The Most Trusted Microfinance Companies May2022 - Insights Success

Lighting lives up

Ahmedabad-based Light Microfinance is leveraging its technology to drive the next generaon of digital lending for Bharat.

Editor’s Note

MARCHING INTO THE GOLDEN ERA OF MICROFINANCE

The role of microfinance in the upliftment of

financially excluded sections of the society is immense. Being the world’s sixth-largest developing economy and on its way to becoming a developed economy, India’s central bank comprehends this astutely.

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In this regard, March 14, 2022, will be seen in the future as the opening up of a golden chapter in India’s microfinance growth story. On this very day, the Reserve Bank of India (RBI) came up with new directives for microfinance lending. RBI further stated that all banking and financial entities, including Banks, Non-Banking Financial Institutions (NBFCs), and Microfinance Institutions (MFIs), will be subjected to these same regulations.

RBI also redefined microfinance loans as ‘collateral-free’ loans granted to any household with an annual household income of rupees three lakhs, erasing the earlier rural-urban divide and treating all these households qualified for the

microfinance guidelines microfinance depending needs. players, Battling industry disbursements of 2022 efficiency ninety-six

This efficiency, microfinance not lending to conduct

Abhishek Joshi Deputy Editor abhishek.joshi@insightssuccess.com

this future as microfinance India (MFIs), ‘collateral-free’ household rural-urban

microfinance loans under these new regulations. The guidelines are tremendously positive for the entire microfinance industry and the millions of borrowers depending on the industry to fulfil their basic financial needs. It will also expand the microfinance market for the players, creating a level playing field.

Battling various crises, including the COVID pandemic, the industry is again showing the signs of recovery with higher disbursements by microfinance players in the two quarters of 2022 than at the pre-COVID level. Also, the collection efficiency of these players was enhanced by reaching ninety-six to ninety-eight per cent level by February 2022.

This recent growth could be attributed to the scope, efficiency, and reliability achieved by some of the best microfinance institutions in the country. These MFIs were not only adhering to the strictest of norms when it came to lending and collection but also showing other players how to conduct the social business of poverty alleviation. And

with the RBIs new policy, these MFIs benchmarks will be emulated by all the other players in the industry.

To bring out and celebrate the stories of these exceptional MFIs, Insights Success’s exclusive edition of ‘ The Most Trusted Microfinance Companies ’ has interviewed the exemplary leaders of these social business enterprises and depicted their successful achievements against all odds in the following pages for you.

Also included in the edition are two trendy articles on the microfinance sector, curated by our in-house editorial team.

Let us march into this upcoming golden era of Indian microfinance together . Flip on the pages, read, learn, and enjoy!

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Light Micronance Enlightening Homes

The Most Trusted Companies MICRO FINANCE

Management Brief Company Name

Bishwajit Das, Founder and CEO

FedBank Financial Services Ltd.

Indi Trade

Light Microfinance Private Limited

Pahal Financial Services Pvt Ltd

SATYA MicroCapital Limited

Sindhuja Microcredit Pvt Ltd

Anil Kothuri, MD and CEO

BJS uses Microfinance as a tool for poverty alleviation and the empowerment of women of the poorest section of the society.

Fedbank Financial Services Ltd (Fedfina) caters to products like Gold Loan, Home Loan, Loan Against Property (LAP) and Business Loan.

Sudip Bandyopadhyay, Director Inditrade Capital Ltd. is focused on ‘Financial Progress’ and catering to the underserved and under-serviced segments of the population

Rakesh Kumar, CEO

Purvi Bavsar, Managing Director

Headquartered in Ahmedabad, Gujarat, Light Microfinance provides micro and meso finance products and services with gender and povertyfocused programs, targeting rural and peri-urban areas, with a specific focus on poor women.

Pahal Financial Services provides microfinance services to lowincome households.

Mr. Vivek Tiwari, MD, CEO and CIO

Malkit Didyala, Co-Founder and COO

SATYA MicroCapital Limited is emerging as one of the fastestgrowing Highly Technology-driven Micro Finance Institutions in the country.

Sindhuja Microcredit (Sindhuja) is a new generation Micro Finance Company which offers credit products like Micro Finance and Micro Enterprise Loan, insurance, pension and other services to its customers.

Belghoria Janakalyan Samity

Enlightening Homes

Founders Deepak Amin, Rakesh Kumar and Aviral Saini interacting with their women customers at Kaniyal village in Gujarat.

COVER STORY

Leaving their daily chores, women of Kaniyal village in Gujarat’s Kheda district were today stealing some time for themselves. These few hours were away from their daily struggle of life, taking care of home, children, farm and cattle. There was so much to talk and discuss with the guests from Ahmedabad that these women arrived before time.

