Has no plans to become a bank
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.”
JLG BASED LENDING
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