Navigating Tech Shifts In Microfinance Operations

HP Singh

Throughout the pandemic, the NBFC sector confronted significant hurdles, with customers losing livelihoods and field employees grappling with loan repayments. Despite these challenges, strategic decisions such as restricting new disbursements and maintaining a focus on asset quality resulted in a commendable 0.4% fresh Portfolio at Risk (PAR) addition since July 2022, shared HP Singh, Chairman cum Managing Director, Satin Creditcare Network Ltd. in an exclusive interaction with Shruti Jain of Elets News Network (ENN).

How do you perceive the evolution of the microfinance sector in India over the past decade, and what role has Satin Creditcare Ltd. played in shaping this landscape? Could you also elaborate on the specific challenges and opportunities that emerged during this period?

As we reflect on the past decade, the metamorphosis witnessed in India’s microfinance sector has been nothing short of extraordinary. From its humble origins of narrow lending to the low-income population, the sector has evolved into a beacon of inclusivity and responsibility. This journey, marked by a shift from poverty alleviation to gender-specific empowerment and a broader emphasis on social impact coupled with a commitment to SDGs goals and sustainability, underscores a sector leading the path to progress. Furthermore, the industry was more inclined towards disbursement than collections in the past, but collections have now taken the centerstage, which reflects a matured understanding within the sector. In the current complex credit culture in the JLG model, putting strong importance on underwriting and collections have become paramount. Precision in these areas are crucial for successfully navigating the challenges posed by today’s credit environment. By prioritising meticulous collection strategies, the industry has ensured the sustainability of their operations while concurrently fostering financial inclusion. At the forefront of this progress stands Satin Creditcare Network Ltd, a pioneer since its inception in 1990. The microfinance industry’s evolution in India holds a distinctive narrative rooted in geographical expansion. While the microfinance sector was initially predominant in the southern regions, we recognised the unique challenges and opportunities that northern states presented. Uttar Pradesh, in particular, emerged as a key focus area due to its vast population and the potential for transformative impact on a larger scale. Currently, Uttar Pradesh is amongst the top states contributing to the sector’s growth.

Our journey commenced with a vision to provide micro-credit loans, laying the groundwork for the microfinance sector’s early development. A steadfast commitment to financial inclusion propelled us into underpenetrated areas, addressing the financial needs of small businesses. The adoption of the Joint Liability Group ( JLG) model in 2008 marked a turning point, especially in empowering women entrepreneurs and expanding our narrative beyond poverty reduction. Yet, every journey faces trials. Demonetization and the disruptive waves of the COVID-19 pandemic tested our strength. Amidst these adversities, we prioritized customer support, ensuring uninterrupted access to affordable micro-credit through both physical and digital means. The pivotal role of technology became evident, enabling us to navigate challenges while upholding safety measures.

Throughout the pandemic, our sector confronted significant hurdles, with customers losing livelihoods and field employees grappling with loan repayments. Despite these challenges, strategic decisions such as restricting new disbursements and maintaining a focus on asset quality resulted in a commendable 0.4% fresh Portfolio at Risk (PAR) addition since July 2022.

Looking to the future, with the implementation of the Regulatory Framework by the RBI, we view these changes as the cornerstone for a more robust foundation for MFIs, fostering a levelled playing field for all lenders. The enhanced flexibility to set lending rates is one of the key driving forces supporting a revival in MFIs’ profitability. Beyond financial dynamics, the new regulations serve as a catalyst for deepening the penetration of microcredit throughout the country, and the positive momentum is expected to persist.
With enhancement of the household income threshold, the MFIs are expected to reach many more households. These regulatory changes not only mark a turning point in
the operational landscape of MFIs but also signify a concerted effort to fortify the pillars of a more inclusive and sustainable financial ecosystem.

Also Read | Transformation will remain as our key focus in 2022: HP Singh, Chairman & MD, Satin Creditcare Network

Satin Creditcare’s enduring strength lies in our robust fundamentals and conservative strategies. These qualities not only helped us navigate uncertain times but also position us for future opportunities in a sector poised for enduring growth.