Most of them were young and beaming with confidence. There was a smile of accomplishment. When 25-year-old Baraiya Vinaben Chaatrasinh was asked what’s so important about today’s meeting, she said, “I want to ask them if the loan amount could be increased next time. When will they start giving loans for other purposes like buying a smartphone, motorcycle and building a house?”

The Light Microfinance founders Deepak Amin, Rakesh Kumar and Aviral Saini encourage these women to share their thoughts, grievances and opportunities. The three founders try to keep their pulse on the ground with their clients. The visits are like a family get-together where trust is paramount and everyone can talk freely. “We are field persons and love to engage with our clients. The feedback is raw and straight, which we respect and want. It helps us to look for new engagements and new opportunities for expanding to new areas,” says Deepak.

Microfinance in India is playing a vital role in rural women’s empowerment. Despite challenging times like COVID-19, the rural women workforce recorded 9.2% growth in 2021 compared to 2020 and microfinance played a significant role in enabling that. Light Microfinance client Sheetal Ben (25) is one of them.

She says, “My kids are one and 3-years-old, so I wanted an opportunity where I could work from home and not compromise with my daily chores.” She and her companions Kamla, Sajan and Jamili took a loan of Rs 60,000 each to buy milch cattle and supplement household income for their growing needs like children’s education, health, food, etc.

These women attribute this empowerment to Kalpesh Kumar, senior field executive, who introduced them to an opportunity with Light Microfinance. They say he instilled confidence in them and explained the working of microfinance in detail. What attracted them most was doorstep delivery for everything. “The paperwork and

instalment collections are all done from within the village or at the doorstep of our house and we don’t have to waste any extra time to visit any office. It’s a big relief,” women added.

Ahmedabad-based Light Microfinance (Light) is a privately held NBFC-MFI registered and regulated by the Reserve Bank of India. Today, it caters to over 3.09 lakh borrowers with a wide array of products. They are serviced through 125 branches across 68 districts of Gujarat, Rajasthan, Madhya Pradesh and Haryana.

Backed by three leading European impact investors, Nordic Microfinance Initiative, Incofin and Triple Jump, Light’s footprint is expanding and its gross NPA is lowest among the microfinance industry.

Light’s CEO Rakesh Kumar says, “Motivated employees, customer-centric products, unique credit underwriting and massive technology intervention are key factors for Light’s growth. Our employee and customer selection are very rigorous and those selected get a unique experience with the company. Light is an attractive place for field executives for one of the best compensation, local hiring, growth opportunities and work-life balance. On the back of strong credit underwriting, the company provides higher ticket loans with a convenient EMI size and monthly repayment frequency to its qualified borrowers. Light is typically the preferred lender to its borrowers wherever it operates.”

According to microfinance industry body MFIN (Microfinance Institutions Network), as of Sept 30, 2021, 3.1 crore clients have a loan outstanding from NBFC-MFIs, which is 3.2% higher than clients as of Sept 30, 2020. The aggregate GLP of MFIs is Rs 81,408 Cr as of Sept 30, 2021, including an owned portfolio of Rs 71,010 Cr and managed portfolio (off BS) of Rs 10,398 Cr.

Light’s CFO Aviral Saini says, “In an Industry where weekly repayments account for 43% of the disbursements, Light’s unique service proposition includes hassle freerenewal process and flexibility in repayments. We provide higher ticket loans to customers if they have sufficient cash flow and good credit record”. The company uses AI (Artificial Intelligence) and ML (Machine Learning) for credit underwriting and operational insights like attrition prediction, collection, and loss forecasting. Light Microfinance was one of the first MFIs to build an in-house

GPS-enabled adopt has technologies company’s industry in technology, The have pucca income name company are borrowers the the During on business

The Most Trusted Microfinance Companies

the 2021, NBFC-MFIs, The disbursements, provide cash in-house

GPS-enabled end-to-end mobile app in 2014 and the first to adopt cloud for its core loan management software. Light has been investing in innovative and leading-edge technologies and processes since its inception. The company’s growth with one of the best asset qualities in the industry is a result of continuous and long-term investment in technology, systems and people.

The lives of women associated with Light Microfinance have seen a significant improvement that includes building pucca houses, financing children's education, regular income to support uncertain times like the pandemic, to name a few. The experience of these women with the company has been excellent, according to them. Customers are given top priority at the company. As a result, many borrowers are either repeat customers or are in talks with the company to take another loan once they have finished the current loan.

During the ongoing COVID-19 crisis, the company focused on business fundamentals, technology led interventions and

responded to problems proactively. It retained all its employees and provided them with the perks and incentives to keep them motivated when the industry saw shedding of staff.

