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PMJDY Bank Mitr Assessment: The Supply-Side Story

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Pradhan Mantri Jan Dhan Yojana (PMJDY) is now the world’s most successful financial inclusion scheme.  This blog highlights the supply-side findings (specifically focused on Bank Mitrs (BMs) or bank agents) of the final round of MicroSave’s PMJDY assessment (Wave III) conducted in December 2015.

The BM network is the backbone of PMJDY scheme. The network of agents act as the arteries and veins of the Indian financial system that delivers technology-enabled financial services, at affordable cost, to otherwise inaccessible corners of India. The success or failure of the PMJDY scheme depends on the vibrancy of a network of more than 125,000 BMs spread across India. A typical BM is considered functional if he is available at the designated sub-service area location, equipped to serve transaction requests/queries of customers, earning a (sustainable) profit from operations, and has robust back-end support from link bank branches. This blog discusses these critical functional parameters of the BM network.

Are BMs available/accessible/transaction-ready?

Yes! PMJDY Wave III highlighted significant availability of BMs, i.e., BMs who are present at the stated location or could be traced to a nearby location. While 97% of the BMs were available, only 3% could not be traced, as they were neither present at their kiosk, nor could be contacted over the phone. Even the local residents could not identify/provide information about the latter. The survey highlights that 79% of the BMs are “transaction-ready”, i.e. BMs equipped to handle customers’ account opening/ withdrawal/deposit requests. BMs’ availability and their transaction-readiness has positively impacted customers’ trust of the PMJDY scheme. BMs were of the opinion that PMJDY scheme has led to greater women’s participation in financial inclusion. One BM from Jind district of Haryana says, “Many women save INR 50–500 (US$ 0.75–7.5) without their husbands knowing about it.” Our findings indicate that out of every three PMJDY customers opening a bank account for the first time, one is a woman. A BM from Bhadrak district of Odisha said “900 accounts out of 1,540 are of females. If it is convenient, we collect deposits from their houses.”

Does income from business match BM’s expectation?

No! There is a huge expectation mismatch between what a BM expects to earn (INR 13,000 (US$ 197) monthly) and what he actually earns (average monthly revenue/income is INR 4,692 (US$ 71)). At current income level, BMs are earning an average income of INR 188/day[1] (US$ 2.8), which is less than the income of an average MGNREGA worker, who earns INR 206 per dayday[2] (US$ 3). A BM from Ghazipur district of U.P. noted, “Our income is lesser than MGNREGA wages. I have received INR 3,500 (US$ 53) in the last 18 months. Can I sustain my family on this income?” BM profitability ranges between a monthly loss of INR 350 (US$ 5.3) to a monthly profit of INR 2,500 (US$ 37.7) depending on the type of commission model and investment made in the infrastructure.

BMs claim that the amount received as commission is not sufficient to cover operational costs, such as travel to link branches, stationery, rent, and connectivity. The fact is corroborated by MicroSave analysis, which reveals that an average BM incurs a monthly operational cost in the range of INR 2,600-3,300 (US$ 39-50). Additionally, BMs have no clarity on the commission structure. BMs receive a lump sum amount in their account, without any break-up to explain the commission paid to the agent. This leaves them unsure of the relationship between monthly transactions performed to the commission earned, and unable to keep track of their monthly earnings from the business. A few BMs also report not having received any commission for the last three to six months. The irregularity and low commission payment has direct impact on service to PMJDY customers due to increased BM dormancy/churn, and low level of investment (liquidity).

BMs’ dormancy (i.e., BMs who have abandoned their role as a BM and have stopped offering financial services) stands at 10%.  At 10% dormancy level, it is estimated that a total of 12,595 BMs[4] across India. Further, an additional 2% BMs have stated that they plan to exit the business in the next two months, owing to inadequate commission, poor support from the bank or agent network manager, and lack of business potential. This may add another 2,519 BMs to the total dormant BM numbers in India and cut off approximately 2.4 million PMJDY customers from mainstream banking. In addition to this, PMJDY survey reveals that around 6% of the active BMs are not conducting any transactions and it is highly probable that they may become dormant if immediate steps are not taken to improve their business profitability.

If it’s a no-profit business, why BMs are still continuing the operations?

