Mahin­dra Fi­nance - the last word in ru­ral fi­nance

Mahin­dra Fi­nance to­day stands tall among the NBFCs in the coun­try with an em­pha­sized fo­cus on ru­ral fi­nance. Ramesh Iyer, VC & MD of the com­pany, who is pas­sion­ate about the busi­ness model he de­vel­oped, nar­rates the 22-year-old jour­ney he un­der­took in 199

Banking Frontiers - - News - Mo­han@bank­ingfron­

Mahin­dra Fi­nance to­day stands tall among the NBFCs in the coun­try with an em­pha­sized fo­cus on ru­ral fi­nance. Ramesh Iyer, VC & MD of the com­pany, who is pas­sion­ate about the busi­ness model he de­vel­oped, nar­rates the 22-year-old jour­ney he un­der­took in 1995

From one branch and a cou­ple of cus­tomers in 1995 to 1400 branches and 4 mil­lion plus cus­tomers to­day is the trans­for­ma­tion nar­ra­tive of Mahin­dra Fi­nance, by far the No 1 NBFC in the coun­try with a com­mit­ted ob­jec­tive of chang­ing the lives of peo­ple in semi­ur­ban and ru­ral In­dia through af­ford­able and cus­tomer-cen­tric fi­nan­cial so­lu­tions. “It has been a phe­nom­e­nal jour­ney for us through these 22 years,” says Ramesh Iyer, VC & MD, who con­verted the or­ga­ni­za­tion from just four peo­ple in the staff to some 27,000 peo­ple now on the rolls and from a bal­ance sheet of `50 crore to be­gin with to nearly `6300 crore in 2016-17. Its to­tal as­sets to­day are nearly `50,000 crore.

Iyer has de­liv­ered more than what he had set out to do when the com­pany was founded with the in­ten­tion of help­ing Mahin­dra & Mahin­dra sell its util­ity ve­hi­cles. From be­ing a cap­tive fi­nance com­pany, it has ma­tured to be­come In­dia’s largest non-bank­ing fi­nance com­pany in the semi-ur­ban and ru­ral ar­eas, per­haps larger than some of the pri­vate sec­tor banks in the coun­try.

“To­day, we are in ev­ery state. Through our branch net­work, we are close to cover­ing up­ward of 85% of the dis­tricts in the coun­try. More im­por­tantly, we have cu­mu­la­tively fi­nanced close to 4 mil­lion plus cus­tomers, over this pe­riod of time. Ac­tu­ally, when we track our cus­tomers, we can spot them in 330,000 vil­lages in the coun­try, which is one in 2 vil­lages. That is the reach we have built,” says Iyer.

What is more grat­i­fy­ing for him is the fact that in 1995, the op­er­a­tions of the com­pany be­gan with 4 em­ploy­ees: “It was me and my col­league V. Ravi, who is now the Ex­ec­u­tive Di­rec­tor and CFO, and two of­fice as­sis­tants. To­day, we are close to 27,000 peo­ple across the coun­try. We be­gan as a cap­tive fi­nance com­pany for fund­ing Mahin­dra util­ity ve­hi­cles and sub­se­quently trac­tors, but to­day we fi­nance all kinds of ve­hi­cles - about 45% to 47% of the bal­ance sheet is Mahin­dra ve­hi­cles and 50% to 55% is non-Mahin­dra ve­hi­cles. This means we have built a busi­ness model, which has be­come hugely cus­tomer

cen­tric and cus­tomer ac­cepted. This is how we have been able to build a busi­ness with a ru­ral fo­cus.”


Iyer re­counts how Mahin­dra Fi­nance de­vel­oped its ru­ral fo­cus: “As I men­tioned, we started as a cap­tive fi­nance com­pany ini­tially to fi­nance the Mahin­dra range of ve­hi­cles. At that time, we did not en­vis­age trac­tor fi­nance at all but only fi­nanc­ing of the Mahin­dra util­ity ve­hi­cles, which were pre­dom­i­nantly sold in the ru­ral mar­kets of In­dia. So, by de­sign, we had to go out to the ru­ral mar­ket and start un­der­stand­ing the op­por­tu­ni­ties and chal­lenges. One thing we knew was that in ru­ral In­dia there were two sources of fi­nance pos­si­ble. One was the bank­ing sys­tem, which com­prised the na­tion­al­ized banks and the co­op­er­a­tive banks, and the other was the money lenders. In such a sit­u­a­tion, we had to first de­cide what we should do. Any­way, we de­cided we will fi­nance ve­hi­cles, and we opened our first branch in Jaipur, the rea­son be­ing one of the board mem­bers, who hap­pened to be a dealer of Mahin­dra and Mahin­dra, hailed from Jaipur and he sug­gested we start from that city.”


