Has no plans to be­come a bank

Banking Frontiers - - Housing Hihglights - Me­hul@bank­ingfron­

Cred­itAc­cess Grameen (CAGL) is a lead­ing In­dian mi­cro-fi­nance in­sti­tu­tion head­quar­tered in Ban­ga­lore, fo­cused on pro­vid­ing mi­croloans to women cus­tomers, pre­dom­i­nantly in ru­ral ar­eas.

Con­sid­er­ing the huge un­met de­mand for ru­ral credit, the com­pany has spread it­self across 132 dis­tricts in 8 large states with a net­work of 516 branches. As on 31 March 2018, it had 6306 full-time em­ploy­ees, in­clud­ing 4544 loan of­fi­cers. Udaya Ku­mar, MD & CEO of the com­pany, says 81% of the cus­tomers are in ru­ral ar­eas, against in­dus­try av­er­age of 38%. “We have 3.2 mil­lion ac­tive loan ac­counts and 82% of our branches have been cater­ing to the ru­ral mar­kets. We have cal­i­brated a con­tigu­ous district-based ex­pan­sion strat­egy, fo­cus­ing on deep ru­ral pen­e­tra­tion. We have 84% cus­tomer re­ten­tion. We pre­fer to move from one district to a neigh­bor district and we try to find whether busi­ness is vi­able and good for us. If it is not, then we move out of it.”


The com­pany un­der­takes fre­quent cus­tomer in­ter­ac­tion through pe­ri­odic ken­dra meet­ings of joint li­a­bil­ity groups (JLGs). Cus­tomers are re­quired to at­tend weekly / fort­nightly ken­dra meet­ings. It fol­lows pre­dom­i­nantly a weekly col­lec­tion model. The fo­cus cus­tomer seg­ment is women hav­ing an an­nual house­hold in­come of `100,000 or less in ru­ral ar­eas and `160,000 or less in ur­ban ar­eas. The com­pany’s se­nior VP, Risk Gu­ru­raj K S Rao says the com­pany can cater to only women be­cause they are good at sav­ing, they man­age and use the money bet­ter than men. “Loan ap­pli­ca­tions are made sub­ject to ap­proval by the group and acceptance of joint li­a­bil­ity. Credit bu­reau check is made prior to ev­ery sanc­tion and ev­ery new client ac­qui­si­tion. Weekly, fort­nightly and 4-weekly op­tions are avail­able for re­pay­ment based on the cus­tomers’ cash-flow.” JLG model proven su­pe­rior post de­mon­e­ti­za­tion


The com­pany has a wide prod­uct suite cater­ing to the whole cus­tomer life cy­cle. There is grad­ual in­crease bor­row­ing lim­its with im­prove­ment in credit his­tory and ten­ure of cus­tomers. Its prod­ucts are built on a deep un­der­stand­ing of the re­quire­ments of the cus­tomers who largely lack ac­cess to the for­mal bank­ing sec­tor. It pri­mar­ily pro­vides in­come gen­er­a­tion loan prod­ucts and also fam­ily wel­fare loans, home im­prove­ment loans and emer­gency loans to its ex­ist­ing cus­tomers.

Cred­itAc­cess Grameen in­tro­duced in­di­vid­ual re­tail fi­nance loans in 2016 for per­sons who had been its cus­tomers for at least 3 years. These loan prod­ucts are of­fered to cus­tomers to es­tab­lish a new en­ter­prise or ex­pand an ex­ist­ing busi­ness in their in­di­vid­ual ca­pac­ity (for in­stance, for the pur­chase of in­ven­to­ries, ma­chin­ery or 2-wheel­ers). Says Rao: “There is flex­i­bil­ity on ticket sizes, na­ture of loans, end-uses and dis­burse­ment and re­pay­ment sched­ules. The man­ner of their de­liv­ery dif­fer­en­ti­ates us from our com­peti­tors and gen­er­ates cus­tomer loy­alty. Our av­er­age ticket size is `19,671.”


The com­pany added 632,606 new bor­row­ers in FY2017-18, tak­ing the to­tal num­ber of bor­row­ers to 18,51,324 as of 31 March 2018. Also, it added 2627 new em­ploy­ees in FY2017-18. Ker­ala, Goa and Odisha and the union ter­ri­tory of Puducherry are the lat­est ad­di­tions as it ex­panded its sphere of ac­tiv­ity.

Cred­itAc­cess’ top 3 loan prod­ucts in value in FY2017-18 are Pra­gati and Pra­gati Plus (`39.75 bil­lion in­come gen­er­a­tion loans), Pra­gati Sup­ple­ment Loans (`3.07 bil­lion) and San­i­ta­tion Loans. The com­pany also en­te­terd into tie-ups with 4 in­sur­ance com­pa­nies, namely, Shri­ram Life In­sur­ance, Ko­tak Life In­sur­ance, DHFL Pramer­ica Life In­sur­ance and Ori­en­tal In­sur­ance Com­pany.


The com­pany’s pri­or­ity is ex­pan­sion from one district to an­other good neigh­bor­ing district, but not di­rectly in­creas­ing the num­ber of states. Its mar­ket share is 11% and ac­cord­ing to CRISIL Re­search, it was the 3rd largest NBFC-MFI in In­dia in terms of gross loan port­fo­lio as of 31 March 2017. Says Udaya Ku­mar: “We look for qual­ity and con­sis­tency in our busi­ness op­er­a­tions, but we don’t work just keep­ing mar­ket share in mind. We want to be in NBFC space only, we don’t wish to di­ver­sify into bank­ing.”

Cred­itAc­cess re­cently came up with an IPO, which was over­sub­scribed by 2.22 times. The `11.31-bil­lion IPO re­ceived bids for 4,17,97,980 shares against the to­tal is­sue size of 1,88,29,684 shares. The por­tion meant for qual­i­fied in­sti­tu­tional buy­ers (QIBs) was sub­scribed 5.52 times, non-in­sti­tu­tional in­vestors 98% and re­tail in­vestors 88%.

The com­pany in­tends to use the pro­ceeds, mailny to­wards aug­ment­ing the cap­i­tal base to meet fu­ture cap­i­tal re­quire­ments. B.R. Di­wakar, CFO, says: “The funds will pri­mar­ily be used as growth cap­i­tal and will be uti­lized for fur­ther lend­ing. We should be able to uti­lize the money for the next 24 months. It will be the main in­gre­di­ent for lever­ag­ing.”

Udaya Ku­mar looks for qual­ity and con­sis­tency in the busi­ness op­er­a­tions, but would not work keep­ing only mar­ket share in mind

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