Light Microfinance’s loan processes are completely digital and mobile, enabling a smooth, controllable customer journey through smart integrations:
Light Microfinance (LM) disbursed over 42,000 loans worth Rs2.86 billion in Q1 of the current financial year. This is 162% higher in accounts and 262% in amount y/y. Credit outflow had dried up in the first 6-9 months of the last FY, more specifically in rural areas, where LM primarily operates. With its rock-solid asset quality, LM attracted lenders to maintain healthy liquidity and were able to disburse in higher numbers to cater to the pent-up demand. The composure of the leadership team and their people-centric approach ensured employees and clients remained engaged and motivated to work with the organization through this difficult period. LM’s growth was driven by the substantial demand in its rural operating areas. In its business model, LM provides doorstep loan facilities for all its customers.
As of August, LM’s AUM stands at Rs12.43 bn and it has catered to over 3.2 lakh customers. For the current fiscal LM has disbursed over 1.1 lakh loans amounting to over Rs7.36 billion. Aviral Saini, Co-founder, and CFO, explains: “Our strong tech-enabled risk management system has ensured growth. Our prudent and innovative technology investments have played a critical role in enabling our performance during the pandemic-impacted years and enabled us to remain very agile, implementing innovative processes to the many challenges faced by the industry at large.”
Mobile Pickup
Light Microfinance grew its customer base by over 43% y/y for Q1. Its customers are women from underserved but creditworthy aspirational rural households. These households are the most resilient in their geographies with diversified and sustainable income streams established over multiple years. LM has recently launched a micro-enterprise loan of up to Rs5 lakh to assist the growing businesses of its microentrepreneurs and enable their upward mobility. However, repayment is still largely cash-based due to the nature of the rural economy. This is changing though.
LM has its integrations in place to assist its borrowers in their effort to digitize. Woman’s ownership of mobiles has climbed up to 25% in rural areas. Saini underlines: “Our loan processes are completely digital and mobile, enabling a smooth, controllable customer journey through smart integrations and processed through proprietary in-house underwriting algorithms. The processes are running on the same tech backbone and do not differ in service considerations. This segment will, however, be much more glued to technology and repayments will be largely digital.”
Apps, Digital Platforms
LM has completely digitized its operations. Customer engagement through digital channels is a work in progress as LM works with its borrowers’ current context. However, its client profile doesn’t allow the submission of online loan applications as rural customers still do not have access to the internet, though the trend of accessibility is clearly setting in. Also, adoption and subsequent trust in the system will take some more time to set in. LM is convinced the aspirational drive of its borrowers and the convenience of technology will create a compelling trend in the coming days. LM’s field staff uses smartphones for all the processes right from onboarding customers to their credit checks.
Saini indicates: “We have a suite of our own mobile apps and digital platforms. We have invested in cloud-based systems since inception and all our loan processes till the disbursement are done through a mobile app that has been built by our technology team. We are confident of customers’ adoption of technology with the trust they have in our systems.”
Forces For Tech Adoption
LM has been working in the microfinance segment since 2009. Its 90-92% of customers are from rural and semi-urban areas between 18-59 years of age. Currently, LM only offers loans to women borrowers and those with robust household cash flow. Based on its geographical presence, 60% of LM’s loan portfolio is for agriculture and allied services, followed by 30% for trade and services and 9% for production. The supply chains for milk and FMCG products were exempted from restrictions. Thus, its collections were not adversely affected by covid.
LM has been investing in technology and is leveraging it into microfinance changing the game. Saini points out: “The agri-based startup ecosystem and India’s dairy industry are acting as driving forces for the adoption of technology in rural segment. We are open to collaborations and will soon be offering digital products too. We are building proprietary software and algorithms that will give us a strong boost. A significant amount of equity infusion proceeds is for strengthening our technology.”
______________________
Read more-