As the com­pany be­gan op­er­a­tions, the ini­tial learn­ings came from the cus­tomers them­selves. The first re­al­iza­tion was that most of the cus­tomers did not have bank ac­counts and there­fore no fi­nan­cial state­ments. There was no method to as­sess their credit risk. Se­condly, the ve­hi­cles that were be­ing bought were ac­tu­ally be­ing used com­mer­cially, ei­ther to carry peo­ple, or to trans­port goods. Dur­ing the in­ter­ac­tions, these cus­tomers, Iyer says, con­vinced the com­pany that if they take these ve­hi­cles, they will earn from the use of the ve­hi­cles and re­pay the loans. “So, it was an ‘earn and pay’ busi­ness model un­like the tra­di­tional model where the cus­tomer had the money to re­pay the loans through an al­ready fixed cash flow,” he adds.

“The real chal­lenge was to un­der­stand how much he can earn from this ve­hi­cle, how much will be the cost of the op­er­a­tions and what are his own per­sonal re­quire­ments and there­fore how much sur­plus would he be able to gen­er­ate to re­pay loans,” says he.


“There was another chal­lenge we faced then,” says Iyer, “that is, who should be the em­ploy­ees who would ser­vice these cus­tomers. We re­al­ized that we can­not re­cruit peo­ple from the cities and send them across, firstly be­cause they will not have the un­der­stand­ing of the ru­ral mar­ket. Se­condly, they may not be will­ing to stay in the coun­try­side. And thirdly, they should be able to speak the lo­cal lan­guage and un­der­stand the lo­cal chal­lenges. Be­sides, they must have a lo­cal con­nec­tion so that they have the sup­port of the so­cial sys­tem. So, we con­sciously de­cided to re­cruit peo­ple from lo­cal col­leges rather than ap­point­ing peo­ple from cities or towns. This was the sec­ond strate­gic ap­proach we took.”

The third chal­lenge was the fact that a cus­tomer is earn­ing al­most on a daily ba­sis and he does not have a fixed in­come pat­tern. He may be able to re­pay the loan ei­ther daily or he can keep the money in safe cus­tody and pay once a month or once in a quar­ter. But, the im­por­tant ques­tion is whether he will come all the way from his vil­lage to the com­pany’s branch to make the pay­ment.


“So, we found that the so­lu­tion lies in open­ing more branches to be closer to the cus­tomers, to cre­ate prox­im­ity with cus­tomers. And we needed this prox­im­ity for two rea­sons - to en­able the cus­tomers to come and pay or for us to be able to go and col­lect the money from them and se­condly, in case he fails to pay, then we should know the rea­son for his do­ing so. Be­cause, in this kind of busi­ness, it is ex­tremely im­por­tant to iden­tify the dif­fer­ence be­tween cir­cum­stan­tial fail­ure and in­ten­tional fail­ure. If it is a cir­cum­stan­tial fail­ure, say due to poor earn­ing, or the ve­hi­cle giv­ing prob­lems or the mon­soons fail­ing his busi­ness, we felt that we needed to part­ner with the cus­tomer and try and give so­lu­tions. But, if the cus­tomer is earn­ing and he is di­vert­ing funds to­wards some whims and fan­cies, or per­sonal as­pi­ra­tions, at the cost of not pay­ing the in­stal­ments, then these are in­ten­tional de­faults that need to be han­dled dif­fer­ently. So, from both these an­gles, we were re­quired to be close to the cus­tomers,” says Iyer.

