The last mile challenge — Microlending in India is getting a Fintech boost!
In a country of over 1.3 Billion people, the biggest challenge that the banking industry is facing is in enabling credit to the last mile. There are a host of challenges that prevent a large segment of the population from accessing formal credit. It is in this credit gap that Fintech is helping Microfinance institutions pave the way forward.
India has been a pioneer and a leader in the Asian market in terms of sheer size of Microfinance loans disbursed, there has been a gross loan portfolio of USD 12.3 billion disbursed by MFIs (Microfinance Institutions) according to data published by PWC. However, there is still immense scope for growth all around as this is only 0.59% of the nation’s total GDP, other South Asian countries such as Bangladesh and Cambodia and Vietnam are leading the pack at 16% and 3.8% of their GDP respectively.
Technology and digital solutions can help MFIs in achieving their growth objective by helping them in increasing their geographical outreach and product offerings, generating better consumer insights and enhancing sales force productivity.
Fintech changing the MFI ecosystem for the better by addressing core business challenges:
• Lead sourcing and management :
Fintechs are helping banks source and manage their leads digitally. These digital modes of lead sourcing and management are helping track customers better and greatly enhances the ability of sales teams to be effective in crafting and selling the right credit products.
• Customer on-boarding and e-KYC :
eKYC based onboarding and pre-filling of forms based on Aadhar/Pan data are vastly improving customer conversions and decreasing turnaround times for customer onboarding. This is helping MFIs improve profits tremendously by reducing drop-offs at the underwriting stage.
• Partner integrations :
MFIs are tying up with technology partners to enable better cross-sell and up-sell to their customers. Fintech companies are enabling detailed customer profiling to help MFIs increase their profits through better customer engagement.
• Analytics insights :
MFIs are using detailed analytics provided by Fintech’s to identify opportunities and market to their customers. They are increasingly leveraging this data to improve Straight Through Processing and lead prioritization to make the underwriting process more cost-effective.
• Underwriting :
Developments in credit scoring models especially using alternative data are helping asses more thin file customers than ever before and are helping to drive credit access. These scores draw on social, behavioural, transactional and other data sourced from mobile devices to better assess ‘high risk’ customers that MFIs lends to and helps accurately gauge the borrower’s ability to repay loans better than traditional credit scores.