Surprisingly, despite challenges, most BMs continue with the business and hope that the situation will improve in future. A BM from Ferozpur, Punjab, noted: “The bank may recruit us as staff, if we continue to perform better.” The perception that work as a BC will lead to full-time job opportunity with the bank led many to join as agents. At times, we also observed banks taking undue advantage of this false expectation of BMs, by asking them to assist in their day-to-day activities.

BMs also cite reasons such as better standing in society as a result of their BM status; and also feeling accountable to the customers for whom they opened accounts/from whom they have taken savings, as reasons for continuing in the role. A BM in Bhadrak district of Odisha stated, “I get a lot of respect wherever I go”.

However, only 37% of the BMs surveyed have additional businesses/occupations (such as photocopy machines, general stores, and/or insurance agent, etc.), indicating that they are not solely dependent on the uncertain income from BM operations. This gives them an important cushion. Worldwide, the agent network surveys performed by MicroSave’s The Helix Institute are showing an increasing trend of agents to be “non-dedicated” – i.e. running the agency business alongside another core business. Even in Kenya, in 2014 64% of agents were non-dedicated – up from 54% a year earlier.

Is BM’s sustainability the only concern?

No! There are other issues as well!! A BM from Jind district in Haryana pointed out: “I have enrolled for the Rs 330 (US$ 5) insurance, but no amount has been deducted from my account. I am not aware where to approach if an accident were to happen?” The survey highlights that many BMs are unaware and untrained about the full benefits and process details, such as insurance premium deposit and claim settlement. BMs reported that they did not receive product details from link branches but, instead, gather information through advertorials in television and newspapers. They mentioned feeling helplessness in the face of customer queries, such as status of activation of an insurance policy, premium deduction, process and documentation of claim submission, etc. BMs noted that a major challenge that they face is the absence of proper documentation which should be received by a customer taking out an insurance policy. BMs reported providing the stub of the insurance form as ‘acknowledgement slip’ only if customers asked for it; otherwise, no proof/documentation was given to customers.

And, finally, what about link branch support?

A BM from Ferozpur district of Punjab noted: “We are called Bank Mitrs, but link branches don’t accept us as one”. BM business and performance improves with better quality support from link bank branch staff. On a day-to-day basis, a BM needs regular support from bank branch staff for a variety of aspects of the business, such as account approval at the back-end, resolving technical challenges, connectivity-related issues pertaining to point of sale (POS), and liquidity management.  BMs with better branch support showed higher customer footfall. As one BM from Dadra & Nagar Haveli said, “If the branch manager is good, then everything is good”. Interestingly, only 63% of active BMs were satisfied with the support they got from staff at the link branch, while 18% BMs were dissatisfied.

MicroSave’s qualitative analysis reveals that, on an average, a bank branch managed 2 BMs and approximately 2,000 PMJDY customers. Assuming 10% of PMJDY customers approach the bank branch for their day-to-day non-financial /financial transaction – bank branches need an additional 34 man-hours to successfully address these additional customers. The lack of support that BMs received from branch staff can thus also be attributed to the bandwidth limitations prevalent in rural branches.

The Surveys: Background, Samples and a Technical Caveat

MicroSave conducted three rounds of PMJDY assessments (Waves I, II and III) from October 2014 to December 2015, to analyse the impact of and challenges associated with PMJDY, both for beneficiaries and channel partners. MicroSaveconducted the study with funding support from the Bill & Melinda Gates Foundation (BMGF) and presented the findings to the Department of Financial Services, Ministry of Finance, Government of India.

It is important to note here that Wave III incorporated a nationally representative survey conducted with 1,627 BMs and 4,859 PMJDY account holders, in a total of 42 districts across 17 states and one Union Territory. The survey results of PMJDY Wave III are not strictly statistically comparable with PMJDY Wave I and II surveys, due to difference in sample frames. The comparisons presented in the blog are for the purpose of convenience and are indicative in nature.