“It feels like a family at Light and the last two COVID-19 years have strengthened this belief. Since 2020, when the lockdown was announced, I would hear stories of pink slips being handed over from family and friends. Still, my family and I had a sound sleep with no fear of job loss,” says Jigar Jodhani, working as an Assistant IT Manager with the company for the last six years. Jigar defines the work environment as exciting with ample opportunities to grow.

Light’s inception story is as intriguing as its journey. Deepak spent a lot of his childhood time in his ancestral village in north Gujarat and has been a witness to financial and livelihood hardships.

From the 1980s to the late ’90s, Deepak worked in Microsoft at the US head office in Seattle. He was closely

village waste women privately borrowers Nordic among employees, and Light’s the for strong repayment

Management team of Light Microfinance.

involved with various international charities and NGOs but felt he wanted to do more where he was directly working in the field with the beneficiaries. He came back to India ready to take the plunge with constructive solutions.

He felt the need to contribute in a scalable manner and adopt a model which is sustainable. Given his role as a technology advisor to Noble laurate Dr Muhammad Yunus’s Grameen Foundation, he felt starting a microfinance company in India would help him to impact lives of economically weaker women directly.

Deepak says, “We wanted a model that was empowering, sustainable and scalable. It should have financial discipline concepts like budgeting, spending judiciously, repaying, etc., which is missing today in this segment. I don’t blame people for lack of financial planning because it’s never taught. We learn it as we grow much later in life. Besides, such concepts are difficult to practice and easy to preach with irregular incomes.” That’s when he got convinced that microfinance was a compelling model to address the needs of the financially excluded segments of India.

Deepak says he is fortunate to have a core founding team in Rakesh and Aviral and a world class management team. The

partnership between the three is now over a decade old and the management team at Light Microfinance has one of the best talents in the industry.

Rakesh says, “What I like about Deepak is that he is clear with the company’s roadmap. He brings lots of insights from his all-around experience of setting multiple enterprises particularly in technology, while my engagement is focussed on execution, team building, setting system and processes for scaling.” Rakesh is a postgraduate from the Institute of Rural Management, Anand (IRMA) and is known in the microfinance industry for implementing microcredit lending in Bihar known as Bihar experiment.

Like many Indians and Deepak, Aviral had returned from Canada with a zeal to do something to build the nation with his business and technology expertise. Aviral says, “My role of being a financial discipline leader was very intriguing for me too. We were technology as well as customer-focused. We believed in prudent spending and our long term vision matched.”

He points out that the company’s core principle never hampered its growth. Difficult times of COVID-19 and lockdown were handled in a humane and financially

prudent as the company demand The came and company product vision deprived, innovation.

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Branch Credit Manager Kalyani Vaniya undertaking document verification.

and the clear setting postgraduate implementing experiment. from with role for customer-focused. vision

prudent manner keeping its customer and 1600 employees as the focus. There were no pink slips and salary cuts. The company aligned its philosophy to bridge the supply and demand gap for credit need of customers.

The trio had the advantage of being early movers when they came up with efficient and world-class cost-effective, timely and technology-driven customer focused products. The company aligned its philosophy to bridge the credit and product gap for the customers. The company holds a strong vision of expanding its customer base and reaching more deprived, unserved and underserved societies with innovation.

When asked, ‘How do you see the evolution of microfinance,’ the team shared

Microfinance is still in a developing stage. Since 2010, microfinance has gained huge traction among rural India. The government has realized the sector’s potential and clearly indicated its intent to nurture the sector. It has become an essential tool for financial inclusion and poverty alleviation.

The strengthening of the regulatory framework by RBI is making it a more attractive option for investors and lenders while ensuring fair and inclusive treatment of the customers. Simultaneously, efforts are being made to make it a level playing field for all entities in microfinance sector.

The banking license for microfinance was a shot in the arm. In the new microfinance landscape, you can see old players embracing new technologies to expand their footprint, while new players are experimenting with new delivery mechanisms and products. Artificial Intelligence (AI) and Machine Learning (ML) will become essential tools. The fact is that existing companies have not been able to tap even half of the market potential.

The new microfinance lending system announced by RBI could see digitization. Submitting documents using home coordinates, online payment, instalment repayments through payment wallets, etc. Like India, Bharat is also embracing technology and entrepreneurship opportunities with full gusto and microfinance is a key driving force.

Bishwajit Das

Founder and CEO

Social Upliftment through Microfinance

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Poverty alleviation and women empowerment are the two guaranteed solutions for societal development and national prosperity. And microfinance is the surest answer to the question of holistic development of the weaker section of the society, especially women and children.