The fourth chal­lenge, ac­cord­ing to him, was com­mu­ni­ca­tion. How would a branch of­fice com­mu­ni­cate with the head of­fice on what is seen on the ground? “We at the head of­fice needed to de­cide on the prod­uct de­sign and chan­nel re­quire­ments, train­ing and un­der­stand­ing the cus­tomer. In 1995, tech­nol­ogy was not very de­vel­oped in or­der to ad­dress this is­sue. There used to be sub­stan­tial tele­phone com­mu­ni­ca­tions be­tween the branches and the head of­fice. It was all about on-the-field in­for­ma­tion col­lec­tion and knowl­edge shar­ing. It was an im­por­tant in­gre­di­ent in the strat­egy,” he says.

“So, if you look at how the busi­ness has ac­tu­ally grown, it is from bot­tom up on the ground, in­ter­ac­tion with cus­tomers and bet­ter prod­uct de­sign, which specif­i­cally suits the cus­tomers and their cash flow. That is how we con­ceived and de­vel­oped the whole busi­ness model. It is a very cus­tomer­centric model. It is not a stan­dard model where I will say I have this model and this cus­tomer. Dif­fer­ent states have dif­fer­ent chal­lenges and dif­fer­ent re­quire­ments. So what works for us in Ker­ala may not work for us in Odisha. It be­came im­por­tant that this has to be an ex­tremely de­cen­tral­ized

busi­ness, it has to be a highly peo­ple­ori­ented busi­ness, it has to be a highly cus­tomer in­ter­ac­tive busi­ness. Be­yond ev­ery­thing, it has to be a highly flex­i­ble busi­ness that can keep bring­ing in the learn­ings from the mar­ket to cre­ate new prod­ucts and de­velop chan­nels and peo­ple ca­pa­bil­ity. That is how we ac­tu­ally grew in this busi­ness,” points out Iyer.


Very soon, the com­pany added trac­tor fi­nance to its port­fo­lio. Iyer says it had a very dif­fer­ent set of chal­lenges. The cus­tomers may buy trac­tors any­time dur­ing the year, but the loan re­pay­ments were linked to the farm­ing cy­cle. The cash flows would ide­ally be in Novem­ber-De­cem­ber or in Fe­bru­aryMarch. There is no ques­tion of reg­u­lar daily or monthly or quar­terly cash flows. The cus­tomers there­fore started ask­ing for ei­ther quar­terly or half-yearly re­pay­ment sched­ules and also for pay­ment hol­i­days dur­ing the lean months like June, July etc. But the prob­lem with this re­pay­ment cy­cle was that if one sea­son was good for the cus­tomers and they could af­ford to pay, there would be another sea­son, which would in­deed be bad and there could be de­faults. The over­dues in such cases would be­come very large. It be­came even more im­por­tant for the com­pany to un­der­stand and build re­la­tion­ships with the cus­tomers at a very lo­cal level.

“So, we had to open branches even at deeper pock­ets and we had to be closer to cus­tomers at the vil­lage lev­els,” says Iyer.


One thing that dis­tin­guishes the ru­ral com­mu­nity, ac­cord­ing to Iyer, is that the in­ten­tion to re­pay is ex­tremely high. The mea­sure­ment of the in­ten­tion, ac­cord­ing to him was: one, when­ever the cus­tomer is not able to pay, he will in­vari­ably come for­ward and ex­plain the rea­sons and cir­cum­stances for the fail­ure; and two, when the com­pany’s rep­re­sen­ta­tives go and meet the cus­tomer, there will be no ef­fort on their part to hide or stay away. Even the fam­ily mem­bers will be aware of the prob­lems and will ex­plain the rea­sons and cir­cum­stances for the non­pay­ment. While the cus­tomer him­self will be avail­able for dis­cus­sions, the as­sets on which the fi­nance was pro­vided would also be made avail­able to be seen by the staff. He will have no in­ten­tion to hide the as­sets or sell them. Ba­si­cally, the in­ten­tion to cheat is very low.


