BASIX Case Analysis

BASIX: Financial Support for the Rural Poor

in India

The focus of the case is a micro-­‐finance company in India called BASIX and its effort to provide

rainfall insurance to farmers in India, mainly in the state of Andra Pradesh.

BASIX was founded in 1996 with the mission of promoDng "sustainable livelihoods" to the rural

poor by providing them with financial services. Besides individual benefactors, the company

was supported by global development agencies (e.g. Ford FoundaDon) and soon grew to be one

of the biggest micro-­‐financers in India. The primary source of income for the company was

interest-­‐based revenue from lending although it had recently started to bundle life insurance

along with loans. Average loan size was approximately INR 8,800 for a term ranging from 11

months to 2 years and bore an annual interest of ~24%. Recent loan repayment rates for the

company was slightly lower than industry average (93% vs. 98%) largely due to drought

condiDons in India. BASIX's compeDDve advantage was aXributed to its penetraDon ability - it

worked directly with farmers in remote parts of the country that were not touched by other

providers.

BASIX's clients comprised of farmers who were overly dependent on agriculture for their

livelihood. Approximately 40% of their clients earned up to INR 3,000 per month, resulDng from

agricultural labor or culDvaDon. They grew a range of crops annually and had limited access to

irrigaDon, thus increasing their reliance on annual rains to provide a successful harvest. Majority

of their clients spent the year in debt/credit paying for seeds, ferDlizers and labor upfront and

repaying a^er the harvest. As such, they rely heavily on monsoon rains. Some years would have

liXle rainfall and adversely affect agricultural output. Other years would bring crop disease,

floods and devastaDng...