Kolkata: Kolkata-headquartered Village Financial Services Limited (VFS) is in the forefront of the financial inclusion movement in the country. The company operates under joint liability group (JLG) based lending model, and lends to women borrowers only. In an interview, Kuldip Maity, MD & CEO, Village Financial Services (VFS) discusses about company’s strategies and what lies ahead for the MFI sector:
Q: Your organisation has a large base of customers. What is it as of March 2020? Tell us about your journey so far.
A: VFS started its microfinance operations in the year 2006 as the first RBI registered NBFC-MFI in Eastern India. Since then, it has grown steadily and touched the lives of many underprivileged and backward section of the society by providing them credit for income generating activities and helping them to become economically self-sufficient. Over these years, VFS has also helped several borrowers become successful entrepreneurs.
Village Financial Services (VFS) currently caters to more than 5 lakhs women borrowers through 246 branches in 13 states- West Bengal, Tripura, Assam, Bihar, Jharkhand, Odisha, Sikkim, Madhya Pradesh, Uttarakhand, Chhattisgarh, Meghalaya, Haryana and Uttar Pradesh.
Q: How did you achieve this growth in customers: reasons & factors responsible for the same?
A: MFIs are not simply a vehicle for lending but they have larger purpose with a huge socio-economic implication. The task of an MFI doesn’t end at creating loan books. It needs to commit itself to its customers by handholding to make them reap surplus from the business that they have taken loan to start. MFIs are also tasked with helping them become aware and gather knowledge to survive and sustain their families by permanently taking them out of the grip of poverty.
As an MFI, we believe in the twin objectives of social commitment to serve the bottom of the pyramid borrowers and at the same time operating profitability. Our key differentiator lies in adopting a holistic approach than in products. We put maximum focus on handholding the customer towards wider financial inclusion which we believe ensures long term sustainability of the business on either side. We also help the borrowers to shape and review their business plans; understand the basics of financial accounting through our CAT (Customer Awareness Training) programme; encourage her to be part of the banking system; resort to cashless transactions including digital transactions and take advantage of various government schemes for the poor.
Besides, we also emphasize on skill development programmes and raising awareness on health issues. We have also consciously included in our mandate the need for generating awareness about the environment and to protect it. As part of which planting of trees by involving our customers is a yearly routine.
Q: How do you acquire, retain customers on seamless and sustainable basis during their life cycles? Please explain the process of acquisition, retention of customers and conversion of potential into actual customers.
A: We organize camps and meetings across locations to build awareness about microfinance services and its benefits. There we invite villagers and family members of prospective borrowers, take them through case studies of successful mini-entrepreneurs. These awareness initiatives have helped a lot in building trust among people. Though, final customer acquisition happens through an assessment process such as our CSRs conduct field study to source customers, then the customer has to go through processes like, preliminary check of the credit history, evaluation of repayment capacity etc, and thereafter the loan is sanctioned.
Our internal analysis shows that lion’s share of our customer base stay with us for more than three years. This stickiness is attributed to factors beyond loan advances, like various training programs, customers’ engagement activities among others. Also, an MFI’s task doesn’t end with the first cycle loan. As a customer grows so does her need and credit demand, therefore, she continues to look up to us for support in her entrepreneurial journey. VFS is in forefront of meeting needs of such customers.
Q: How do you put to use technology & digital initiatives for your customers?
A: We are focusing on complete digitalization and going cashless. It is being done in a phased manner, keeping in mind the affordability of the process, and I am confident that we will complete the process in an effective manner within the timeframe envisaged. For now, I am happy to report that our entire disbursement process is now completely cashless. But, I must reiterate that technology cannot replace human connectivity. We are in the business of non-collateralized loans. Our relationship with the borrowers is our collateral. So, we will always follow a touch and tech model.
Q: In what ways the COVID-19 crisis has impacted your business? When do you see normalcy returning?
A: MFI sector is not immune to COVID-19 impact. The lockdown imposed due to COVID-19 pandemic has taken a toll on the industry, limiting its business outreach with suspension of EMI collections and loan disbursals. We too had to defer our group meetings. Though, post the government announcements of phase-wise unlock, we have now resumed our operations across branches with proper safety protocols in place.
As far as the MFI industry is concerned, it may recover soon with regular cash flows once the complete normalcy is restored. Moreover, the rural economy is the best bet to revive growth, and being the biggest source of liquidity flow to the rural enterprises as ever, micro credit service is expected to play a pivotal role in keeping the cash flows intact to the business activities in those belts.
Therefore, in the post COVID world, MFIs can assume huge significance as it largely caters to the rural economy.
Q: What are the target plans of your company in FY2020-21 and afterwards?
A: We remain committed towards of core objective of improving the quality of lives of poor and underprivileged women across societies by providing them a complete range of financial and non-financial services. With this aim in mind, we wish to expand in coming years and have a vision of enhancing coverage to 20 states. We also wish to reach and serve one million customers in next couple of years.