Migrant homecoming is revving up native town economies:
Pic: Manish Jaiswal
Global financial systems are reeling under the onslaught of covid pandemic and the most affected seems to the small-scale businesses, which have been severely impacted by the crisis resulting from lockdowns and financial constraints. Loan moratoriums need to be extended, job losses have crossed the over the 4 million marks and liquidity seems to be resting with only a prospering few while its lack in other major areas is denting the financial landscape. Of their own volition, banks and NBFCs have tightened the lending norms and are reluctant for credit expansions given the elevated risks.
The initial shock that covid created seems to be waning now. Everyone appears to be able to cope with the infection per se and there is an awareness that vaccines for masses may be a far cry. So, businesses are getting back on track and the credit flow in the system is showing a semblance of near-normal albeit selectively with the government providing support for liquidity and offering some schemes under Atmanirbhar Bharat. This can be the beginning of a new era where financial enterprises are rapidly altering their business models.
The financial paradigms are shifting to deep reliance on technology to serve more clients at a faster pace and to impart more effectiveness to conventional banking dominated by human judgment, touch, and feel. The lenders today, including the fintech, are relying on transaction and interaction data trails and online verifications as they look to bolstering their credit models and underlying processes. The landscape now includes self-learning technologies, machine intelligence, big data, agile technologies and all of these are today part of the WFH model.
Manish Jaiswal, MD, and CEO of Magma Housing Finance are among the business heads in the financial services realm, who are articulating newer strategies and his forte is the affordable housing space and micro, small and medium enterprises. He is steering Magma Housing Finance to become an organization with fintech capabilities but with a difference, that is, strong on-ground presence and rich collection infrastructure. He mentions that the company is focused on evolving newer and well-segmented business models and thus balancing the traditional models with technological supplant. He, however, concedes: “Most credit models today are under brutal testing and paving the way for altered lending landscape”
CUSTOMER LEVEL DATA RICHNESS
While the combination of data and technologies is helping evolve smarter products with agility, the customer and underlying data intelligence around is assuming proprietary proportions, believes Manish Jaiswal. He mentions that as data richness enhances, the service deliveries will enhance from ‘months to minutes’. He says Magma Housing Finance is a tech-NBFC and believes that organizations that connect emotionally with the customers while deploying technology to serve them will gravitate customers exponentially. He reiterates that the importance of customer connections is unwavering and the topmost priority.
He also believes that while being agile and nimble is the need of the hour, it is also equally important to have a flexible business architecture with high-quality data aggregation. He says that the last 3 crises which impacted the financial services industry were man-made – demonetization, GST implementation, and now covid-19. The silver lining that these crises bring about is that each of these has accelerated the digital journey in the corporate world. Rapid digitization aided by high quality and cheap connectivity is building transaction and interaction trails. “Mr. Covid 19 (certainly not a teenager) is the new Chief Technology Officer of most enterprises, which are driving collaboration technologies for contactless or minimal contact transactions, like never before,” he says jocularly.
Manish Jaiswal says enterprises of the future will focus on specialized niches with deeper intelligence. “Organizations should have a sharper clarity on whom to serve and whom to not. It is important to size up one’s deep internal capabilities and natural strengths of the organization,” he says.
When he discusses the focus of Magma Housing Finance on affordable housing, especially for self-employed people in the semi-urban and rural India, he says: “Genealogically, our deep association with hinterland credit spans over 3 decades and this helped us to build a relentless focus on this chosen segment. We certainly are not strategizing forays into high street metro business at the backdrop of who we basically are.”
According to him, deeper data backed intelligence about the chosen customer segment helps get beneath the veneer and unravel sciences of consumer psychology thus helping build specialization. With principles of segmentation at the core, he believes that credit analysis should be never outsourced while the peripherals certainly can be with due protections. He also stresses that while most financial enterprises have a top-down business architecture approach, the modern-day CEOs are embracing ground connectedness and earthy intelligence for continuous learning – unlearning – reinvention process with agility and nimble footedness.
Manish Jaiswal says WFH adoption is now a way of life and has necessitated the need for one’s own ‘corner office’ in most homes. He describes WFH as ‘Hoffice’ and says it is the new normal. “WFH, need for workouts and space for kids’ online education will push people looking for more spacious homes. Especially so where families have multiple working members. The intensity and duration of the pandemic will play a seminal role in driving up ‘usable square feet in every home’ given the need to accommodate the altered, digital work and education from home,” he predicts.
With 200+ days already into a pandemic and with no certainty of mass vaccination at least for another 12-18 months, people have accepted to coexist with covid as a reality of life and have begun to alter business model, he says, adding: “The financial year 2020-21 will be all about survivability and certainly not profitability. Organizations must have a sharp focus on capital conservation.”
He expects businesses to shift gears from survival to revival in the latter half of the next financial year and the pre-covid business level might not return until March 2022. “The ‘Hoffice’ culture will need modularity at homes and also individual personal space will get more attention,” he feels.
SELF-CONSTRUCTION IN SMALL TOWNS
Urban dwellers may postpone or even cancel their home purchase decisions in the light of the frail economic conditions, job uncertainties, pay-cuts, says Manish Jaiswal, adding lending norms will tighten. “The reverse migration is settling down and many have made choices to stay put in their native towns and this will drive rural demand with a need for higher space per capita. A majority of migrant families are now exploring options to build an additional room or additional floor and organizations like ours are focussing on personal space expansion in existing homes,” he explains.
He is of the view that massive unemployment that is prevailing now will pave the way for self-employment and most of these people will make their humble beginnings from their own Hoffices. The near-term growth is likely to come from self-construction houses, he states, adding: “Given this impetus, our business is fast getting back to normalcy with over 90% normal collections in the home loan segment post the end of the moratorium period. Our disbursements are getting closer to pre-covid levels.”
RISK MANAGEMENT & COLLECTIONS
“Risk mitigation is right at the front and has to be a forte for lending institutions,” says Manish Jaiswal, adding: “Proactive steps and intelligence in collections with predictive models will help assess the risk much before. You have to stem any rot and well in time before it gets deeper and cut losses much earlier.”
He mentions that investments in data, digitization, and intelligence building are no more options but a mandate for implementation. While risks are elevated currently, the post-moratorium consumer behavior in his segment, according to him is encouraging. “The possibility of massive fallout in risk assessment is unlikely. We have a separate vertical for Risk and Analytics in our company,” he says.
PASSION AND COMPASSION
Manish Jaiswal reveals that his frontline teams have done a very commendable job by ensuring PMAY benefits transmission of over Rs200 million to eligible home loan customers and also extended interest subvention of Rs70 million to over 7000 MSMEs. Says he: “We are grateful to the government for such schemes and our frontline teams have accessed customers physically or digitally to deliver such benefits at the customers’ doorsteps without them having them to spend anything. The sheer experience of the joy of giving is helping create a culture of gratitude towards our customers.”
When asked whether such schemes like PMAY which curtail the loan and thus reduce the earnings and affect overall profitability, he quips candidly: “Not everything can be measured in numbers! Any benefaction which alleviates the loan burden yields goodness, gratitude, and positivity. Good wishes are our best intrinsic valuations.”