In this mission, Belghoria Janakalyan Samity (BJS) began its noble journey as a non-governmental, nonprofitable organisation for social upliftment by poverty alleviation and women empowerment through microfinance. It is registered under the West Bengal Societies Registration Act XXVI of 1961.

Over the years, BJS could maintain a steady growth of the services and placed itself in a reputed position in the industry because of the indomitable spirit of its Founder Bishwajit Das , who is also its Chief Executive Officer (CEO). BJS grew due to his strong determination, commitment, hard work, and honest appeals to its holistic task.

“Above all, these achievements would not be possible if the clients could not keep trust and faith in our commitments,” stated Mr Das. He spoke with Insights Success for its edition of “The Most Trusted Microfinance Companies”. In a candid discussion, Mr Das spoke about the microfinance industry in general and particularly his and BJS’s journey in it so far.

Below are the excerpts of his compassionate wisdom.

Sir, please give our audience a brief overview of your journey in BJS. I came from a very simple lower-middle-class family seeing many odds and obstructions in daily life from my early boyhood. I could understand the agony of the distressed people of my class or lower. Therefore, I had a very positive mindset to stand beside the neighbouring people of my area, relatives, associates and friends in case of need to help in any situation.

With almost six years of working experience in a reputed organisation in the microfinance field and social development sector, I started the operation of BJS in 2006. This was the result of my thinking to do something for the class of people formally that I nurtured in my mind from my boyhood.

In the early years, we had faced many obstructions, particularly a fund crisis when there was a massive demand in the field, but we didn’t have many resources. In the first three years, we could not arrange any financial assistance from any bank. We got our first loan from the State Bank of India in 2009 and got sub-debt equity from SIDBI in 2012. The operation got the momentum in 2014, and afterwards, at a point in time total number of lenders rose to 19. Geographical penetration now encompasses seven districts of West Bengal, and 27 branches are involved in the operation.

Tell us more about BJS, its vision, and the key aspects of its stronghold in the Microfinance space. BJS is a social development organisation working for the livelihood generation by promoting enterprise development among the poorer and downtrodden class. The motto is to alleviate poverty through the financial inclusion of the unserved class of women.

Through these activities, the vision is to build a happy and prosperous society through the overall development of the people, especially women and children, by ensuring their strong and active participation. Over the last fifty years of operational history, microfinance has evolved as a powerful tool for poverty alleviation, women empowerment, economic development, and establishing a peaceful society.

This is the largest industry wherein the highest number of people in the world are engaged for their livelihood activities. BJS became the part of this vast and noble work, and we feel proud that we, the people in the organisation, are involved in such a work where we are not doing the work for ourselves only, but also some people of the society are getting some benefit out of our work. This gives us immense pleasure, pleasantly driving us for the next day’s work.

From a business leadership perspective, what is your opinion on the impact of the COVID-19 pandemic on the Microfinance Industry?

We cannot dream of a society keeping aside this sector. On the other hand, our vision is a long-term process. As you know, the resources and capacity are also limited; achieving the goal of having a happy and prosperous society is required to support the targeted sector continuously.

The Most Trusted Microfinance Companies

But in the CIOVID-19 pandemic, the process had been disrupted profoundly in two ways. For example, unavailability of resources to deploy among the members of the sector, and most people in the industry were also unable to do their work for their livelihood earning.

In fact, the pandemic pushed the development vehicle backwards by a huge gap. Most of our microfinance borrowers could not do any work for a long period, and they have consumed their small savings and other resources that they had in their hands.

At some point in time, a big uncertainty engulfed the hope of the life of many people. There was a very big blow on the microfinance sector, and it may take several years to recover the position as it was immediately before the pandemic started.

What efforts did you take during the pandemic to sustain operations and ensure the safety of your team at the same time?

A few months during the initial lockdown period, the operation at the field was totally closed. However, we kept close contact over the mobile phone with our borrowers. We gave them motivational thoughts and safety tips to protect themselves and their families from getting infected by the coronavirus and combat the virus if infected. At the first step of the new normal period, the field level staff met the borrowers at their house, kept probable safety measures, and handed over two pieces of soap to each member to wash hands regularly. We have arranged a sufficient number of masks and sanitisers for all our staff.

What is your opinion on the necessity for Microfinance companies to align their offerings with technologies like AI and ML?

In the digitisation process, AI and ML are coming as an integral part in all sectors. However, it may take more time to take the benefit of AI and ML in our field as the

infrastructure development and the digital learning among our targeted class of people is still too far and lagging behind.

As an established industry leader, what would be your advice to the budding entrepreneurs and enthusiasts aspiring to venture into the Microfinance Space?

