The world’s largest microfinance market in India has come to
a halt due to the lockdown. It caters to around 120 million families that have
no access to financial services.
This sector makes use of the Grameen methodology, residence checks and financial literacy sessions, to provide unsecured loans, within a week of the initial application, to be paid back weekly/fortnightly or monthly as per the client’s preference.
So how does this sector, which caters to the Bottom of the Pyramid clients, always evolve stronger after every crisis?
Mr. Alok Biswas
MD and Founder at Jankalyan Financial Services
Ms. Komal Sharma
HR Head at Svamaan Financial Services Pvt Ltd
Mr. Ashwini Kumar
Chief People Officer at Samasta Microfinance Limited
Mr. Vineet Chattree
Director at Svatantra Microfin Pvt Ltd
Mr. Dinesh Saili
Senior Vice President – MFI Operations at Sub-K IMPACT Solutions Ltd
Mr. Vijay Agarwal
Head – Microfinance at Shivalik Mercantile Co-operative Bank Ltd
Mr. Manish Jain
CTO at Bharat Financial Inclusion Limited
Mr. Asutosh Mishra
Deputy HR Manager at Samasta Microfinance Limited
Mr. Prasad Rajappan
CEO & Founder at ZingHR – A Global HR Tech Software Solution in India
Mr. Ravi Kikan
Growth & Marketing Head at ZingHR – A Global HR Tech Software Solution in India
Mr. Alok Biswas gave
his opening statements on the topic. He drew from his own experience where he
left Axis Bank in 2010 and started Jagran Financial Services, and there was an
economic crisis. People questioned his decision as money had dried up and there
were no RBI regulations back then. But this is a different market and it
bounced back. But the situation might not be the same during lockdown. There
are multiple articles being published which indicate that the market will
bounce back; but collection will be a key issue for MFI particularly.
Retrenchment might happen as people don’t want to move far from homes.
Work from Home is another challenge for this sector. He
mentioned they have currently opened their branches and the collections have
started to an extent. Moratorium period
is difficult, where RBI has provided another extension, but the sector needs to
manage it and be polite.
Demonetization was different as compared to Covid; and it
will take time to settle down. Even post Covid, norms like social distancing
will still continue.
The biggest challenge is aligning HR processes, employee
engagement and motivation; they are in talks with ZingHR for the same.
With the extended moratorium, asset quality might be
depleted in the long run.
There will be an increase in demand post Covid, as most
people have exhausted their savings and will need to revive their lives.
Mr. Vineet Chattree started
his notes by explaining what microfinance is. In his opinion, MFI is providing
working capital for life for most of their customers. The sector has around 5.6
CR women borrowers who impact probably 5 times more the number of people. They
mainly support the basic economy which is also largely impacted by agriculture.
When the Moratorium extension was announced, the RBI
Governor mentioned, among the gloom, the only sector to bring out a little
happiness is Agri and Agrilife, where there’s an increase of 3.7%. There has
been a great productivity in sowing of kharif crops. In his opinion there will
be a fair amount of production in rural and tier 3 cities, but at the same time
there will be a fair demand of credit. Because nothing happens without money and
it’s an important part to keep the economic engines running.
A trend of reverse migration has been observed, and there
might be a little percent of permanency in it. This might imply that our
honorable PM’s ‘Atmanirbhar’ initiative is imperative; because people
decongesting metros will need to start entrepreneurial initiatives in their
local areas. This will lead to demand for infrastructure. Here again credit
will need to come from entities which can reach there. This is where
microfinance has a pride in their reach.
Microfinance is peoples’ choice because it’s a combination
of a great work model and customer experience. The sector gives unsecured loans
to people who in his opinion belong to the most resilient part of the economy.
Microfinance has the lowest delinquency.
We tend to extrapolate Mumbai as entire India, but India is
large. As Mr. Alok mentioned, all the field staff are working, we are operating
and have now started with collections.
But yes, the business model will be impacted to an extent.
After demonetization, one thing that changed is everyone started dispersing the
loan amount in customer’s bank accounts.
So probably after Covid, there might be a realization that
digital collection will be the way to go! We might also have to change the
approach in customer engagement and provide more awareness.
In his perspective, moratorium has given our customers extra
time to repay without an overdue and also a chance at reviving their
Crisis makes everyone innovative, and so does their team. In
terms of employee engagement everyone came together with innovations for
Covid has bought up questions like, ‘Do we centralize or
decentralize our metro offices?’ ‘Do we digitize all the processes, like we
have digitized our HR processes using ZingHR a Global HR Software Platform?’
