Muthoot Microfin
The launch of Mahila Mitra app enabled Muthoot Microfin to cutdown loan decisioning and dis-bursement time by half. The easy access for the customers translated to a significant growth in business earnings and productivity, says Sadaf Sayed, CEO of the co
Babu Nair: What steps did Muthoot Microfin take to help customers and keep the business afloat during this challenging period?
Sadaf Sayed: Our busi nes s is predominantly in gold, micro and 2-wheeler finance, affordable housing. These 4 core units contribute almost 95% of the group’s revenue. Rural economy, being more resilient and tenacious, has come back with much fervor. Rural areas need credit support and they value the services that we offer. Our business is user-intensive and done face to face. We do use technology, but rural business is wholly dependent on the personal element. The parent com-pany has around 3600 branches and we have around 755 branches across India. The purpose of having that kind of a footprint was to reach every doorstep. It is a people’s business after all. Our employees are those who usually come from the same households that we are serving. We have a workforce of around 25,000 across the group.
While other NBFCs saw lack of capital and credit offtake, your organization disbursed around ` 25 billion in the last one year. The workforce also increased by 30-37%.
Last year was a shortened year because of the lockdown. Considering this, disbursement of `27 billion in 6 months is a good growth. Muthoot Fincorp, in a normal year, sees loan disbursement of over `40 billion. Savings and assets among the rural households are very limited and they need cash flow for their businesses. Generally, they save in gold. We have managed to give our customers additional working capital through these disbursements. Also, we needed a larger staff to cater to our 1.8 billion customers, as the core concept of microfinance, a center meeting was no longer conducive during the pandemic.
How have you managed NPAs during this current scenario?
When the lockdown was announced,
we were apprehensive about the outcome as our loans fall under the unsecured category. But we had a strong conviction because our borrowers are commit-ted with genuine businesses and they would not default. Collections were affected initially, as they happen in cash and through center meetings. But the collection efficiency has since improved in the succeeding months and by March it touched 96%. All those who were unable to pay during the lockdown, started paying.
Technology (automation) brings in scalability. But as a people-oriented business majorly based in rural, how do you blend people and technology together? What technologies have helped in making the business better?
There is a need to establish better ways to connect with clients. We developed an in-house soft-ware that allows complete sourcing from the last mile on a digital platform. It is QR code-enabled. Personal and credit information is put together in a credit scorecard, which becomes the basis for a loan issuance. Mahila Mitra app was developed to service these loans. As many as 400,000 cus-tomers have already downloaded it. Customers can pay their instalments, request a loan or share their grievances through this app. All disbursements happen digitally - the money is directly cred-ited into the customer’s account. Almost 20% of our collections also happen through the digital format. Users of this app are increasing.
Is there any change in the turnaround time from the sourcing to disbursement of loans?
With the app, we have cut down processing time considerably. Loan decision now happens in 2-3 days. Customers know the outcome early.
Do these faster decisions contribute significantly to the turnover of the business?
Absolutely. It increased our business and also the number of customers. So, there are gains, both, on the productivity side and on the business side. Going forward, we expect 20-30% increase in the output.
What is the typical ticket size of the business?
The average ticket size is around `30,000 starting from `10,000 and reaching `100,000.
From a business and a technology standpoint, what is on your Wishlist?
Technology has made rural customers very aspirational. Our aim is to provide lifecycle needs-based products to our customers; from small loans to 2-wheeler loans to house loans or home fi-nance products. And our short-term goal is to bridge the digital divide and help our customers get digital-savvy. We want our customers to be able to reach out and we want to make it seamless for them. Hopefully, we will achieve it within 6 months to a year.