Driven by strong growth and diversification:
Navachetana Microfinance Services has emerged as a vital player in the microfinance sector in Karnataka, India, with 2 operational locations in Haveri and Bengaluru North. Founded in May 2009, the company was established to manage the microfinance initiatives of the Navachetana Foundation (NCF), which was originally founded in 1999 by N V Mali. With a mission to uplift the weaker sections of society, particularly women, NMSPL has successfully served over 42,000 customers engaged in various occupations over the years.
Expansion & New Initiatives
Navachetana has made significant strides in the past 12 months, expanding its operations beyond South India for the first time in its 18-year history. The company established 12 new branches in Madhya Pradesh, marking a key milestone. Additionally, it introduced secured MSME lending with loans over Rs 1 lakh through a co-lending partnership with SBI, further strengthening its portfolio.
The organization also increased its presence in Andhra Pradesh and Telangana, opening 40 branches in the first half of the fiscal year (FY). CEO Unnikrishnan Janardnan emphasized: “We are actively exploring new BC arrangements with small finance banks, and have tied up with two new banking partners in the last 6 months.” These initiatives underscore Navachetana’s continued focus on growth and diversification.
Notable Achievements
Navachetana has successfully hived off its major Business Correspondent (BC) relationship with ESAF into a separate private entity, complying with RBI regulations. On the financial front, the company reported impressive growth, with a 62% yoy increase in revenue from operations and a 60% growth in PAT for FY 23-24. In terms of expansion, the number of branches rose from 151 in March 2024 to 238 by September, with plans to reach 300 by the end of the FY, focusing on Tamil Nadu, Andhra Pradesh, and Madhya Pradesh.
“We have also maintained a strong collection performance of over 99.73% and reduced our NNPA from 0.96% to 0.91%, highlighted Unnikrishnan. Navachetana’s customer base has now surpassed 4 lakhs, reflecting its steady progress and commitment to growth.
Management Bandwidth
Navachetana has made strategic changes in its top management over the past 2 years to support its diversification and risk mitigation efforts. The company has focused on expanding its secured loan offerings in newer geographies, introducing products like two-wheeler loans, commercial vehicle (CV) loans, housing loans, MSME loans, and agricultural loans.
To oversee these new initiatives, the company has appointed new business heads for its MSME and agriculture verticals, both of which were established this FY. The company now operates 3 distinct distribution models, ensuring both branch and non-branch sales teams can effectively manage the expanding product suite on the field.
Key Tech Initiatives
In the past 24 months, Navachetana has implemented several key technological initiatives to enhance operational efficiency. One significant step was the deployment of ‘TRACK O LAP’ software, which enables the company to conduct loan appraisals through house visits and customer meetings, with data securely stored in the cloud. This application also allows for tracking field employees’ GEO locations and daily attendance. Unnikrishnan stated: “This advancement has greatly improved our efficiency and data management.”
Additionally, the organization transitioned its entire internal audit function to M2I software, moving from a manual system to a real-time management information system (MIS) that provides comprehensive dashboards for senior management and the Board. Lastly, the adoption of BIJLI software has facilitated co-lending with SBI, contributing to the disbursement of over 2 bn in loans in the last 24 months.
HR Initiatives
Navachetana has implemented impactful HR initiatives aimed at enhancing employee training and retention. A standout initiative is the introduction of the ‘navashikshana app,’ an online training platform that all employees use for induction training, product training, and mandatory HR modules. This app also serves as a resource for sharing company policies and partner bank product training. Unnikrishnan asserted: “This tool has streamlined our training processes and ensured consistent knowledge across the organization.”
Additionally, the company has partnered with the credit bureau Equifax to conduct background checks for all lateral hires, significantly improving the quality of manpower, especially at the middle management level. Furthermore, shared accommodation facilities have been introduced in select geographies facing challenges in sourcing local talent. This initiative has proven effective in controlling attrition rates and substantially reducing hiring costs in those areas.
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