| Abstract: |
The paper traces the evolution of Spandana group of institutions. At the
outset we explore the background of Spandana, the motivation for the promoters
to set up the organisation and how it has aggressively grown from the time it
was set up. The organisation reached a stage where transformation became
inevitable and this change happened in a very quick time. As a part of the
study, we examine the unique issues arising out of fund movement (in the form
of debt or equity) between an organisation incorporated for public purposes
and a for-profit entity that would generate profits to the shareholders. The
paper examines how these two seemingly contradictory aspects could be
reconciled. The structural options available and how they jell with the
orientation of the promoters are examined. We examine how the organisation has
experimented with various options in carrying out its financial services and
trading activities. We conclude that while the current legal environment did
place some constraints on how the organisation’s design got determined, there
were issues about the quality of governance available to the organisation
during its initial years. Spandana demonstrates that there is a huge potential
for many MFIs to operate both in the urban and rural space. The fact that it
could garner a portfolio of Rs. 2.4 billion in a fairly limited area and time
demonstrates the size of the potential market that could be served by
microfinance. In undertaking activities at such scale, any organisation would
face hurdles. This paper looks at the hurdles caused by the regulatory regime
that forces organisations to take fairly circuitous routes to achieve obvious
results in the organisational form. It also deals with the other services that
were being offered by Spandana and how these had to be dropped due to
regulatory requirements. The study concludes by drawing important lessons,
raising further issues for regulation by bringing out the peculiar
circumstances in which Spandana and similar organisations are working. |