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Customers rate field officers, basis their interaction

Magma Fincorp has evidence that women-led SMEs are growing and are showing high degrees of credit worthiness:

Magma Fincorp, the Mumbai based NBFC registered with the Reserve Bank of India as an asset finance company, has a wide network of 297 branches spread across 21 states at present. The company, with its registered office in Kolkata, has a strong presence in rural and semi-rural India. The company also has an employee base of close to 9000.

Average Loan Size

Magma Fincorp’s vehicle finance business portfolio is being reshaped by increasing the contribution of focused products and customer segments. The contribution to AUM of used vehicles, agri and auto lease to total ABF portfolio increased to 73% in Q3FY21 as against 68% yoy.

Diana Monteiro, Head, Public Relations & GM, Investor Relations, Magma Fincorp, reveals: “The average loan size in our company is Rs300,000 to Rs600,000 for vehicle finance, Rs1.7 to Rs2 million for SME finance and Rs900,000 to Rs1.3 million for housing finance. We have serviced 5 million customers since inception.”

Customer Experience

In financial year 2021, the company saw remarkable changes in the customer experience because of the restricted mobility of people and enhanced use of technology to reach out to existing and prospective customers. The company deployed several technology-driven solutions to effectively service the needs of its customers. The number of customers opting for moratorium 2.0 reduced to 45% in June 2020 and further to 40% in July 2020.

The company has taken a calibrated approach towards extending the second moratorium to its customers, after assessing their cash flows, etc. It ended December 2020 with a comfortable liquidity of over Rs21.10 billion. It did not opt for any moratorium from its lenders and the provisions under the lockdown induced moratorium situation stood at Rs1.49 billion, ie 1% of the AUM in the third quarter.

Diana says the company is making use of bots to handle customer queries, specifically on the moratorium. WhatsApp channels are being used extensively for communication with the customers during the moratorium period and revision in the amortization schedule used to be communicated with transparency.

Paperless, Seamless Credit

Deploying the best of fintech capabilities, the SME business of the company digitally accessed and disbursed emergency credit to 3200 SMEs with an end-to-end paperless and seamless process. The SME business has also successfully concluded the pilot for secured lending in 3 states and is expected to double its distribution in Q4 FY21. The business took long strides in working with the ministry of MSME, SIDBI and NCTGC to give a fillip to the initiative of ECLGS under the Government of India’s ‘Atmanirbhar Bharat’ scheme. Almost 60% of eligible MSMEs who needed revival capital have been beneficiaries of ECLGS under the ‘Go Digital’ SME initiative.

“We have initiated a free annual statement delivery through digital links too,” says Diana, adding: “We have been servicing customers at their homes to prevent the risk of high walk-ins and crowding at branches. We have digitized all key documents and links are sent to customers on WhatsApp. We have strengthened our controls through digital initiatives which help in preventing issuance of fraudulent NOCs, which is an industry-wide problem.”

Women Share In SME Loans Up

Magma Fincorp provides Express Business Loans, ie unsecured business loans or collateral free SME loans up to Rs1 million to micro-SMEs. Self-employed professionals and non-professionals engaged in manufacturing or trading are eligible for these loans. The company realizes that women are playing a key role in SMEs – the critical drivers of growth and engines of job creation.

“It is interesting to note that 22% of the SME business loans given by Magma’ SME business has women as the first co-applicant or prime applicant. It is evident that women-led SMEs are growing and they are showing high degrees of credit worthiness along with improving their business and financial practices, building their confidence, and expanding their networks,” says Diana.

Rating Field Force

Magma Fincorp conducted a survey of 300,000 customers who have obtained passenger and commercial vehicle loans, commercial equipment loans and tractor finance in July 2020 and found found that on a weighted average basis deployment across asset classes has improved in July 2020 compared to April 2020. There was a 10-fold increase in vehicle deployment between the time of the 2 interactions. Out of the 60% asset deployment in the second engagement, load utilization was 50%.

Diana points out: “We have also undertaken API integration with RTOs in the country. We can smoothly conduct a nationwide search over the digitized data of registered vehicles and view the details on various parameters. Credit decisions can be taken quickly now because this data is available and this naturally leads to quick TAT and enhanced customer experience.”.

Collection Efficiency

The company has seen improvement in collections after the end of the moratorium in August, and recorded collection efficiency of 97.2% in January 2021. It had collection efficiency of 90% in October and November and 94% in December 2020. It has lowered operating expenses by Rs1.16 billion in YTD 9M FY21, which translates to a saving of 70 bps during the year, of which 40 bps is sustainable due to structural changes undertaken. For agri business, bumper rabi crop harvest and timely government interventions enabled farmers to improve crop sale and cash flows during challenging times. 70% of the customers were able to make their payments on time.

Although the situation has improved in general, the company finds that cash flow crunch is still an issue to deployment problems.

Diana speaks about how the company could create better customer experience: “Going the cab aggregator way, our customers give rating to our field officers basis their interactions. Similar to the rating for our service providers or cab services, our customers now rate our field force. The ratings impact incentives and encourage our front-line staff to enhance customer experience.”

Co-ownership Conditions

Magma Housing Finance, a 100% affordable housing finance subsidiary of Magma Fincorp, targets home loan buyers in the unbanked areas. The government scheme Pradhan Mantri Awas Yojana (PMAY), states that in case the applicant is female, she need not have a co-owner for the house constructed under PMAY. Diana says out of the total loan portfolio, 95-96% of loans given by the company have a women co-applicant. However, if the applicant under PMAY is male, he needs to sign a female member of his family as a co-owner of the house constructed under PMAY. This female family member can either be his wife, mother or daughter.”

Room For More Women In FI

Women have come a long way from having no say about finances to today starting their own businesses and leading financial services enterprises in India. Diana feels that the pace of progress and change has been rather slow; nonetheless one cannot deny that the change has not happened. “And this change is here to stay. While a lot of women have been part of financial inclusion, there is significant room for improvement.”

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