Bharat Financial Inclusion, formerly known as SKS Microfinance, has launched an Aadhaar- based instant loan approval system, marking a major step towards digital inclusion of the unbanked population in the rural hinterlands.
The Hyderabad-based firm is among the largest microfinance companies in India with a presence across 18 states covering 1,00,000 villages, catering to its 63.65 lakh women members. It provides collateral-free loans to individuals, usually women, to fund income-generating activities like Kirana shops, poultry farms and tailoring shops. Bharat
Financial Inclusion is the only microfinance entity to have the lowest interest rate of 19.75 % in the industry. It disburses loans of over Rs 15 crores every year.
In an industry-first initiative, the MFI is leveraging Aadhaar which is already the world’s largest biometric database to dole out loans instantly.
In the new system based on Aadhaar-enabled biometric authentication, the members can apply for a loan instantly. At the start of a weekly meeting at the loan center, the Sangam manager/ loan officer announces the names of the members who are eligible to take the loan. He then asks every eligible member if she would like to take the loan on that particular day. If the member is interested, she can apply for the loan instantly.
Her data will be, then, sent to the credit bureau for approval. The status report/ update from the credit bureau is received within 10 seconds and the client is informed about her eligibility status. After taking the member’s consent, her loan is processed for disbursement. If the member has a bank account registered with Bharat Financial Inclusion, then the loan amount is credited to her account on the same day.
The transaction happens on the Sangam manager’s tablet device. The member is asked to place her finger on the biometric device on the tab. The data is sent for verification and the response is received.
After the KYC verification, the data is sent for credit bureau clearance. Once the member has been verified, she is deemed eligible for the loan. All of this happens in just about 15 seconds. If the member is eligible the Sangam manager fills the loan form based on her requirement and takes her signature. He then gives her a carbon copy of the application form, collects the insurance and loan fee. This completes the instant loan disbursement process and the loan gets credited on the same day.
The digital initiative is aimed a providing an abiding competitive advantage and customer delight. It will increase the ease of doing business and will help the MFI take the big tech stride towards cashless transactions.
With the instant loan approval, it will be able to dole out loans easily. “Typically, if a member participates in a center meeting today, she doesn’t know if she will get a loan until next week. Even if she is eligible for the loan by our company standards we still need approval from a credit bureau. The offline procedure would take time. And if she has an immediate need for finance, she will scout the market for a loan during the week-long wait. By giving her instant approval, under the new system, we prevent her from going to the competition,” explains Ritesh Chatterjee, Chief Process Officer, Bharat Financial Inclusion.
The digital initiative provides the MFI a sure-fire way of enriching its data with the government certified Aadhar scheme. “Bharat Financial Inclusion is targeting a customer base of over 95 lakh customers in the next 18 months. With the new system, we will have the most authentic data coming from Aadhar. This will ensure that we bring the right members on board. For instance, if a member owes an amount of over Rs 1.5 lakh to another MFI or is enrolled with 3 other MFIs then there’s no point bringing her on board. She will provide little in terms of business opportunity. That’s where the Aadhaar- based authentication helps the microlender filter customers based on their credit history,” explains Srinivas Peddada, CIO, Bharat Financial Inclusion.
The system has been piloted successfully in the Bhubaneshwar and Puri branches. And the response has been overwhelming. Over the next one year, Bharat Financial Inclusion aims to provide biometric devices and SIM card for all its 10,000 Sangam managers. In the long run, the cost benefits realized from the initiative will be passed on to the members.