Presently the state-wise Microfinance Penetration Index (MPI) shows a big gap between the requirement and coverage. The MPI of southern states is around 62%, and that in the eastern states around 21%. In central, western, north and north-eastern states, the MPI is below 10.

Therefore, budding entrepreneurs have the opportunity to work in many vacant places. The only requirement is to have a positive mindset to render the service and build up a strong, dedicated team.

How do you envision further strengthening BJS’s stronghold in 2022 and beyond?

We have faced many challenges over the last 16 years and have kept the organisation on the right trajectory. This had been possible with the support of all our bankers, our mentors, the governing body members, and last but not least, our workforce – our people in the organisation.

With the people's intense level of motivation, the organisation will continue with its mission beyond 2022, particularly in this post-pandemic period. We know still we have to go many miles more, and we will continue to do so.

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How Micro Finance is Changing the Rural Landscape?

India, being a developing country, a significant part of its population still resides in rural areas. Therefore, the overall development of the economy totally depends on the parallel growth of its rural economy.

The key idea of microfinance is to uplift the earnings of rural people. In the past half-century, the concept of microfinance has gained massive importance and impetus in India through the support of cooperative societies and its MFI model. Fundamentally, it is meant for tiny farmers, households, small businessmen and cottage industries in order to carry out their routine business activities.

Microfinance is emerging as an anti-poverty vaccine in India by offering wide-ranging financial services to the people of low-income groups, especially in rural areas who cannot take bank assistance.

As Microfinance is providing financial services such as savings accounts, insurance funds, and credit, the rural people are also observing improvement in their standard of living. The essential feature of microfinance is that it provides loans without security.

As microfinance loans are provided with no collateral, the borrower is not bound to pledge something as security for repayment of these loans.

It also offers a better overall loan repayment rate than traditional banking products and enhances the possibility of future investments as it is a sustainable process.

Through their NGOs, they improve saving habits among poor people. There are Self Help Groups (SHGs), where the members of these groups get loans and advances through the financial resources produced through savings and microcredit obtained from banks. In this way, microfinance institutions help in the mobilization of savings and using the same for the welfare of their members.

Microfinance also supports women's empowerment. In the year 1992, NABARD initiated the SHG-Bank Linkage Programme (SBLP). This programme motivated women belonging to financially backward classes to unite and form a group of 10-15 members. These women gave their individual savings to the group at regular intervals. Then, the members of the group got loans from their contributions. Later, self-help groups (SHG) also provided loans for income-generating activities.

Another financial service that borrowers of microloans get is Microinsurance. The premiums for these insurance plans are lower than traditional insurance policies. The significance of microinsurance is that it is the machinery to protect the poor people from all the mishaps that might take place in future—for instance, chronic diseases, Accidents etc.

Microfinance makes insurance plans by studying all kinds of risks that people of low-income groups or poor people face worldwide.

To reduce poverty in rural areas, the significant step is to create employment and provide an income-generating opportunity for the poor rural people. The main objective of people participating in the microfinance program is to get access to credit funds to start micro-business and create self-employment at the local level.

Rural people invest the amount of money received from microloans to operate small retail shops like grocery, cosmetics, furniture, and food processing. They also run service industries like- beauty parlours, tailoring, photo studio, and hotel restaurant.

In villages, there are agro-based enterprises like vegetable farming, pig farming, poultry farming, and goat farming. As microfinance provides loans, creating self-employment at the local level with the help of these industries is possible for rural people.

The lack of financial stability results in creating barriers to the education of children of poor families. These barriers also include lack of transportation facilities in rural areas, inability to afford schoolbooks and uniforms, as well as lost hours of child labour that would contribute to family income.

Microfinance institutions specifically give loans to women, as women are likely to place more importance on educating their children than men. This results in increased household expenditure on education. So, in this way, Microfinance is supporting both women's empowerment and child education.

The Future Course

No country can progress by neglecting its rural people. India is an agricultural country; more than 65% of people live in villages. So, if India wants to prosper, it has to take necessary actions to uplift the rural people's lives.

In recent years, Microfinance is emerging as a boon for rural people. By providing various financial services, it focuses on assisting economically excluded communities in achieving a greater level of asset creation and income security at the household and community level.

-Pooja Jaipal

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A Quest to make Micro-Lending Better Microfinance

Microfinance institutes and organizations play a significant role in the development of India. It acts as an antipoverty vaccine for the people living in rural areas. It aims to assist economically excluded communities in achieving a greater level of asset creation and income security at the household and community levels.

The utmost significance of microfinance in India is that it dispenses access to capital to small entrepreneurs. Microfinance organizations and institutes in India provide loans, insurance, access to savings accounts.