For more information visit here

[1] Assuming BM works for 25 days in a month

[2] MGNREGA website: http://nrega.nic.in/netnrega/homestciti.aspx?state_code=26

[3] There are 125,956 BMs present across India: http://www.pmjdy.gov.in/infrastructure

[4]  On an average, a BM handles 949 PMJDY customers: PMJDY Wave III findings. Therefore 12,595 dormant BMs multiplied by 949 gives us a total of approximately 12 million PMJDY customers who are not being served

PMJDY: Milestones Reached, Yet Miles To Go – Customer Side Story Part 2

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In the first part of this blog, we discussed the demand-side findings of PMJDY Wave III survey conducted by MicroSave in December 2015. The blog highlights the positive impact of the PMJDY scheme on the financial behaviour of rural customers. Rural customers, including women, have enthusiastically contributed to the success of the scheme and have started to make small savings in these accounts. This blog presents the other side of the coin and highlights some of the areas where things are not working quite as well.[1]

1. Expectation mismatch because of low awareness on ‘Jan Suraksha’ scheme 

Despite their success, the PMJDY schemes (PMJJBY, PMSBY, and APY) have not been able to build required trust among customers. The low trust can mostly be attributed to low scheme awareness (among customers and Bank Mitrs (BMs)) and process inefficiencies. “Customers visited my place to claim money for natural death as they were unaware that the claim can only be made for accidental cases,” said a BM in Vidisha district of MP. BMs report of difficulty in getting customers to sign up for schemes, since customers are not sure whether these schemes would continue beyond the current government, and also whether the claim would be settled successfully. A customer in Odisha raised his doubts: “I have enrolled for INR 330 [US$4.85] insurance, but no amount has been deducted from my account. Where will we go if an accident happens now?”

Miscommunication of the Overdraft.[2] (OD) facility as “free money” has been one of the motivations to open PMJDY accounts. Customers did not perceive OD to be a credit product and enthusiastically opened bank accounts to ‘receive’ INR 5,000 (US$ 73). A BM in Ghazipur district of Uttar Pradesh said: “Around 50% of the accounts have been opened with the intention of receiving ‘free money’ of INR 5,000.” BMs report that such customers do not want to take the OD when they realise that they have to repay the amount with interest.

On the other hand, banks are reluctant to provide OD to customers presumably because the perception is that these will turn into non-performing assets. BMs reported submitting OD documents to the bank branch and not receiving any information thereafter.

2. Mismatched expectations has led to account duplication and dormancy

Customer dormancy, i.e., the number of PMJDY accounts where no transactions have been conducted in the last three months, stands at 28%. The high level of customer dormancy can be attributed to reasons such as lack of customer awareness (misconception that PMJDY account is a must to avail of government benefits) and false expectation of receiving free money (overdraft) in bank accounts. Of the total customers interviewed during Wave III surveys, 67% reported that PMJDY is their first formal bank account.

However, it is important to note that 33% of the PMJDY customers reported having alternate bank accounts (other than PMJDY account) and 31% of such customers actively use their alternate account. A significant portion of overall PMJDY account dormancy can also be attributed to these customers, who open multiple accounts just to avail benefits of facilities such as OD and insurance.

3. Low pace of Aadhaar seeding and RuPay Card distribution 

The rate of RuPay card distribution (47%) and Aadhaar seeding  (62%) is slow. Only 33% of the PMJDY customers are “RuPay transaction-ready” (i.e., customers who carry activated RuPay cards) and only 26% of the customers have ever used their RuPay card.

PMJDY customers who have received RuPay card as well as PIN, find it difficult to activate the RuPay cards and to use it continuously. Only 24% of BMs have RuPay card-enabled devices;  most customers have to visit the nearest ATMs to activate their RuPay cards and to change personal identification numbers (PINs). Since first-time activation happens at the issuing bank terminals/ATMs, PMJDY customers find it cumbersome, owing to unavailability of ATMs in the vicinity; this leads to RuPay card turning dormant.  BMs report that risks (fraud/misuse of RuPay card by relatives) associated with the card also demotivates PMJDY customers from maintaining active RuPay cards.

4. Unfair charges/practices may reduce customer’s trust in PMJDY

PMJDY scheme was launched with the intent of financially including the otherwise traditionally excluded customer segments. Since these customers lack experience of transacting on formal financial channels, they are susceptible to risks such as overcharging or unfair practices by BM, bank staff and/or BCNM. A few BMs in Vidisha, MP, stated that customers were charged for all withdrawal as well as deposit transactions in their PMJDY accounts. The branch had not provided any plausible explanation for these charges, even after multiple complaints by the BM and customers. Deductions from these accounts have reduced their trust in formal financial channels.

