Her dream seemed impossible, but she persisted — and 750,000 Indians benefited

How Swadhaar, RBL Bank, and Accion’s partnership spurred social progress and expanded microfinance in India

Nagarajan runs a bakery and snack shop in Ambalapattu Village. He's one of Swadhaar's 750,000 customers today.

While microfinance was taking off in rural India in the early 2000s, micro-entrepreneurs in cities still had limited access to the financial tools they needed to manage their businesses and pursue opportunities. The group loans for women that were popular in rural areas had not seen much traction in urban centers.

Veena Mankar decided to get to the bottom of this problem. After a lifelong career in international banking, she decided to focus on the poor and spend time visiting with micro-entrepreneurs in the urban neighborhoods in Mumbai. Through these visits, Veena saw that, while group products worked in rural settings where socioeconomic conditions were generally homogeneous, they fell short for people in cities, where the demographics are more diverse. Armed with this knowledge, Veena started Swadhaar FinAccess (SFA) as a nonprofit offering microcredit in urban areas.

When looking for partners to embark on this journey, Veena found Accion. While others insisted that offering individual loans to this segment would not be feasible, we saw the value in Veena’s plan and offered our encouragement. Veena soon realized that Accion’s expertise made us the perfect partner to help her enact her vision.

“Swadhaar always operated under three key pillars: the client, the employee, and the investors,” says Abhishek Agrawal, Accion’s Chief Regional Officer in India and former CFO of Swadhaar.  Veena’s client-focused vision meant not relying on “cookie-cutter” products, which made growing fast a challenge. Veena was also determined to form a team of highly motivated individuals, with competitive salaries, who were committed to Swadhaar’s mission and open to innovation. Many microfinance institutions at the time had their loan officers working six or even seven days a week, often living in or near the branch. She prioritized work-life balance and maintained a 5-day work week. Finding the right talent was hard, and the first year and a half involved a lot of turnover. Accion helped ease this process by sending some of our senior management staff, who could run with Veena’s vision, to work alongside the Swadhaar team.

The industry was skeptical of Swadhaar’s plan to launch new microfinance products and “spoil” employees with benefits. But still Veena persisted. “I started Swadhaar with the aim that after four or five years, it would have a big impact on customers, and it would have a big impact on the way the employees in the underserved sector are treated,” Veena says.

The biggest challenge of all was translating Veena’s research and vision into a viable product. In 2006, Swadhaar experimented with a hybrid of an individual and a joint loan for small groups of just three to four people. However, as it often happens with new business ventures, the first iterations were challenging. This type of product hadn’t been done before, and testing and adjusting it was a complex process, made even more complicated by the ongoing hunt for the right staff.

As Swadhaar expanded its offering, it also increased its territory. Accion sent more of our staff to work with Swadhaar as it grew beyond Mumbai, to make back-end operations more efficient and launch an individual loan product to serve the “missing middle,” micro and small merchants that needed access to credit. In 2008, when Swadhaar converted from a nonprofit to a microfinance institution called Swadhaar FinServe, Accion took a stake in the company.

Two years of significant expansion proceeded for Swadhaar, and the future seemed to be brighter. Then, in late 2010, the Andhra Pradesh crisis hit. Ultimately, new regulations, which included interest rate caps, meant Swadhaar could no longer afford to offer its individual loan product and had difficulties raising the funds required for on-lending.

Accion supported Swadhaar with a standby guarantee to continue the flow of funding and sent Abhishek Agrawal to be seconded as Swadhaar’s CFO. Mr. Agrawal led an initiative to partner with RBL Bank Limited to expand Swadhaar’s portfolio. In 2014, Swadhaar became a business correspondent exclusively for RBL Bank, sourcing and servicing group loans for the bank. With RBL Bank, Swadhaar’s clients can now access a broader array of products, including savings. It’s a win-win relationship, and Veena’s vision became a reality through this strong partnership.

“What I enjoyed the most about working with Accion is having a joint vision. Accion and I had a great clarity of what we wanted to do together. I am proud to say that our mission in Swadhaar has not changed since we started. We changed our product, we changed the way we implement it, we changed the way our operations are run, but we never had to change our mission. Accion had the same vision of bringing financial inclusion to underserved communities, the same vision of customer protection and customer service.”

– Veena Mankar, Swadhaar Founder & Chairperson

Despite being unable to offer individual loans, Swadhaar did not lose its vision of bringing underserved merchants access to credit. An opportunity arose when RBL Bank agreed to extend their partnership with Swadhaar to individual loans as well. While RBL Bank already successfully served micro and small entrepreneurs with limited formal income documents, the Bank hoped to expand its customer base into new geographies and to clients with no formal documentation.

In 2016, Swadhaar, with RBL Bank, relaunched the individual lending product — a small business loan to serve the “missing middle.”  The introduction of these loans involved a three-way partnership between Swadhaar, Accion, and RBL Bank, to design a product built on Accion’s global expertise, Swadhaar and RBL Bank’s experience in India, and controls that met the Bank’s internal requirements.

Today, Swadhaar distributes two main products for RBL Bank: group loans, for women, and individual loans, for male and female small merchants.

From Veena’s initial vision, Swadhaar has grown to serve more than 750,000 clients in 17 states. We’re now exiting our investment in Swadhaar, proud of what we’ve accomplished while working together. By mid-2018, Swadhaar was wholly owned by RBL Bank. This acquisition demonstrates the impact and effectiveness of Accion’s model. By staying true to Veena’s vision of bringing microfinance to unserved Indians, learning through trial and error, receiving support from Accion, and pursuing partnerships, Swadhaar has grown into a powerful force for financial inclusion. We’re confident that Swadhaar will continue to pursue Veena’s inclusive ideals and offer financial products that can transform the lives of low-income Indians.

Anjali Shahani contributed to this article.

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