Moreover, the concept of microfinance focuses on women also by granting them loans. It acts as a tool for the empowerment of poor women as women are becoming independent, they can contribute directly to the wellbeing of their families, and they can confront all the gender inequalities. These organizations and institutes majorly target the poor rural and urban households and women too.

Also, the Reserve Bank of India imparts no ceiling concerning minimum and maximum amounts to be given as loans. As a result, microfinance plays a significant role in

alleviating poverty in society.

Many banks in India have initiated to lend money to microfinance institutions. It works towards the empowerment of women, which is an excellent move towards the development of the country. This is where Inditrade Microfinance excels as a leading player in the microfinance industry.

Under the visionary leadership of Mr Sudip Bandyopadhyay, Director, the company bequests an industrial presence of five years and counting—focused on “Financial Progress” and catering to the underserved and under-serviced population segments.

In an interview with Insights Success, Mr Sudip sheds light on the journey of Inditrade Microfinance, with some facts on the current industry scenario, and his opinions on the future of the company.

Please tell us about Inditrade Microfinance's professional tenure in the microfinance industry. Our journey in Microfinance Industry started when we sought RBI approval for a Microfinance license in mid-2016.

After obtaining the requisite approval in March 2017, we launched our business in Solapur, Maharashtra, on 17th April 2017. Thus, with an industrial presence of five years and counting, Inditrade Capital Ltd. is focused on “Financial Progress” and catering to the underserved and underserviced segments of the population.

Amongst the other segments, we found that the Microfinance industry offers significant opportunities for not only catering to under-serviced segments of the society but also women empowerment. In the Microfinance business, we only lend to women. 70% of our business is in the three southern states of Tamil Nadu, Karnataka and Kerala, and this geography continues to be our stronghold.

What was the impact of the pandemic on the microfinance industry, and how did Inditrade Microfinance surmount the adversities of the COVID-19? COVID has definitely impacted the Microfinance industry. However, the industry has seen similar other disturbances during natural calamities (e.g., flood, cyclone etc.) and demonetization.

Ltd. Progress' catering underserved under-serviced segments

Inditrade

Inditrade Capital Ltd. is focused on 'Financial Progress' and catering to the underserved and under-serviced segments of the population

“ “

Mr Sudip Bandyopadhyay

In the case of natural calamities, our clients may lose their earning assets (like loss of cattle during floods) , or the same may get damaged. Fortunately, in the case of COVID, there was no impact on their assets; their lives and livelihood were interrupted , which affected their income.

In the Microfinance business, where 99% of collection happens physically, our representatives visit the clients and collect cash. The lockdowns introduced consequently upon the pandemic was disastrous.

This led to a delay in collecting repayments and corresponding account classification of receivables into NPAs. However, these are mere delays in collection and not necessarily defaults , and the industry has since then bounced back.

We believe that within a few months, the industry would reach a steady state where the asset quality problem will be only to the extent of 1-2% of the book.

Pandemic was a challenging time, and we still are extremely careful about our employees' health, safety, and wellbeing.

Apart from procuring separate COVID Insurance for all our employees, on top of our existing health insurance, we also arranged company transport as and when we were allowed to operate in compliance with local and state norms.

We continue to educate all our employees about the “dos and don'ts . ” Whenever necessary, we supported our employees who were suffering from the infection.

As an industry professional, share your opinion on how emerging technologies like AI and ML are revolutionizing the industry? Technology is a great enabler. We are fine-tuning our lending mechanism and credit engines with artificial intelligence and machine learning. This should help us to reduce the

possibilities of intentional defaults even further. This will enable us to service the target audience more efficiently and effectively.

What is the microfinance industry's current scenario, and how do you envision scaling Inditrade Microfinance's operations eventually?

There is significant scope of expanding Microfinance business in India, and we need many more well-intentioned and principled participants to meet the ever-growing needs of the target audience. The industry is rewarding and facilitates poverty eradication in the true sense.

The last two years have been a lean period for us due to the COVID-19 pandemic. However, in the near future, we plan to significantly scale up our business operations in the existing markets and move into contiguous states in the next fiscal year.

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Micro-Tech Technology

Micronance?

Tengagement, efficiency possible. In rural technology, entrepreneurs. savings or groups financial Microfinance financial population knowledge, The Centricity Data

How can Technology Enhance Access to Micronance?

The development in science and technology has

impacted every aspect of human life. With the innovations in technology, creating new channels of engagement, expanding opportunities and increasing efficiency for individuals, businesses and governments are possible.

In rural areas, the microfinance industry, by adapting technology, dispensing capital access to small entrepreneurs. It provides loans, insurance, and access to savings accounts to unemployed or low-income individuals or groups who otherwise would have no other access to financial services.