A bank in Mahasamund, Chhattisgarh, provided PMSBY to MGNREGA account holders by debiting INR 12 from their wage payments without the customers’ prior consent. Some of these customers had already enrolled for PMSBY and lost money on the same scheme. One of the leading banks, in its attempt to tackle zero-balance accounts, deposited INR 10 in each zero-balance account, and the BM was asked to put another INR 2 from his/her commissions. This process disappointed most BMs associated with the bank.

For more details on the assessments please visit our website. 

[1] Survey results of PMJDY Wave III are not strictly speaking statistically comparable with PMJDY Wave I and II surveys, due to differences in sample frames. The comparisons presented in the blog are for the purpose of convenience and are indicative in nature.

[2] Overdraft facility is a general purpose loan to provide hassle-free credit of up to INR 5,000 to low-income group / underprivileged customers.

PMJDY: Milestones Reached, Yet Miles to Go – Customer Side Story Part 1

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Pradhan Mantri Jan Dhan Yojana (PMJDY) is now the world’s most successful financial inclusion scheme. The scheme envisages universal access to banking facilities with at least one bank account for every household, in addition to access to credit, insurance, and pension facilities. As of March 15, 2016, the scheme has mobilised approximately INR 335 billion (US$ 4.9 billion) through 210 million new bank accounts ― a significant achievement, considering that the scheme was launched on August 28, 2014.

MicroSave conducted three rounds of PMJDY assessments (waves I, II and III) from October 2014 to December 2015. The key aim of the three assessments was to analyse and assess the impact of, and challenges associated with, PMJDY from the perspective of beneficiaries and channel partners (specifically Bank Mitrs (BMs) or agents). The study was conducted with support from the Bill & Melinda Gates Foundation (BMGF) and the results were shared with the Department of Financial Services, Ministry of Finance, Government of India.

This blog highlights the demand-side findings of the final round of PMJDY assessment (Wave III), conducted in December 2015. Wave III incorporated a nationally representative survey, conducted with 1,627 BMs and 4,859 PMJDY account holders, in 42 districts across 17 states and one Union Territory.

1. Acceptance of PMJDY scheme has increased

Pinki, a PMJDY customer in Khadoli village of Dadra and Nagar Haveli, summarised: “Jan means poor people and dhan means money. 

Therefore, jan-dhan means wealth of the poor”. Pinki summarises the top-of-the-mind perception customers have about PMJDY scheme. PMJDY is positioned in customers’ minds as a useful government scheme that provides low-cost insurance facility and an opportunity to open a bank account for free.

PMJDY has led to universalisation of accounts and provided easily accessible banking to customers in their neighbourhood. Most PMJDY customers (78%) use BM to make their regular financial transactions. A BM in Ghazipur, Uttar Pradesh, said, “The number of bank accounts have increased from 15 to 500 in the village. Villagers have understood banking.”

80% of PMJDY customers who regularly transact, ranked Bank Mitr agents as their first preference to conduct banking transactions. The main reasons for this are: proximity of the BM location to their home and work place; quick and convenient processes; and availability of BMs beyond bank working hours.[1]

PMJDY scheme has also led to inclusion of women in the financial mainstream. For every three PMJDY customers who opened a bank account for the first time,[2] one was a female customer. “900 accounts out of 1,540 are of females. If it is convenient, we collect deposits from their houses”, said a BM in Bhadrak, Odisha

2. Saving behaviour has been induced among rural customers

There is significant shift in savings behaviour of PMJDY customers; the percentage of those who do not save has come down from 12% in Wave II to 8% in Wave III . Similarly, the number of customers who save at home has gone down (21% in Wave II to 17% in Wave III). These customers have started to use their own savings account to save (up from 77% in Wave II to 86% in Wave III). Additionally, there is a small increment in number of customer transactions per month from last wave of PMJDY survey. A total of 65% of customers transact at least once in a month at a BM location, compared to 58% in Wave II. A recent study in rural households of Karnataka highlights that PMJDY has led to significant increase in total household savings and savings in bank accounts.

“Non-skilled labourers have greatly benefited. They save out of their daily wage income” – BM, Ghazipur, U.P.