And the answer may be YES..
Mr. Ashwini Kumar was
in sync with Mr. Alok and Mr. Vineet. Covid has been an opportunity of a kind,
where there were certain projects in the pipeline which they had deemed as long
term; but due to need of the hour started the implementation and have completed
in as fast as 2-3 months.
As an industry, digital collections to an extent have
started; they are digitally educating the customers on Moratorium. So the
initial fear about Lockdown in April has decreased. Samasta Microfinance
re-started their business from 4th May, and educated their people on
safety and sanitization. They educated the employees as per the government
norms on ways in which we need to communicate with customers and plan the
Fear might lead to economic downturn and overcoming that
will be difficult. So although the cases are rising, everyone needs to live
with it by maintaining safety and hygiene.
Mr. Ashwini has worked in multiple sectors, and there was
never a concept of working from home. But Covid made this change and observed
everyone was equally productive working from home as well. Employees were
oriented on this transition, and everything has come up well.
From an HR perspective two major challenges were customer
and employee engagement. This is where technology played a major role.
Moratorium 2.0 was unexpected, and there was a fear of
customer behavior. So strategies had to be revisited.
not negatively impacted microfinance much, but in his opinion the sector is
more prone to Covid. If we don’t change our strategies then we will miss the
Employees connect and customer engagement needs to be a
priority. ‘ZingHR has been our HRTech
partner here. I have used multiple HR software platforms in my past
organizations, but honestly ZingHR has given us a lot of flexibility and met
our requirements. Major things that I observed are amazing employee connect
using helpdesk and a seamless, hassle free payroll software system,
attendance and leave management. Geo-fencing has been helping us tremendously
ZingHR has played a
pivotal role in our digital transition.
Ms. Komal Sharma agreed
with most of the points mentioned in the previous notes. MFI as an industry has
definitely felt a pinch during Covid, with the operations halted, slowed or
suspended during lockdown. As per various experts, the impacts could be short
term or long term. Given the working model of the sector where they work with
unsecured loans, the major concern has been connecting with the customers.
Digitization has been helpful, beginning from disbursements of loans to
collections. There have been thoughts of using UPI as well as setting up
The guidelines given by RBI helped in restarting with the
operations. As Svamaan has branches in rural areas, sanitization, social
distancing and hygiene became important. As an organization they educated the
entire workforce, and did things at local as well as central level. They
ensured sanitizers, masks, gloves were provided at all the branches as well as
employees were covered under mediclaim policies.
Work from Home was a new norm for the finance segment, but
it has worked well for them. Now the time has come when all organizations will
leave the conventional way and start working as a fintech.
Mr. Dinesh Saili mentioned
there were two biggest fears, one was fear of the unknown and second was
political intervention. We have seen two crises before this and both have
taught us lessons. The AP crisis showed the importance of credit bureaus; then
demonetization emphasized on the importance of cashless disbursements.
So irrespective of city, state or education everyone is
worried about safety and now the strategies will revolve around contactless
services while not compromising with the quality.
90-95% of the microfinance staff works in the field, so work
from home was because of compulsion. Covid has taught us that work from home
can be productive with the right data and technology.
Moratorium 1.0 was like a holiday; whereas in phase 2.0 it
was cleared that payments will only be delayed and will be with interest. So
that has made life a little easy.
Many people have migrated back to their hometowns with their
skills, so they might look at MFIs, NBFCs to start off their livelihood there.
Also he agreed with Ms. Komal’s views, now everyone will
start working like fintech, to get the best of both the worlds. Covid has acted
as a catalyst for customer engagement and employee connect.
People have also realized the importance of health insurance
and savings. Products and services of all organizations will change where now
there will be credit plus models.
Mr. Vijay Agarwal felt
the major fear of the lockdown was its unknown time period. Second fear was
community spread, as urban areas are affected the most.
MFI is all about connectivity, and as mentioned previously
by Mr. Dinesh, most of our employees are on field. So the working style needs
to be revamped.
Moratorium was mainly announced to review the lower
businesses of the people at the bottom of the pyramid, whose main source of
income has been hampered. This period has helped in connecting better with the
Covid has emphasized the importance of digital payments.
They have not observed any impact on liquidity as demands
are expected to go up post Covid.
According to him, as
organizations we also need to look at repeat customers.