As years passed on, the busi­ness has grown real big. And it be­came im­per­a­tive that there should be other lines of busi­ness. Soon, the com­pany got into car fi­nanc­ing, be­cause the next big prod­uct that was get­ting sold apart from util­ity ve­hi­cles and trac­tors was cars. And the com­pany felt that Maruti Suzuki was a good part­ner to work with be­cause it had also built pen­e­tra­tion and a good dealer net­work. The first car fi­nanc­ing was for the Maruti range of ve­hi­cles.


While fi­nanc­ing util­ity ve­hi­cles and trac­tors got sta­bi­lized, Iyer says the com­pany looked at other pos­si­bil­i­ties that could uti­lize the ef­fi­cient chan­nel net­work and the cus­tomer base that were cre­ated. The first op­por­tu­nity was the cre­ation of Mahin­dra In­sur­ance Bro­kers. It be­gan as an agent for one in­sur­ance com­pany, but when the com­pany reached out to the cus­tomers, it was found that they were want­ing op­tions. So, it de­cided to of­fer prod­ucts of sev­eral com­pa­nies.

Says Iyer: “Why in­sur­ance broking was cho­sen was that we re­al­ized that all our cus­tomers re­quired some kind of a life cover be­cause most of the ve­hi­cle own­ers were owner-driv­ers. In case some­thing was to go wrong, the whole fam­ily would suf­fer. So, we dis­cussed and de­cided that we need to come out with an in­no­va­tive prod­uct rather than a stan­dard one. That was how we started dis­cussing with Om Ko­tak and we de­vel­oped and in­tro­duced a prod­uct called ‘Loan Su­rak­sha’. It is an in­no­va­tive in­sur­ance prod­uct in that we in­sured the life of the bor­rower, and the value of the in­sur­ance is equiv­a­lent of the value of the loan we had ex­tended. So, if some­thing was to go wrong with the cus­tomer dur­ing the loan pe­riod, the cus­tomer’s fam­ily could de­cide ei­ther to take the ve­hi­cle or take the claim. In the lat­ter case, the fi­nance com­pany gets to take the ve­hi­cle. It was well pro­grammed that the cus­tomer’s fam­ily is pro­tected, the fi­nance com­pany is pro­tected and the in­sur­ance com­pany gets busi­ness.”

Started as a very small syn­er­gized busi­ness, it has grown with a busi­ness vol­ume up­ward of `175 crore. It is mak­ing a profit af­ter tax ev­ery year of `50 crore plus. And the unit has kept pace with the growth of Mahin­dra Fi­nance with branches in al­most ev­ery state. It has a sep­a­rate team of about 1000 peo­ple and there are sales ar­range­ments with all the life and gen­eral in­sur­ance com­pa­nies for dis­tri­bu­tion of their re­spec­tive prod­ucts.


“Then, we looked at the other re­quire­ments of our tar­get cus­tomers from a fi­nan­cial per­spec­tive,” says Iyer. “The first thing that we came across was the fact that many of the houses in ru­ral In­dia are in semifin­ished con­di­tion. The own­ers of­ten did some ren­o­va­tion from time to time de­pend­ing on their cash flow - say dur­ing

a good crop sea­son. If the next sea­son fails, the work re­mains unfinished. They did not know where they can get fi­nance to com­plete the work. We spot­ted this as an op­por­tu­nity and set up a busi­ness called Mahin­dra Ru­ral Hous­ing Fi­nance.”