3. Product uptake is not only limited to savings 

PMJDY has helped improve uptake of financial products; customers have enthusiastically enrolled for PMJDY life and accident insurance policies due to the value proposition that they offer and the low cost. These schemes are popularly known as “12 aur 330 rupaya wala bima” (i.e., insurance for INR 12 (PMSBY) and INR 330 (PMJJBY))

By paying a nominal premium of INR 12 (US$ 0.18) per person per year, PMJDY account holders can avail of an accidental insurance scheme under the Pradhan Mantri Suraksha Bima Yojana (PMSBY) with a maximum insurance cover of INR 200,000 (US$ 3,077) in case of accidental death or permanent disability. For a premium of INR 330 (US$ 5.1), a PMJDY account holder can avail life insurance cover of INR 200,000 (US$ 3,077) under the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY). Another interesting product available for Jan Dhan account holders is Atal Pension Yojana (APY), specially designed to cater to pension needs of the unorganised sector. See Jansuraksha: India’s New Tryst with Mass Insurance for more details of these schemes.

The number of customers who have either enrolled for insurance or pension scheme has increased to 56% from 43% in Wave II. A PMJDY customer from Sonitpur district of Assam said “I am fine now but that may not be the case later. INR 50 is spent on tea and snacks, so spending INR 330 for such a nice insurance facility is not a problem.” The uptake of accident insurance scheme (60%) among surveyed PMJDY customers is higher than for life insurance (49%) and pension scheme (6%).

Life insurance scheme is found to be popular among female customers, as women feel that there are less likely to be involved in accidents as compared to male members. On the other hand, pension scheme has been popular among literate and relatively higher-income customers. Low-income customers find this scheme costlier (INR 504 or US$ 7.52). They also find it burdensome to make regular monthly contribution over a long period. Further, customers who are receiving old age pension under National Social Assistance Programme (NSAP) do not want to pay for another pension scheme.

For more details on the assessments please visit our website.

[1] Multiple responses received from customers for this question

[2] 3,273 out of a total 4,859 PMJDY customers interviewed have PMJDY as first and only account

[3] Survey results of PMJDY Wave-III are not strictly-speaking statistically comparable with PMJDY Wave-I and II surveys due to differences in sample frames. The comparisons presented in the blog are for the purpose of convenience and are indicative in nature.

Interventions to Strengthen PMJDY Scheme

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Pradhan Mantri Jan Dhan Yojana (PMJDY) is now the world’s most successful financial inclusion scheme to provide access to savings accounts, credit, remittance, insurance and pensions, to the financially excluded of India. MicroSave conducted three rounds of assessments of PMJDY scheme between October 2014 and December 2015. The detailed analysis of data on Bank Mitrs (BMs) and PMJDY customers revealed bottlenecks prevalent in PMJDY scheme at both policy and operational levels. This IFN presents key policy and operational interventions that need to be addressed to improve the overall scheme effectiveness, enhance the usage of PMJDY accounts and improve the sustainability of the BM channel.

Agent Dormancy: Impact on Customers

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Agent dormancy is a cause of concern for financial inclusion. MicroSave recently conducted research to understand rural customers’ perception of dormancy, the challenges faced by them after an agent goes dormant and their coping mechanisms. The research was carried out in 12 districts across four states of India. This Note analyses the impact of agent dormancy on the financial behaviour of customers. Agent dormancy results in many negative impacts on the customers such as: customer account dormancy, inaccessibility of savings, challenges associated in reaching the bank branch and, as a result, a behavioural shift towards cash.

The next IFN – Agent Dormancy: Reasons and Remedial Measures- addresses the reasons for agent dormancy and the ways to address this issue.

Democratising Financial Services

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Sheetal, a 41 year-old widow, is a vegetable hawker and lives by herself in Mumbai. She wanted to expand her business by adding more stock and buying a new wheel-cart. She has a bank account, opened under the Prime Minister’s Jan Dhan Yojana. She could not avail credit from her bank for lack of any collateral or transaction history. Indeed, she is not aware of the importance of transacting regularly through her account. She has, however, been remitting money through a Suvidhaa agent (a small grocery store owner) to her mother for the education of her daughters, studying in her native village. The agent recently informed her of the possibility of availing loan from Suvidhaa (and Axis Bank) and she decided to avail it. The agent checked her eligibility and agreed to her request within an hour. She walked out of the store with the loan disbursed on her pre-paid card account. The next day, she withdrew about a half of the amount at a nearby ATM, to buy more vegetables to sell. She plans to buy a new cart soon, by withdrawing additional cash from the same account. Sadly, very few of the poor like Sheetal have an opportunity or the benefit of getting credit from banks to meet their personal or business needs.

