Ravi Lalwani: Recently RBI has relaxed the minimum holding period for which the asset needs to stay on the book before it is eligible for securitization. What could be The impact of this measure on the industry?
Manish Jaiswal: The banking system in India is going through a conversion. So, the relaxation of minimum holding period and related policies will have a limited impact on the industry and liquidity will continue to be tight. Also, the recent exemptions have given power to RBI to regulate HFCs, while earlier we were under the purview of National Housing Bank. This was part of the recent budgetary declaration.
The housing finance sector growth has slowed down in the last one year due to liquidity crunch. Apart from liquidity crunch, which other challenges faced by your company?
Supply, cost and structure are the 3 issues within liquidity. The HFC sector is prone to ALM miss matches and bridging them through structural liability is very important. In the current environment, the evaluated cost of funds should come down because of the risk conversions from the bank. The cost of funds continues to remain high despite the repo rate drop of 135 basis points. There is a sector diversion between repo rates and borrowing cost for the HFCs in the current market conditions.
What is the impact of Pradhan Mantri Awas Yojana scheme on your company’s business?
The Pradhan Mantri Awas Yojana is the best government scheme administered after independence. It is an extremely beneficial scheme specially for the first-time home buyers who have never stayed in their own houses. We are actively promoting this scheme and we feel that life of the people has changed under these scheme as we are providing dignity to them to stay in their own house.
Magma HFC will be actively leveraging this scheme in the long run. Customers across the geographies in more than 5000 districts can be covered under this scheme. Customers within the limit of the municipal corporations are covered under this scheme, while customers outside the gram panchayat areas are not covered. As much as 60% of our customers are eligible under this scheme.
Which emerging technologies have you adopted to reach different customer segments? And how they are helping your company to leverage with different customers?
We have adopted extremely efficient and ahead-of-the-time technologies. From the point of sales to point of collections, our officers are equipped with their BYOD devices. We have recently integrated the top of the line loan recognition system with our BYOD, our loan life cycle management process is seamlessly integrated, and our customer gets brilliant turn around time. The decision-making capability is integrated in these business engines. The algorithm has been made through risk decision models and this makes us the front runner of technology in giving great customer and employee experience.
We are an NBFC tech organization which is a hybrid of fintech and NBFC. We use scoring engines and rule-based engines through decision scorecard. Our business rule engines are integrated with loan system that makes our company a ‘phygital fintech.’
What is your marketing communication strategy to reach tier 2, 3, & 4 cities and rural areas?
We have adopted a very cautious strategy and direct marketing is our business philosophy for home loans. As much as 80% of our business comes from direct sales and marketing activities. Our customers have no or low documentation for the home loan process. It takes 8 to 13 customer visits to close a customer loan cycle. One satisfied customer through word of mouth marketing communicates to the community and we get additional customers in turn.
What is your offline and online business ratio? Who are your offline and online partners for selling home finance products?
Our business model involves touch and feel; our customer enquires digitally, and the fulfilment happens physically. For our customer segment, physical presence is a matter of trust, therefore some of our businesses might come from intermediaries, but largely it is a community led business. Publicity and word of mouth are the primary source of customer acquisition and we don’t have any digital partners. In the future, we will work on customer acquisition system for online and community selling.
What are your expansion plans for 2020? What new products do you plan to launch?
We have an extremely secured SME lending business, hosing finance business and parent level asset-based financing business which is into truck and lorry finance. We are making sure that our customer gets protected through insurance, be it life or general. If the regulator allows us, we will introduce financial savings or micro savings products for our customers through appropriate tie ups.
In most of the affordable housing finance companies, 70% of their business comes from 2-3 states. But we have presence in the 11 states, and we will continue to deepen our presence in these states.
Which technologies are you focusing in 2020?
In 2020, we will introduce digital loan origination system, which will be installed in the BYOD devices of the front-end officers and backend team for superior business decision. We will integrate our channel partners and their portals. For the credit decision model, we have adopted logic regression technique which helps us in decision making. The integration of APIs will provide live data sources, scoring, statistical sciences and regression technique in our business models.