The com­pany does not fi­nance con­struc­tion of large houses, but pro­vides funds for home im­prove­ments or re­pairs. In­ter­est­ingly, the ticket size of the loans re­quired was in the range of `1 lakh to `1.5 lakh on an av­er­age and the ten­ure could be any­thing be­tween 3 to 7 years. “We be­lieve this is a most so­cially im­pact­ing project with a huge po­ten­tial,” says Iyer, adding: “In the space of less than 10 years that we are in this busi­ness, we are al­ready in 12 states and are run­ning a bal­ance sheet of up­ward of `5000 crore and a very prof­itable busi­ness. What is in­ter­est­ing is that be­cause of the ru­ral fo­cus of the busi­ness, the Na­tional Hous­ing Bank has taken a share­hold­ing of 12.5% in this ven­ture. The com­pany has built a very large cus­tomer base of up­ward of about 5 lakh and is present in some 50,000 vil­lages in the coun­try. In 2016-17, its PBT was at `126 crore.”Iyer be­lieves that this busi­ness has a great po­ten­tial and can reach a level of `20,000 crore in about 5 years. In ad­di­tion to vil­lage-based hous­ing fi­nance, it has also en­tered the semi-ur­ban lower mid­dle-class hous­ing fi­nance busi­ness. Cur­rently, about 15% of the busi­ness com­prises low cost and semi-ur­ban hous­ing fi­nance. Again, the fo­cus will be be­yond the metro mar­ket and look­ing at ticket sizes of `7 to `10 lakh and for peo­ple who are ei­ther lo­cal pro­fes­sion­als, or those work­ing in lo­cal fac­to­ries, lo­cal deal­er­ships etc. “We will look at their cash­flows and will de­sign prod­ucts to suit their in­di­vid­ual re­quire­ments and their ca­pac­ity to ser­vice the loan. We strongly be­lieve low cost af­ford­able hous­ing is the next phase of growth and has lot of scope and we may be able to look at schemes like PMAY, CLSS to ad­dress ‘Hous­ing for all by 2020’. I think this busi­ness - ru­ral hous­ing and low-cost hous­ing to­gether - can scale up to a level of `20,000 crore plus,” says Iyer.


All is not ru­ral with Mahin­dra Fi­nance. In fact, it had a di­ag­o­nally dif­fer­ent ap­proach when it set up a joint ven­ture in the US. The idea came from the fact that Mahin­dra & Mahin­dra sells a large num­ber of trac­tors, es­pe­cially in the US. So, Mahin­dra Fi­nance joined hands with a sub­sidiary of Rabobank called DLL. In­ter­est­ingly, 51% of the in­vest­ment is by DLL and 49% by Mahin­dra Fi­nance, but the com­pany is called Mahin­dra Fi­nance USA. The com­pany has built a bal­ance sheet of al­most $1 bil­lion and it gives a re­turn of up­ward of 10% to 12% on eq­uity and has been one of the most suc­cess­ful ven­tures.

Says Iyer: “We be­lieve as we go along we will look at other in­ter­na­tional mar­kets along with our part­ners. To start with, we may look at mar­kets like Brazil, Mex­ico and Canada. We are also ac­tively in di­a­logue to see whether we can look at Africa as also the mar­kets just ad­ja­cent to us like Bangladesh, Nepal, Myan­mar, Sri Lanka, etc. Our in­ter­na­tional foray is clearly go­ing to be to fol­low the foot­prints of Mahin­dra & Mahin­dra. We will look at two an­gles - one part­ner­ing with our cur­rent part­ners and see which are the mar­kets they are in­ter­ested in and whether we can set up shop there, and se­condly ex­plor­ing ad­ja­cent mar­kets in neigh­bor­ing coun­tries where we think that we will have a bet­ter un­der­stand­ing of the pro­file of the cus­tomer and our abil­ity to de­sign prod­ucts for these mar­kets. Our ap­proach would be to look for some lo­cal part­ners who would be will­ing to join us. Mahin­dra & Mahin­dra has strong deal­ers in all these mar­kets and they them­selves are in­ter­ested in look­ing at fi­nance com­pany op­tions. We may look at part­ner­ing with them and set­ting up joint ven­tures. This will be our in­ter­na­tional foray.”


