Restructuring to Remain relevant

Restructuring to Remain relevant

Basix Social Enterprise Group started by providing solutions to enhance the income levels of rural India and now runs 13 entities for varying needs

S. MEERA

VIJAY MAHAJAN, FOUNDER, BASIX SOCIAL ENTERPRISE GROUP
VIJAY MAHAJAN, FOUNDER, BASIX SOCIAL ENTERPRISE GROUP

Vijay Mahajan, an IIT-Delhi and IIM-Ahmedabad graduate, who had worked in the field of rural livelihood promotion for 15 years since 1981, formed Basix Social Enterprise Group (Basix) of companies in 1996 to help the rural Indian population generate adequate income from its livelihoods. He realised that the greatest challenges rural India faced were low productivity, unmanaged risk, low access to market information and financial services, geographical and social exclusion and low-price realisation. He was joined in this venture by co-promoters Bharti Gupta Ramola, Head of Financial Sector Practice, PricewaterhouseCoopers, and Deep Joshi, rural development expert, and a graduate of MIT and the Sloan School, who had co-founded PRADAN, a leading NGO in the field of rural livelihood promotion.

When the Andhra Pradesh ordinance shook the micro-finance sector two years ago, the future of companies working in this space seemed uncertain. Basix, though, restructured its model to maintain its relevance and, today, works in 26 states of India and 6 countries overseas through its 13 group companies.

Experiencing the ups and downs

So far, Basix has touched the lives of over two million households in India and about 1,00,000 abroad. “There are several independent studies to show that people have enhanced their incomes, reduced the variability in incomes; avoided shocks due to adverse events, improved their productivity in agriculture and livestock activities; acquired new skills; linked with distant markets for input supply and output sales; and most importantly, organised themselves into producers’ groups to do things they could not do individually,” says Mahajan.

While the company has been able to achieve this due to its dedicated staff as well as local level leadership/managers, its greatest constraint/challenge was in raising adequate finance especially after the AP ordinance was issued.

To overcome this crisis, Basix stopped further loaning and recovered as much as it could of its previously issued loans so that it could repay banks to whatever extent possible. It sought corporate debt restructuring benefits and moved away from a pure interest income model to a fee-based model with a focus on maintaining a connect with customers. It established the other entities in its group and moved its trained staff from the MFI division to those entities. It opened nearly 4,000 common services centres with the support of the government and worked with banks to run and manage business correspondent outlets- as many as 2,500 have been opened, since then. It also collaborated with funding agencies to expand overseas while moving the government, RBI and others to favour MFIs with a more supportive policy. Most importantly, it talked to the media to improve the image of the MFI sector. It also had to reduce its operating expenditure by scaling down regular disbursement and reducing its staff to 1,460 from 10,240 in 2010.

In backward regions, underprivileged people, in addition to credit, need a whole range of agricultural and business development services such as input supply, training, technical assistance, market linkages.

Forming the triad

In 2011, Basix launched a range of specialised entities to address the continuing need for livelihood through a strategy it has termed as the ‘livelihood triad’. “In backward regions, underprivileged, in addition to credit, need a whole range of agricultural and business development services such as input supply, training, technical assistance, market linkages,” points out Mahajan. To offer these services in a cost-effective manner, poor households need to be organised into groups, informal associations and sometimes, cooperatives or producer companies. This in turn needs institutional development services, which Basix addresses through the livelihood triad model providing financial inclusion services, agricultural and business development services and institutional development services to its customers.

The holding company manages the investments and builds synergies across its corporate structure while each individual company meets specific needs of target customers in a cost-efficient, sustainable and profitable manner.

“We recognised that the problem of rural poverty in India cannot be solved with just grant support. So since inception, we have operated with commercial funding (loans, equity) and aimed to give a competitive rate of return to our investors so as to continually access mainstream capital,” explains Mahajan. Basix also uses grants for research, capacity building and public purposes. Individuals, funds such as The Acumen Fund and organisations such as the Michael and Susan Dell Foundation have been part of Basix’s journey.

Touching lives

Each of the Basix entities provides a specific set of livelihood promotion services for which it has been set up, in sync with the other livelihood triad services.

It provides comprehensive services to the rural poor and urban slum dwellers and has set up a group of financial institutions to provide access to financial services to micro- entrepreneurs and skill building institutions for creation of the jobs for the weaker and marginalised sections of society. Through its learning in India, Basix has also set up livelihood promotion models across the globe to reach out to the women, poor and disadvantaged especially in least developed countries. It is already working in Asia-Pacific and African regions.

Each entity is expected to earn enough to be sustainable so that the services being rendered to the customer continue to be delivered without interruption.

Interest and fee income for various services it renders to its customers; interest on micro- credit and fees for various technical support services rendered are some of the revenue streams. “The poor are willing to pay as they see value in the services they receive which leads to enhanced productivity and incomes; needless to add, every effort is made by Basix to ensure that the interest or fee charged is as low as possible so that poor can afford to pay the same,” stresses Mahajan. While the margin of earning is very slim, the volumes are large to make the model viable.

Riding on success

Basix has several milestones to its credit: it pioneered the SHG bank linkage model, introduced micro-insurance, pioneered the design of weather index-based crop insurance, was the first in the sector to carry out a portfolio securitisation deal in 2003 and has won several awards including the2009 Ramon Magsaysay Award for Deep Joshi, Director, Basix. Mahajan was selected among 60 outstanding social entrepreneurs of the world at the World Economic Forum, Davos in 2003, among “the 50 most influential Indians” by Business Week, Asia in 2009, and among “the twenty Indians who will lead India’s reforms this decade”, by the Financial Express in 2011.

Having now steadied its course with its livelihood triad model, Basix aims to become an engine of inclusive growth in India and in other developing countries across the globe by working synergistically with user communities, governments, banks, technology solutions providers, funding organisations, civil society and others to create an equitable and just society.


The 13 companies of Basix, function broadly under four categories:

  • Financial Inclusion Services companies– BhartiyaSamruddhi Finance Limited (BSFL), Krishna BhimaSamruddhi Local Area Bank (KBSLAB) and Basix Sub-K iTransactions to offer credit, savings, micro insurance, micro pension and last mile transactions services.
  • Livelihood Promotion Services companies – Agricultural and livestock development, skill building, and urban solid waste management.
  • Consulting Services companies: Inclusive Banking, institutional development both in India and least developed nations around the globe; energy, environment, climate change and adaptation with particular focus to mitigate the risk and minimise impact on the underprivileged and their livelihoods.
  • Non-profit affiliates – for incubating models in livelihood promotion, knowledge building through action research, R&D, HRD for the sector as a whole. 

Knowledge Partner:

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