Microfinance is trying to bridge the gap between the financial service providers and the financially excluded population with the help of technology, innovation and knowledge, the key drivers of economic growth today.

The Application of Technology helps in CustomerCentricity Data and Digital technology allow financial service

providers to serve the financially excluded more effectively with a 'customer-centric' approach.

By using specialized algorithms, providers can analyse information on a customer's mobile telephone (e.g., frequency and amount of airtime top-up) and nontraditional data (e.g., social media profiles) to create a customer report when they make lending decisions.

With these digital footprints, financial service providers can interact better with customers and provides a range of financial products and services based on a deeper understanding of their financial needs.

Reduces operational risk

With the use of digital channels, microfinance institutions can mitigate cash risk and increase operational efficiency. The Present microfinance lending models are cashintensive, exposing the institution and customer to cash risk, such as during storage and transit, which incurs additional costs.

This time that could have been used more productively is spent managing the risk. With the help of digital technology, clients have the flexibility to repay loans through their mobile phones, avoiding the risks of cash-intransit. So, in this way, technology saves valuable time.

Supports for Innovative business models

Mobile banking helps new business models through mobile technology and data analytics in credit scoring, decision and underwriting processes. Though, mobile network operators are responsible for implementation and, to some extent, large commercial banks and a small number of new cashless microfinance institutions.

As traditional institutes are famous for their expertise in clients' needs, they adapt and develop more capacity to stay competitive and relevant to take advantage of mobile banking services.

Furthermore, crowdfunding can enhance access to finance for unserved and underserved borrowers, which creates cheaper, community-based financial products, and enables access to digital investments for people with limited options to receive financial returns on their savings.

Eases the process

Microfinance institutions involve all aspects of gathering, storing, tracking, retrieving and using the information within a business or organization. With the development of computers and software applications, much of this work can now be automated and information more readily accessed.

The loan officers can track their clients' repayment schedules and balances with the help of an information system. It also eases management to assess the quality of the loan portfolio and can also support the entire institution in monitoring progress toward operational objectives.

The application of technology can improve transparency and efficiency, improve reporting, and allow management to make more informed decisions. In this way, it is making the process easier and enhancing access to microfinance.

Helps in building trust

FinTech and Microfinance institutions face similar challenges in building trust around new financial services,

and ensuring reliable and stable service delivery takes time. As providers establish communication channels and complaint resolution mechanisms, it helps to address customers' risk perceptions.

By using approaches like assisted digitization (step-by-step demonstrations of processes that show transactions in passbooks or receipts), it assists the client's transition to digital financial services.

Reduces costs

The use of ATMs, Smart cards, and Fingerprint Identification makes it less costly to provide loans to customers and process their savings. For instance, smart cards with embedded microchips allow data storage and contain all loan-related and purchase information.

Smart cards contain all the necessary information about the customer's cash dispensers can operate in the most remote location without a permanent network connection.

With the help of fingerprint identification, illiterate customers can easily use the dispenser. Even In case of theft or card loss, it protects customers from unauthorised usage.

On a Futuristic Path

The emergence of Microfinance, as a possible alternative, to formal financial systems has expanded beyond what many considered at its inception. Areas of the world where there were no realistic means for the poorest and least educated to obtain credit now rely on microfinance. It helps to avoid the exclusionary nature of formal banking systems.

All this progress has been due to the pioneering use of technologies that allow microfinance institutions to survive or even thrive in financial environments that are exceptionally difficult to work with. But the continued growth of the microfinance industry will depend on overcoming technology-related problems that have yet to be adequately addressed.

- Pooja Jaipal

time. (step-by-step the remote theft usage. alternative, to many there educated to the survive to be Jaipal

Ms Purvi Bavsar Managing Director

Banking without Boundaries

The Indian economy has been hugely affected by the outbreak of COVID-19. Among the many industries, NBFCs have faced unprecedented challenges and a liquidity crunch. The lack of credit and increased operational costs made the situation more intricate for companies to sustain.

However, fighting against all odds, P ahal Financial Services Pvt Ltd has made its way through by granting loans to the bottom of the pyramid section. With over a decade of experience in the company and under the influential leadership of the Managing Director, Ms Purvi Bavsar, they are close to achieving the astonishing vision of providing loans to over two million women.

As the industry is getting back on foot, Pahal Financial Services has planned and implemented various strategies for having a smooth roadmap ahead. In an interview with Insights Success, Managing Director Purvi Bavsar sheds light on the journey of the company and the challenges it faced in the financial niche.