The lat­est ven­ture that has been ini­ti­ated is an as­set man­age­ment com­pany, Mahin­dra As­set Man­age­ment Com­pany. Strate­gi­cally, the com­pany be­lieves its strength is ru­ral. Says Iyer: “An as­set man­age­ment com­pany can­not af­ford to ig­nore the size of the ur­ban mar­ket, but our strength, our abil­ity and our in­ten­tion and strate­gic in­tent would al­ways be to grow in the semi-ur­ban and ru­ral mar­ket. When we sur­veyed the ru­ral mar­ket, we found that many of the ru­ral cus­tomers have sur­plus funds, which they usu­ally de­posit in prod­ucts like fixed de­posits of banks or buy gold or land. When we look at the av­er­age age of the ru­ral pop­u­la­tion, it is get­ting younger and when we look at the other op­tions for them to in­vest, the in­put that we got was that they are will­ing to look at other in­vest­ment prod­ucts. As re­gards mu­tual funds, 80% plus of the mu­tual fund gets col­lected from the ur­ban mar­kets. So, we feel here is another op­por­tu­nity to in­no­vate cer­tain prod­ucts and com­mu­ni­cate the de­tails to the ru­ral pop­u­la­tion so that they have an op­por­tu­nity to be par­tic­i­pants in the growth. We got the li­cense for the AMC and reg­u­la­tory ap­proval for spe­cially de­signed prod­ucts, which are very ru­ral­spe­cific or ru­ral-fla­vored. The de­tails of these prod­ucts are very easy to com­mu­ni­cate to the ru­ral pop­u­la­tion. They are small ticket prod­ucts and ru­ral cash flow-based. This busi­ness is less than 3 years old and it has done very well for us with a book close to `3000 crore. In­ter­est­ingly, we can­not ig­nore the ur­ban cus­tomers. We have been able to mo­bi­lize funds from large cor­po­rates but large re­tail busi­ness has come from ru­ral In­dia.”

So, the mis­sion that be­gan in 1995 when the four peo­ple set out to reach ru­ral In­dia, aim­ing to pro­vide spe­cially de­signed fi­nan­cial prod­ucts for the peo­ple there, has be­come a re­al­ity. In these 20-plus years, the com­pany has been able to de­velop a strong ru­ral pen­e­trated fi­nan­cial in­clu­sion model, which is com­pletely based on cre­at­ing

and de­vel­op­ing prod­ucts and ser­vices and de­liv­er­ing them through a lo­cally built chan­nel and through a large net­work of lo­cally re­cruited em­ploy­ees. This, feels Iyer, is the true fi­nan­cial in­clu­sion story that the com­pany has cre­ated.


“When we look back and ask our­selves about the chal­lenges we face in spite of all the ex­pe­ri­ences and knowl­edge we have gained, I would men­tion that the cus­tomers con­tinue to rely on their cash flows which have lot of va­garies - like the mon­soon, or lo­cal is­sues. We have dif­fer­ent pe­ri­ods of cyclic im­pacts like if the mon­soon does not do well in cer­tain mar­kets, the cus­tomer cash flows do suf­fer, or for that mat­ter when both the mon­soon and in­fra­struc­ture story do not go well in cer­tain pock­ets, the cus­tomer suf­fers even more. We have had some test­ing sit­u­a­tions where our gross NPAs had re­ally climbed very high, even cross­ing the 10% mark. But, a very im­por­tant and salu­tary point to be un­der­stood is that these are not in­ten­tional de­faults. Once the sea­son starts cor­rect­ing, we col­lect back all our money that is due and pro­vided for. We had a sit­u­a­tion in 20092010, when the gross NPA crossed the 10% mark, but in the next sea­son or 2 sea­sons af­ter that, when the mar­ket con­di­tions im­proved, the NPA lev­els came down to as low as 3%. The money does in­deed come back. We faced a sim­i­lar sit­u­a­tion in 201415 and 2015-16, when the mon­soon failed in many states, the in­fra­struc­ture at cer­tain ge­ogra­phies was not promis­ing and there was the im­pact of de­mon­e­ti­za­tion. This led to our gross NPAs go­ing up. Now, if you look at the last two quar­ters, we have seen sub­stan­tial im­prove­ment in growth re­turn­ing and past pro­vi­sions com­ing back,” says Iyer.

He em­pha­sizes that this is a model where one needs to have tremen­dous pa­tience. One needs to have deep pen­e­tra­tion, one needs to have phe­nom­e­nal pas­sion for the work that is be­ing done and an affin­ity to­wards a very home-grown process. Above all, it re­quires a very well-de­fined prod­uct based on cus­tomer abil­ity and cash flow, which are very mar­ket re­lated. “If you have all these in­gre­di­ents, and you de­liver through peo­ple who are well trained, I think this is a great busi­ness model which may see its ups and downs dur­ing cer­tain sea­sons, but on a port­fo­lio ba­sis or on a con­sis­tent growth ba­sis, it is a high re­turn model. If you look at our 20-year his­tory, we have had a com­pounded an­nual growth rate of up­ward of 25%; if you look at our net worth, from a small base, it has grown into a large net worth of `8000 crore. We are close to $300 bil­lion to $400 bil­lion mar­ket cap,” says he.