To sum up, I would say Satin proudly stands as a trailblazer in the microfinance sector, significantly contributing to its evolution and showcasing resilience in the face of challenges. Our strong belief in inclusive growth and responsible practices continues, empowering individuals and communities through long- term financial solutions. As we celebrate our journey, we remain dedicated to shaping a future where microfinance continues to be a catalyst for positive change.

In the context of increasing digitalization, what strategies are you adapting to integrate technological advancements at Satin Creditcare? What impact has this digital shift had on your operations, customer outreach, and service delivery?

At Satin Creditcare, we strategically integrate technological advancements to enhance operations, customer outreach, and service delivery. Fully embracing technology, we’ve implemented in-house digital platforms and centralized processes, allowing quick responses to liquidity needs. Technological solutions, including a customer service app, UPI 2.0, and a website payment gateway, offer convenient communication and cashless repayment options. Our streamlined loan onboarding journeys and real-time credit bureau checks leverage technology for world- class convenience. Video KYC, geo-tagging, and MFI scorecards enhance credit risk profiling. This digital shift has transformed our operations, ensuring improved process efficiency and enhanced customer experiences. By wholeheartedly adopting these advancements, Satin establishes itself as a leader in the dynamic microfinance industry, effortlessly merging traditional and digital methodologies.

Can you discuss the initiatives Satin Creditcare Ltd. has undertaken to promote financial inclusion in rural and underserved areas? How do you measure the socioeconomic impact of these initiatives on the communities you serve?

Satin has taken strategic initiatives to advance financial inclusion in rural and underserved regions. Initially focusing on underpenetrated areas and now spanning 24 states, our Joint Liability Group ( JLG) model fosters social bonds, encouraging responsible borrowing and community support. Our diversified product offerings include income generating loans, product financing for the purchase of solar lamps and bicycles among others, as well as loans for the development of water connections and sanitation facilities. We are working to enable large swathes of India’s financially and socially-disadvantaged population with access to microcredit options, hence we continue to focus on expanding our reach to more people with our customized products and services. Conducting financial literacy programs in rural areas empowers our customers to make informed financial decisions, while our collaborative efforts with banks and NBFCs help us extend our reach. Through our collaboration with one of our partners DocOnline, we have been able to provide healthcare services to our clients, thereby advancing our commitment to their overall well-being. Through our subsidiaries, we are also expanding across Micro, Small & Medium Enterprises (MSMEs) and affordable housing finance segments. Using thorough assessments, in-house technology, and real- time checks, we measure the socioeconomic impact responsibly. Our commitment to inclusive growth reflects in creating positive community changes, aligning with our journey from underpenetrated areas to a nationwide presence.

Looking towards the future, what innovations or new approaches is Satin Creditcare Ltd. considering staying ahead in the competitive microfinance market? How do you foresee the company evolving in the next five years in response to market trends and customer needs?
Looking forward, Satin Creditcare Ltd. is strategically positioned to thrive in the competitive microfinance market. Our vision entails increasing our reach in existing geographies, expanding our secured book, introducing cutting edge new-age technologies like Iris-based E-KYC, face recognition attendance system and customer profiling through data science, etc. With a special focus on sustaining 25-30% growth , our goals include increasing disbursal rates, enhancing asset quality, and improving collection efficiency. As a responsible corporate company, we prioritize raising awareness about the benefits of microfinance within our target communities and leveraging advanced technology for customer tracking and digital payments.

Also Read | Tech-Driven Transformation Enhancing operations and customer experiences in rural areas

Emphasizing product finance to existing clients, fostering value-based collaborations, and aligning with new regulatory frameworks for MFIs highlight our commitment to responsible growth. Over the next five years, Satin aims to fortify its financial and operational standing, leveraging industry growth and regulatory support to maintain a leading position. Our strategy encompasses technology adoption, talent development, and a prudent approach, ensuring a robust response to market trends, including a targeted focus on MSME and housing segments, and evolving customer needs while staying ahead in the dynamic microfinance landscape.

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