ABOUT SPANDANA SPHOORTY

‘Spandan’ is a Sankrit word that means Response. As Spandana was in fact born as a response to a deeply rooted need within the context of rural India, the organisation was rather fittingly named ‘Spandana’.

Spandana Sphoorty Financial Limited (“Spandana” or the “Company”) is a public limited company registered with Reserve Bank of India (RBI) as an NBFC-MFI. Spandana’s journey began in 1998 and within five years, the company grew to become the largest Micro finance Institution (MFI) in India and 6th largest MFI across globe by 2003. At its peak, Spandana had 1,856 branches with presence across 10 states and a work force of over 13,500 employees.

Spandana, founded by Mrs. Padmaja Reddy in 1998, was initially set up as a society which later transformed into an NBFC and then finally as an NBFC-MFI. Prior to founding Spandana, Mrs. Reddy worked at an NGO in Andhra Pradesh. The NGO’s motive was to help the underprivileged to build their homes, provide clean drinking water, sanitation, and health education. The NGO used to raise grants from different funding agencies to implement the aforementioned activities.

While working at this organisation, she happened to meet a rag picker and through their interaction, Mrs. Reddy learned that the rag picker earned approximately Rs.60 a day, of which she paid Rs.10 a day towards rent for a handcart and Rs.30 towards interest on the loan for some working capital. This left her with a meagre income of Rs.20 per day. The rag picker continued to explain her misery that her husband was not supportive to the household and that the whole family had to live out of this small income. The rag picker also mentioned that she started working as a rag picker when she was 12 years old and was working for the past 14 years. The rag picker had paid over Rs.40,000 rent for a cart that would have costed her Rs.1,500, had she bought the same off the market. She also mentioned that she was borrowing Rs.270 every day and re-paying Rs.300 on the same day to the money lender and moreover, was obligated to sell the scrap to him at a price dictated by him which was lower than the market price.

Mrs.Reddy told her that, over the years she paid over Rs.1,50,000 interest on a daily loan of Rs.270 which is paid back on the same day. When asked about why she did not start this business on her own, which would have helped her to save roughly Rs.2,00,000 she mentioned that without a home no formal institution would even look at her. Mrs. Reddy enquired whether she would be able to repay a loan if given the opportunity. Upon assurance from her, Rs.2,000 loan was given from that NGO. Out of this Rs.2,000 loan, the rag picker invested Rs.1,500 to buy a new handcart and the balance Rs.500 was used as working capital to buy scrap off customers. As she was no longer required to pay Rs.10 rent and Rs.30 towards interest to the money lender, from the very next day, her income increased from Rs.20 to Rs.60. The rag picker was overwhelmed and she shared this news with the other rag pickers in town, as well as vegetable vendors and fruit vendors who would push handcarts for their trading activity. She proudly showcased her new handcart to all of them and said that she is no longer taking a daily loan from the money lender on which she used to pay 10% a day. The news spread like wild fire and after two days, about 300+ women came to the NGO office to request for the same loan. Each one of them promised that they could easily repay the loan without any default and wanted a relief from the clutches of money lenders

lady in a grocery shop
A local lady makes the utensils.
A village lady spins yarn with her child.
Mrs. Reddy, convinced by the impact this small loan could create on the rag picker’s livelihood decided to scale up and extend support to other such women who are exploited by money lenders and are struggling to make ends meet. These women were so confident and honest that it made her believe that this activity, if scaled up, can significantly improve the socio-economic status of millions of poor families in India. This example has proven beyond doubt that women by nature are honest and at the same time very dynamic and enterprising. Given the required support, these women can bring about a change amongst themselves, their families, community and the whole Society at large. Unlike other developmental programmes where scalability and sustainability always remain a concern, this model of financing has the inherent strength of meeting its cost by which the business is sustainable with no dependency on grants and therefore can be scaled up to endless possibilities.
With this conviction, Mrs. Reddy wanted to scale up the programme by extending loans to many more women from the same NGO. While she did not get the required support internally, she decided to quit and start Spandana.
With that humble beginning in 1998, today the organisation has expanded its roots to 18 states across India with its Head Office in Hyderabad. It has over 1,010 branches and over 8,200 employees working at the Head Office and branches.