Iyer be­lieves that there are 3 strong pil­lars that help busi­nesses to grow peo­ple, liq­uid­ity sup­port and tech­nol­ogy. “As far as tech­nol­ogy is con­cerned, our fo­cus has al­ways been two-fold: one how do we con­tin­u­ously bring costs un­der con­trol so that the cus­tomer can ben­e­fit and two how do we en­sure that such a large busi­ness, wide­spread at the re­tail level across the coun­try, does not have any con­trol weak­nesses. At the end of the day, it is a very highly reg­u­lated busi­ness and we need to en­sure that ev­ery­thing that hap­pens at ev­ery branch is very well un­der­stood and meets all the reg­u­la­tory and au­dit re­quire­ments. There­fore, con­trol be­comes crit­i­cal. The third el­e­ment of the busi­ness also comes from a highly ef­fi­cient CRM sys­tem as well as a strong MIS base. Keep­ing these in mind, we have in­vested ad­e­quately and con­tin­u­ously in tech­nol­ogy all the time. This is a very unique busi­ness where ini­tially - 1995 to 2000 - al­most 100% of our col­lec­tions were com­ing in cash. And over a pe­riod of time be­cause of the mix of cus­tomers, cash col­lec­tions ac­counted for

65% to 70%. This is then de­posited into thou­sands of bank ac­counts all over the coun­try. Against this, the cus­tomer pro­file is not that lit­er­ate. They al­ways look at the safety and se­cu­rity of the cash trans­ac­tions. So, when they make an in­stal­ment pay­ment, they want to make sure that the pay­ment is duly given to the au­tho­rized per­son, it is duly ac­knowl­edged and the pay­ment is re­flected in their state­ment of ac­counts, si­mul­ta­ne­ously as a credit. We could meet this fun­da­men­tal re­quire­ment right from our ini­tial days in busi­ness.”


He points out that Mahin­dra Fi­nance was the first fi­nan­cial ser­vices com­pany in the coun­try to in­tro­duce hand­held de­vices whereby when the staff reaches out to a cus­tomer and col­lects his in­stal­ments, he is given in­stant re­ceipts ir­re­spec­tive of the lo­ca­tion. The cash gets de­posited in the bank and gets ac­counted with­out any man­ual in­ter­ven­tion. The re­ceipt is cut through the hand­held de­vice and this is au­to­mat­i­cally ac­counted for in the sys­tem. So, the cus­tomer felt hugely com­fort­able about the pro­cesses.

Iyer also main­tains that over a pe­riod of time, the com­pany has be­come a very live one – that is one can sit say in Mumbai and see the trans­ac­tions live hap­pen­ing say in Nager­coil in Tamil Nadu.

“Over a pe­riod of time, we have put in all the knowl­edge of this busi­ness and con­verted it into a tech­nol­ogy so­lu­tion and all the MIS we get are highly an­a­lyzed for peo­ple at ev­ery level to ac­cess and take ap­pro­pri­ate de­ci­sions. But, the over­all ap­proach of the tech­nol­ogy in­ter­ven­tion has a strong twofold ap­proach - one how do we bring down the cost of op­er­a­tions be­cause of the large na­ture of the op­er­a­tions, and two how do we not lose con­trol. We have achieved both these ob­jec­tives phe­nom­e­nally well. We have also built a strong cus­tomer re­la­tion­ship man­age­ment mod­ule. There are re­peat cus­tomers to­day up­ward of 15% to 20% ev­ery month through our di­rect mar­ket­ing ini­tia­tives. And that is one of the out­comes of this tech­nol­ogy in­ter­ven­tion,” he points out.

The com­pany is now mov­ing to the next phase of tech­nol­ogy up­da­tion, which is us­ing the dig­i­tal plat­form to give var­i­ous op­tions to the cus­tomer. He can bor­row through the dig­i­tal plat­form, or make re­pay­ments. The com­pany has also en­tered into tie-ups as a part­ner­ship ap­proach with pay­ments banks or pay­ment fa­cil­i­ta­tors and other ser­vice providers through which the cus­tomer can be ser­viced.

