Fincare Small Finance Bank is the name that DishaMicrofin’s venture has. It is about to launch operations and intends to be a fintech company with a banking license
Microfinance company DishaMicrofin, which is about to start operations of its small finance bank Fincare Small Finance Bank, will continue to have a focus on women and their empowerment. It believes this focus is integral to its business and women would be a very major segment of the bank’s customer base as well.
“Women borrowers currently comprise over 95% of our customer base,” says Keyur Doshi, CFO at DishaMicrofin. “Going forward, women would continue to account for the majority of our customer base. We intend to offer savings, deposits and insurance offerings tailor-made to the needs of this segment to achieve financial inclusion in the true spirit.”
Keyur Doshi explains how the new small finance bank will continue to have the focus on women as well as the base of the pyramid segment
BASE OF THE PYRAMID
While the base of the pyramid segment would continue to be a strong focus area, the bank would also be targetingthe mass retail customer segment in the rural and semi urban areas and would be offering new products such as affordable housing, loan against gold and overdrafts, says Doshi. “Our ability to offer deposit products would also help position us as a one-stop shop for their financial requirements,” he says.
DishaMicrofin was promoted in 2009 with an objective to make measurable economic and social impact on the lives of the lower income households by carrying out various microfinance initiatives and creating environment friendly livelihood opportunities, leading to a lifetime of progress. It was in 2010 that a like-minded PE firm – TrueNorth – invested in the company and as the journey continued over time and following integration with other group companies, the brand Fincare finally came into being. Doshi says today DishaMicrofin is ready to take on the exciting journey of small finance bank.
NEW MILESTONES
“ We b e l i e v e t h at t h e b a n k i n g transformation would help us set new milestones in achieving our objective with which DishaMicrofin was formed and further expanding the horizon to serve base of pyramid customers by offering savings, credit, remittances and insurance products,” says he.
Which are the states that the proposed bank intends to focus initially? How many branches are envisaged?
Doshi says as of today, DishaMicrofin is present in 7 states – Gujarat, Madhya Pradesh, Maharashtra, Tamil Nadu, Rajasthan, Karnataka, Andhra Pradesh – and 1 union territory – Puducherry. “As Fincare Small Finance Bank, we would continue to focus on the geography where we have a presence and will deepen our penetration before expanding to newer states.
“Other than the existing 250 NBFC- MFI offices, we plan to have about 100- 110 bank branches by the end of FY2018,” he adds.
ASSETS AND CAPITAL
Doshi points out that as an NBFC, the Fincare group had total assets under management of `1700 crore as of 31 March 2017. “As Fincare Small Finance Bank, we are targeting to reach an AUM of `20,000 crore by FY2022,” says he.DishaMicrofin recently concluded an equity transaction and strengthened its equity base. With the infusion of additional capital, it now has a net worth of ~`450 crore and a strong capital adequacy ratio of about 47 % as against the 15 % required for small finance banks. Says Doshi: “Over the next 2 years we’ll also generate adequate tier II funds and hence we are well capitalized for our growth over next 3 years.”
BUSINESS PROSPECTS
How would the bank attract deposits? What are the loan products that the bank intends to offer? Says Doshi: “For small finance banks, the overall deposits requirement is very small compared to the existing vast deposits market. We will have dedicated and different channels sourcing deposits from different sets of customers. Also, as we are a NBFC-MFI converting into a small finance bank, we have the advantage of having an asset portfolio at better rates compared to traditional banks, resulting in better net interest margins and effectively allowing us to offer attractive interest rate for FDs for retail as well as corporate clients to generate required deposits.”
He adds that the bank would be offering a variety of liability and asset products such as savings accounts, current accounts, retail deposits, corporate deposits, recurring deposits, overdraft facilities, guarantee products, microfinance loans, loans against property, individual loans, affordable housing loans, loans against gold, institutional finance and other retail asset products.
He also expects that all the existing customers of the DishaMicrofin to become customers of the small finance bank.
GROUP STRUCTURE
Post the setting up of the bank, what would be the proposed structure of group? Explains Doshi: “DishaMicrofin, the NBFC-MFI, would be the entity that would be converting as the small finance bank. After the group companies restructuring, it would be a 2-tier structure comprising a holding company – Fincare Business Services Ltd and the subsidiary – Fincare Small Finance Bank.”
TECH PLATFORM
Doshi speaks about the technology platform the group is setting up for operations as a bank. As most of the transactions involve the rural India, there are challenges in creating a digital platform. He says: “I would say that Fincare Small Finance Bank would be a fintech company with a small finance bank license. We would have a full-fledged omni-channel digital offering. As a bank, we would strive to attain ~95% paperless transactions, with paper transactions as an exception.
“As a fintech platform, with ~97% of our customers being rural, we see some challenges in connectivity and comfort of the customers in transacting online. However, with the growth in internet access, initiatives to educate the customer along with product designs that incentivize use of digital channels, we believe we would be able to overcome these challenges.”
CHANNELS
He adds that the bank would be having ATMs in its branches and through debit cards, customers will have access to the entire ATM network of all banks. “We plan to offer instant account opening, powered by Aadhaar based eKYC, which would result into quick TAT and customer delight. Besides, tablet banking would be an integral channel for the bank. Our field agents would be empowered by tablets for deposit account opening and servicing. These tablets would also be used for loan disbursals. A customer walking into the branch would be able to carry out all transactions using the tablets located in our branches,” he elaborates.
And finally, when is the formal launch? And where will be the corporate headquarters?
“We are awaiting the final license from RBI and we are working towards launching Fincare Small Finance Bank in June 2017. The corporate headquarters of the bank would be Bangalore,” reveals Doshi.
