About Spandana Sphoorty

Spandan is a Sankrit word and it means Response. As Spandana was born in response to a problem, the Organisation was named as Spandana. Spandana is a public limited company registered with Reserve Bank of India (RBI) as an NBFC MFI. Started in 1998, within five years, by 2003, it grew to the largest Micro finance Institution in India and 6th largest across globe. In its peak, Spandana had 1,856 Branches with presence in 10 states and work force of over 13,500 employees.

Spandana was founded by Mrs. Padmaja Reddy in 1998 as a Society which was later transformed into an NBFC and subsequently as NBFC MFI. Mrs. Reddy, the Promoter and Managing Director of Spandana prior to founding Spandana used to work with an NGO in Andhra Pradesh. This NGO used to help poor people to build their houses, provide safe drinking water, sanitation, health education etc. The NGO used to raise grants from different funding agencies and implement these activities.

While working with this organisation, she happened to meet a rag picker and in her interactions with her, she came to know that the rag picker earns about Rs.60 per day, of which she was paying Rs.10 per day towards rent for the cart and Rs.30 towards interest on the loan and she is left with meagre income of Rs.20 per day. She explained her misery that the husband is not supportive and the whole family had to live out of this small income. When asked about, since how long she is doing this business, the rag picker said that she started it when she was 12 years old and was doing it for the past 14 years. She paid over Rs.40,000 rent for a cart that would have costed Rs.1,500- had she bought the same. She also said that she was borrowing Rs.270 everyday and paying back Rs.300 on the same day to the money lender and she was obligated to sell the scrap to him at a price dictated by him which is lower than the market price.

Ms.Reddy told her that she paid over Rs.1,50,000 interest on a 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 Rs.2,00,000 she said that she has no house and they are vagabonds and she never thought of availing a loan. Mrs. Reddy enquired on whether she would be able to repay the loan in case she is given a loan. 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 the cart and the balance Rs.500 she used it as a working capital to buy scrap. While she was not required to pay Rs.10 rent and Rs.30 towards interest to the money lender from next day onwards, her income increased from Rs.20 to Rs.60 while she started servicing loan by paying Rs.10 per day. The rag picker was overwhelmed and she shared it with other rag pickers, vegetable vendors and fruit vendors who use push cart for their trading activity. She proudly shown her new cart to all of them and said that she is not taking daily loan from the money lender anymore on which she used to pay 10% per day. The news spread like wild fire and after two days, about 300+ women came to the NGO office to request for the loan. Each one of them were promising that they could repay the loan without any default and wanted a relief from the clutches of money lenders.

Mrs. Reddy having been 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 being exploited by money lenders and are struggling to make both 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 very honest and the same time very dynamic and enterprising, given the support they can bring around a change amongst themselves, their families, community and the whole society. 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 boundless limits.

With this conviction she 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 1000 branches and over 7000 employees working at Corporate office and branches.