owned by major financial institutions and engaged
in microcredit and retailing insurance and providing technical assistance”;
3
Krishna Bhima Samruddhi Local Area Bank Ltd. (KBS LAB): “an RBI licensed
bank providing microcredit and savings services in three districts”
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in the Indian states of
Andhra Pradesh and Karnataka. KBS LAB has been operating since 2001, and “is the
only entity in the group that is able to provide all of the service components
acknowledged as being vital to microfinance, viz. credit, savings, insurance and more
recently, money transfer services”;
5
Indian Grameen Services (IGS): “a section 25, not-for-profit company engaged in
research and development and training related to livelihoods.”
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IGS makes investments
that cannot be recouped in the short-term, and receives separate funding from foundations
including the Swiss Agency for Development Cooperation, the Ford Foundation, the Sir
Ratan Tata Trust, and others. “IGS is focusing on building the knowledge base required
for supporting livelihoods and disseminating the knowledge so generated for building the
implementation capabilities of various organizations playing a critical role in supporting
livelihoods. IGS also carries out human resource and institutional development for the
BASIX group as well as for other rural/microfinance and community/producer
institutions. It also designed and developed financial products for extending credit,
evolving distribution channels for delivery of its services and developing necessary
systems for service delivery such as accounting and MIS”;
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and
Sarvodaya Nano Finance Ltd. (Sarvodaya): “an RBI registered NBFC, owned by
women’s self-help groups, and managed by BASICS Ltd.”
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In July 2001, BASICS Ltd
disposed off Sarvodaya Nano Finance Ltd to a group of community-based mutual benefit
trusts, whose members comprise over 5,000… [self-help groups] SHGs of poor women in
Tamil Nadu. The new owners signed a management agreement with BASICS Ltd. [to]
provide a wide-range of management services and assistance to Sarvodaya.”
9
Today, BASIX has approximately 150,000 borrowers and 8,600 savers in 7,800 villages in 10
states. BASIX has disbursed $37 million in loans since 1996; currently, 45% of loans are made
to women, and 49% for non-farm activities. However, BASIX conceives of itself, not as a
microfinance institution, but as “a new generation livelihood promotion institution.”
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In other
words, credit alone is not a complete solution. BASIX’s goal is to impact 1 million livelihoods
by 2010500,000 directly through financial services, and another 500,000 through indirect
3
www.basixindia.com.
4
www.basixindia.com.
5
BASIX Annual Report 2003-04.
6
www.basixindia.com.
7
www.basixindia.com/igs.asp.
8
www.basixinda.com.
9
www.basixindia.com/sarvodaya.asp.
10
www.basixindia.com.

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BASIX Case Study1 Ashley Hubka 25 August 2004 v2 BASIX: A new generation rural livelihood promotion institution in India Risk Mitigation Customer selection and lending methodologies Partnerships with other institutions Helping customers to reduce their own risks Insurance, including life, livestock and weather Cost Reduction Staff productivity enhancements IT initiatives, including an ERP system, data mining, and a mobile computing solution Culture New hire training program Learning and sharing mechanisms Performance pay Executive Summary Established in 1996, BASIX has emerged as one of the leading microfinance institutions in India. It is cited for its scale, creativity, commercial orientation, and collaborative philosophy in a sector often marked by limited operations, routine approaches, donor dependence, and territoriality. More specifically, BASIX has systematically addressed the twin issues of risk mitigation and cost reduction with an eye to attracting investment from the mainstream capital markets. At the same time, these actions have enabled the organization to maintain and expand its lending in rural areas, including lending for agriculture in drought-prone geographies. Context BASIX is the name used to denote a group of companies, related to each other through the following corporate structure: Bhartiya Samruddhi Investments and Consulting Services, Ltd. (BASICS Ltd): “the holding company, through which equity and debit investments are made ...
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