Mr. Manish Jain had
a different perspective. 20th March 2020 which was the last full
business day before lockdown, we disbursed close to 200 CR of loan, and it’s
been 6 weeks since our offices have opened and we have not done that amount
collectively till now. It was a chaotic situation during lockdown from IT
perspective; it was month end, quarter end and financial year end.
In his opinion, today the fear of Covid has been superseded
by the instinct of survival for most people including customers and employees.
The demand is high, where people in villages need money for reviving their
livelihood. Everyone is in need of money.
There are new customers due to reverse migration, which is a
complex situation, as you don’t know for long these people will live there.
This is an opportunity with risk.
BFIL used to acquire around 5000 customers a day pre
Lockdown, which currently has changed to 20 a day.
Moratorium is a chicken and egg situation, where people who
have money are opting for it in the midst of all confusion; and people who are
badly impacted by Covid we need to help them. It is a difficult situation, as
if even 1 or 2 people default payments then the entire village will not get
In this situation we are in need of new products under RBI
guidelines, which will help these people in refinance their out standings post
They had their field staff work from home, by developing an
app, which helped them in understanding the customers situation and
The collections are optimistic right now and are expected to
improve. An issue with digital collections is, how do the rural customers deposit
their money in absence of reasonable smartphones?
Major challenge is whether we should invest in digitization
of payment processes or control costs for survival?
Mr. Ravi Kikan introduced Mr. Prasad Rajappan, who suggested
to have this Round-Table, as he thinks ‘The
voice of the microfinance, which is the base of the lending industry, should be
heard and talked about’
Mr. Prasad Rajappan: ZingHR
is really excited with the thought process of the microfinance industry towards
making India Atma nirbhar. I feel microfinance is the future for India. In my
recent interactions with a few NGOs, they mentioned that CSR funds are drying
up; and thanks to Mr. Vineet Chattree we were able to get together with other
microfinances and raise funds. It’s true when he says; this is one vertical
where all the organizations are ready to share the practices.
ZingHR will continue to support you, and don’t look at us
only as your HR technology partner but as your business outcomation
partner. We are here to partner and learn with you.
Mr. Asutosh Mishra was
in sync with Mr. Ashwini’s views, where the primary focus needs to be on
customer engagement, to understand how we can better help them in this crisis.
With respect to Work from Home, we organized multiple
awareness programs for our employees in terms of health and safety.
Key Pointers from the discussion
Mr. Vineet Chattree:
Engagement is the Key.
Customer Engagement, which doesn’t look forceful, is dominantly
digital and helpful in nature.
Engage with your employees, everyone is scared and our
employees are working on the field. We need to keep their morale high and
ensure their safety.
Vendor engagement for negotiations, as well as ensuring
their timely payments.
Mr. Alok Biswas:
We are in the same boat; we need to take care of our
customers and liquidity management.
First we need to save our organizations, Cash is the King.
Work from Home is not a luxury for our employees, and we
need to ensure their safety.
Ms. Komal Sharma:
Customer connect to understand their situation and help
Ensuring safety of employees, especially the front liners,
and also look at employee recognition.
Mr. Ashwini Kumar:
Expedite the turnaround time for projects like digitizing
Customer awareness on better utilization of loans.
Continuous learning and development of employees.
Mr. Dinesh Saili:
Financial wellbeing of organization.
Communication and training with employees and; communication
to and from customers on financial awareness, moratorium.
Qualification and analyzing of current data, before moving
Mr. Manish Jain:
Continue dispersing loans and the collection cycle will
We need to adapt quickly to changing regulations.
Invest in cloud technologies and ensure timely vendor
Mr. Vijay Agarwal:
Customer connect should be a priority.
Technology is the way forward.
Liquidity needs to be managed.
Landing approach towards customers need to change.
Mr. Asutosh Mishra:
ZingHR is an amazing HR Tech partner to Samasta Microfinance
Automation is the key for us.
Customer and employee engagement are extremely essential.
Mr. Prasad Rajappan:
Redesigning of business processes is essential with a focus
on business outcomes.
Connect with employees and customers.
For CXOs it’s all about outcomes, which includes topline,
EBIDTA margin, people engagement and growth.
So it’s important for everyone to come together and do
what’s important for the entire ecosystem.
Covid-19 has had a negative effect not only on the economy but almost all the industries and households. Yes, there will be post Covid-19 effects but it is not something we cannot fight. With the right strategy and right state of mind, we can survive the effects and come out stronger.
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