Give us a brief overview of your journey in your respective company

It all started with an intent to do something more meaningful, scalable and impactful. From being an employee to being an employer after working for 17 years

with acquiring acquired From now country, We demonetization and, during ourselves to a one. Pahal crores branches well Tell aspects We borrowers achieving to attract bottom

with various large corporates and banks, we started by acquiring a small portfolio of a trust and merging it with an acquired NBFC. It was a very small beginning indeed. From just being in one state with 12 branch operations to now eight states and more than 200 branches across the country, we are spreading our wings further.

We had to go through the turbulent times during demonetization as we were comparatively smaller in size and, hence, fragile. We also utilized the difficult times during the first and second waves of COVID to convert ourselves from being a traditional microfinance institution to a more technologically-enabled and digitally-focused one.

Pahal has reached a balance sheet size of close to 1000 crores with more than 1700 people working in 200+ branches spread across eight states and is technologically well poised to take advantage of the changing landscape.

Tell us more about your company, its vision, and the key aspects of its stronghold in the microfinance space. We started with a vision to reach out to two million women borrowers at competitive rates. Our vision also included achieving internationally acceptable returns on investments to attract mainstream capital in the segment's service at the bottom of the pyramid.

We were one of the few microfinance companies to emerge from the western hemisphere, and we continue to have a strong market presence in Gujarat. So far, we have reached out close to a million borrowers.

From a business leadership perspective, what is your opinion on the impact of the COVID-19 pandemic on the microfinance industry? Since microfinance is all about reaching out to financially excluded and vulnerable communities and people, the impact was very devastating. However, fighting and getting back to normal was the only option for survival for our customers. The impact has been very severe during the first two waves—right from losing some close family members to the pandemic to losing their livelihood and going through the pains of migration in some cases.

At an organisational level, we had never encountered a problem of this magnitude before, and hence every day was a new or unknown challenge. This included everything right from taking care of our own people to reaching out to customers in need to managing the operational expenses in such a delicate situation and managing funders or investors.

•Medium-term impact

The cost of operations has increased for most players considering the efforts required for collection. Credit costs have gone up compared to the track record of microfinance organisations. The cost of funds has been favourable for some time due to the availability of funds under government schemes for medium and large MFI's.

•Long term

The sector is on the cusp of recovery and is well-placed to deliver a very healthy growth rate in AUM and earnings, coupled with expected new RBI regulations. What efforts did you take during the pandemic to sustain operations and ensure the safety of your team at the same time?

For us at Pahal, the safety and well-being of our people and customers are at the centre of everything that we do.

To sustain the operations, we•actively engaged with customers through tele-calling at a central and branch level to start with.

•created training videos to educate staff and create awareness among customers about the COVID protocol and guidelines announced by RBI regarding the moratorium.

Pahal has reached a balance sheet size of close to Rs 1000 crores with more than 1700 people working in 200+ branches spread across eight states

•Once the vaccination programme was announced, ensuring our staff was vaccinated was a priority.

•Engaging with the funders or investors.

•Managing our cash position on a daily basis to ensure that we have at least 2-3 months of run-way at all times.

•One of the most important things was to align the systems to deal with the moratorium and related changes.

During the pandemic, we took some immediate steps for our staff, like -

We reached out to all our employees on a regular basis to ensure they were safe and gave them confidence about the job security and continuation of their remuneration, even when there was a lockdown and they were not able to work.

We did not lay off even a single employee or rationalise their salaries. In fact, against all the odds, we ensured we paid their salaries on time.

We also increased the health insurance and life insurance cover for our employees, and this timely decision has been of great help to our people during the most difficult times.

In addition to the insurance benefits, we also started to take care of our employees’ families for one year in the unfortunate event of death.

What is your opinion on the necessity for microfinance companies to align their offerings with technologies like AI and ML?

Given the dynamic external environment, it is critical for microfinance firms to adapt to newer technologies and ways of working. This is soon going to be more of a compulsion than a choice that one has.

As an established industry leader, what would be your advice to the budding entrepreneurs and enthusiasts aspiring to venture into the microfinance space?

I always say that financial services, including microfinance, is a business of relevant credit and efficient collection, not money distribution. This business also requires a lot of patience as the ticket sizes are smaller and geography is difficult. However, the satisfaction of creating an impact and being relevant and available to the bottom of the pyramid customers, particularly women, is worth all the effort and pain!

How do you envision further strengthening your company’s stronghold in 2022 and beyond?

We will further strengthen the company by -

•Adding newer geographies

•Adding newer and more focused products that are more relevant to our customers. This is one of the most critical pieces considering the changed market and customer requirements in a post-pandemic scenario and to capitalise on new opportunities available in the market

•Moving to cashless and digital collections

•Continue to upgrade the technology to enhance the customer experience

•Build more robust credit evaluation systems

•Continue to remain focused on Risk Management and Compliance