SEWA Grih Rin (Sitara)

Sitara was born from the legacy of SEWA Grih Rin. The company offers small loans to help low-income women in India build their credit histories and improve their living situations.

The problem

More than 65 million people live in India’s slums due to migration, rapid urbanization, and an ever-growing population. The government has estimated a shortage of 20 million homes in the country’s urban sprawls, which is expected to rise to 38 million by 2030. Despite the urgency of the crisis, there is a shortage of home loans available in India, particularly for the most vulnerable. Those who are formally employed can access bank loans, and people with formal property titles can borrow against them through microfinance and affordable housing lenders. However, citizens with informal property titles and informal incomes have access only to short-term, exploitatively high-rate loans as their sole credit option.

The solution

SEWA Grih Rin (Sitara) bridges the gap in the financial chain, offering loan access to low-income women in the informal sector to improve their living conditions.

While the government has affordable housing schemes, many women lack the benefits of ownership. Despite taking responsibility for upkeep and improvements, most women are unable to use their home as collateral for an improvement loan.

Sitara’s unique model is what enables them to lend to the most vulnerable households. They work to formalize a wide range of property documentation in order to grant loans to those who cannot obtain the land titles required for most financial services.

Sitara offers a range of financial loans for housing improvements and extensions, like roofs, staircases, and storefronts. The average ticket size of the majority of the loans is around INR 3.2 lakh (~$3,875 USD) and the tenure is approximately 10 years. The interest rate offered is between 18% to 20% which is typically lower than most microfinance institutions.

In 2012, Acumen developed an affordable housing thesis and identified a gap in access to finance for incremental housing. Low-income customers who did not have formal tenure and clear, mortgageable title were not being served by banks and housing finance companies. It was in this context that the Acumen team met with Shruti Gonsalves, the Managing Director and CEO of SEWA, and the SEWA group, and became interested in investing in the Sitara model.

The combination of the SEWA legacy and the unique target segment which had not been served at scale by other banks or non-bank financial institutions gathered interest from the National Housing Bank (the overseeing regulatory body for housing finance in India). The backing of the National Housing Bank had a positive effect on other investors considering the opportunity.

The Acumen investment team at the time also worked with Shruti to define the opportunity, refine the business plan, and bring together the right set of investors. Within the year, the team had secured commitments from a group of investors including leading banks and funds such as Acumen and Lok Capital.

“We didn’t have a proper home before taking a loan from SEWA but now we are living in a proper home just because of SEWA. So, the quality of life has surely improved.”

Customer of SEWA Grih Rin

The impact

Sitara has created the first successful housing loan product for borrowers without title. It has reached more than 15,000 borrowers over the last seven years. As of December 2022, ~90% of borrowers belonged to households earning less than INR 35,000 per month, with 41% earning less than INR 20,000.

In India, women own even less land than government estimates of more than 28%. Against this context, Sitara is helping women leverage informal housing titles — almost half of Sitara’s loans are registered by women. In a Lean Data survey conducted by 60 Decibels in 2019, more than 70% of customers reported that they felt more secure in their house and that their sense of home ownership had improved as a result.

“We were living in pathetic conditions earlier. Now all our difficulties are solved and we are happy.”

-Customer of SEWA Grih Rin

The investment

Acumen invested around ~$300,000 USD in equity in 2014, participating as a board member, and providing strategic accompaniment as Sitara launched its operations. In the initial launch phase, the Acumen team supported the founding team in identifying and hiring the chief financial and operation officers, setting up risk management and control committees, and bringing in international debt funders.

Sitara went on to raise equity from later-stage investors. By 2022, the company had secured an investment of ~$34 million USD and built a loan book of ~$46 million USD. In their latest Series D round, Acumen exited the investment at an attractive return through a secondary sale to a follow-on investor.

The story

SEWA, a trade union born from the struggles of underpaid textile workers, has always championed the cause of women’s empowerment. In 1972, Elaben Bhatt, a fearless advocate for equity and freedom, laid the foundation of SEWA with a vision of full employment and self-reliance for women. Today, SEWA boasts a membership of 2.1 million, a testament to its enduring legacy.

Part of SEWA’s vision is to empower women through asset creation, a critical step towards self-sufficiency. Leveraging the ethos of the SEWA network and the insights gained from the bank that provided loans to informal women workers in Gujarat, Shruti Gonsalves implemented the concept of a housing finance company that primarily served borrowers lacking formal title ownership. This gave birth to Sitara, a for-profit entity born from the legacy of the pioneering nonprofit organization.

Sitara was created to help achieve one of SEWA’s fundamental goals: asset increase for the poor. Its initial capital came from SEWA members: they provided INR 1 crore in seed funds for Sitara. But Sitara took a different approach from SEWA, one that involved raising equity from foreign investors and lending money to non-members.

There was some initial discomfort with the speed of growth, rates of interest, and the hiring of commercial risk officers. But this is not a unique problem; nonprofits that rely on for-profit business models to achieve their objectives often find themselves negotiating difficult tradeoffs. Successful organizations such as Sitara embraced the “productive tensions” of the social and commercial activities, and provided space to negotiate those tensions.

Building a sustainable for-profit institution within this context took a lot of grit – finding the right talent, paying market salaries, and creating appropriate incentive structures. But the focus on commercial rigor has paid returns, as Sitara has been able to grow quickly, but sustainably.

“All the partners are centered on the same ideologies; the core goal of all these institutions is to develop products or solutions that empower women socially or economically. Since the goal was the same, we were mission driven. The differences were with respect to how we achieved the goal,” says Shruti.

Today, Sitara stands tall as an example of how profit and purpose can go hand in hand. It proves that businesses can be incredible engines of social change, empowering individuals and communities while achieving financial sustainability.

Sitara’s journey is far from over. But its commitment to its mission, its belief in gender equality, and its ability to navigate the productive tensions between social impact and financial viability ensures that it will continue to illuminate the path towards a brighter future, where profit and purpose live in harmony.