Iyer says the next phase will come from an­a­lyt­ics. “We have over 4 mil­lion cus­tomers to­day and are adding 50,000 new cus­tomers ev­ery month. This is a great scope for an­a­lyt­ics. With 20 plus years of ex­pe­ri­ence, of 20,000 odd peo­ple col­lect­ing in­for­ma­tion about cus­tomers through mar­ket in­ter­ven­tions, I think the knowl­edge and data that have be­come avail­able have fan­tas­tic abil­ity to cre­ate many more such in­no­va­tive prod­ucts for the cus­tomers specif­i­cally meet­ing their needs and many such chan­nels to de­liver these prod­ucts and other ser­vices at a very af­ford­able price. More im­por­tantly, we are now in a po­si­tion to re­ally set out and fore­cast trends of who will buy what, when, why and through whom and how. We are ac­tu­ally mov­ing away from a purely sales ful­fil­ment or­ga­ni­za­tion to a sales gen­er­at­ing and con­vert­ing or­ga­ni­za­tion with the help of the large data and vast knowl­edge and ac­tive in­ter­ven­tions through tech­nol­ogy plat­forms. This is our tech­nol­ogy ap­proach and you will see us as re­ally lead­ing the tech­nol­ogy change that will hap­pen in ru­ral In­dia along­side the sev­eral gov­ern­ment ini­tia­tives to cre­ate var­i­ous dig­i­tal means and plat­forms.”


Hav­ing built such a large busi­ness, the com­pany has al­ways looked at how it can con­trib­ute back to the com­mu­nity and so­ci­ety through a sus­tain­abil­ity ap­proach and through its CSR ini­tia­tives. Apart from the fact that there is a need for in­vest­ing 2% of the profit in CSR ini­tia­tives, what the com­pany has looked at as in­vest­ment and con­tri­bu­tion back to so­ci­ety is to mean­ing­fully de­ploy these funds rather than just do­nate money to an or­ga­ni­za­tion. “Our ap­proach in this re­gard is to in­volve the en­tire em­ployee com­mu­nity along with the funds that are made avail­able. We chose cer­tain projects un­der the larger head­ing of health, ed­u­ca­tion and en­vi­ron­ment and en­sure that these are re­ally de­signed and de­liv­ered at the ru­ral level so that the ul­ti­mate ben­e­fi­cia­ries are the fam­i­lies in ru­ral In­dia. It is not nec­es­sary that the funds are routed through some in­ter­me­di­aries on whom we may not al­ways have con­trol. There­fore, we have set up a team purely fo­cus­ing on CSR ac­tiv­i­ties and we have some flag­ship pro­grams like driver train­ing, fi­nan­cial lit­er­acy pro­grams, Life Line Ex­press for ru­ral vil­lage pop­u­la­tion and pro­vid­ing am­bu­lances to very de­serv­ing ru­ral health clin­ics and hos­pi­tals. These are our ap­proaches where apart from the ben­e­fi­ciary be­ing the lo­cal pop­u­la­tion we look for ut­most sat­is­fac­tion for the doer of such ac­tiv­i­ties,” says Iyer.

So, the em­ploy­ees - al­most 65% to 70% - ac­tively par­tic­i­pate in these ac­tiv­i­ties. Iyer says that gives him the ul­ti­mate sat­is­fac­tion apart from grow­ing a busi­ness into a large size. Sim­i­larly, on the sus­tain­abil­ity front, the com­pany is try­ing to make branches move to so­lar-based sys­tem wher­ever pos­si­ble and un­der­take tree plan­ta­tion across the coun­try. “Above all of these, what we try and en­cour­age is to en­sure that em­ploy­ees and their fam­i­lies par­tic­i­pate in these ini­tia­tives as much as pos­si­ble. This is how we en­sure that we con­trib­ute back to the so­ci­ety,” says Iyer.

Ramesh Iyer be­lieves that there are 3 strong pil­lars that help busi­nesses to grow peo­ple, liq­uid­ity sup­port and tech­nol­ogy

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