As Nandan Nilekani puts it, “democratising credit”, to meet the needs of the productive sectors, as well as the marginalised and the poorer sections of the society, was amongst the original objectives of nationalising 14 banks in 1969. After 47 years, the reality is that traditional banks still only serve a small number of large borrowers, leading to what the economic survey for 2016-17 terms as “twin balance sheet problem”.

By providing relatively easy access to micro credit to over 28 million women clients, microfinance institutions play a vital role in partially democratising credit. Nevertheless, there is significant unfulfilled demand that is often met by informal sector moneylenders at exorbitant rates.

Meanwhile, Aadhaar has been enabling a silent revolution. To quote Nandan, “India has a unique opportunity to create a new and alternative credit infrastructure that can provide easy access to credit for millions of businesses and individuals, arising from the convergence of Aadhaar’s recent legislative legitimacy with regulatory innovation, technology and digitisation.”

(Source: iSpirt)

In addition to Aadhaar, the India Stack is likely to transform payments, financial services and consumer protection in India. The India Stack has four layers. The foundation  presence-less layer is Aadhaar and its extension in the form of JAM trinity (Jan Dhan will 213 million accounts, Aadhaar that reaches 97% of the adults; and mobile with over 1 billion registered users and over 300 million smartphones). The paperless layer will leverage digital identity (e.g. eKYC, eSignatures) and a repository for digital documents (DigiLocker) for storage, sharing and other purposes.

The cashless layer is a range of systems and platforms that can enable seamless and low cost digital transactions for all segments of population. Aadhaar-Enabled Payments System (AEPS), Aadhaar Payments Bridge (APB) System and Immediate Payment Service (IMPS) are already handling over a 100 million transactions a month, with value exceeding INR 200 billion (as of February 2016). The recently introduced Unified Payments Interface (UPI) aims at democratising payments and enabling interoperability across a wide range of payment instruments, not just bank accounts. Bharat Bill Payments Service (BBPS) will enable utility bill payments for the mass market. The consent layer is on the lines of the OpenPDS (open personal data store) developed by Massachusetts Institute of Technology. The consent layer will give people access to a store for all their personal data; and to which they can allow selective access to others. This will ensure data privacy, reduce consumer fraud, enhance consumer protection and allow users to build a repository of their digital footprints to enable financial service providers to make informed decisions on products for them.

Innovators and early adopter service providers are leveraging the building blocks of the India Stack that are already available, to deliver innovative financial products and services. Suvidhaa, a financial service provider for the mass market, in collaboration with Axis Bank, was amongst the first to adopt e-KYC and roll it out across its retail points. Building on this, Suvidhaa introduced another innovative product ‘Nano Credit’ for mass-market consumers and small businesses that regularly transact at Suvidhaa’s retail outlets[1]. It is a term loan for a period of 18 months and with a ticket size of US$ 225. The interest rate charged is 22% per annum, with plans to lower it further. Nearly two-thirds of the borrowers so far have taken the loan for business purposes. The table below compares the typical ticket size, interest/fee rates charged and the common purpose for the loans.

Suvidhaa and Axis Bank are able to offer loan ticket sizes comparable to the microfinance sector, but at lower rates and with much quicker disbursement. Moreover, in the main, the loans are being availed of by customers who do not have access to credit from other sources, including from microfinance institutions. When benchmarked against global MFIs and the much lauded M-Shwari, the rates, ticket size, and processing time are (in the main) significantly better.

The factors that drive Suvidhaa’s superior offering are sophisticated, rapid credit scoring of applicants using a combination of a scoring algorithm with over 85 parameters (such as nature, frequency and ticket size of transactions; account balances; sending and receiving locations; sending agent coordinates) analysed from a financial transaction history of at least a year; e-KYC for customers; rapid appraisal by the bank team; credit bureau checks and digital disbursement through fully interoperable prepaid cards.

Going forward, Suvidhaa plans to leverage e-sign for customer consent and eliminate the process of authorisation with wet signatures. This will reduce the processing time by 15 minutes and enhance the convenience for clients even further. Efforts are underway to link directly with credit bureaus in India, which would allow Suvidhaa to then offer instant processing of loans for its customers.

In the three months of pilot to date, Suvidhaa has processed over a 1,000 loans and not one has arrears. All borrowers are called within two days of taking the loan to remind them of their obligations, that their loan is registered with credit bureaus and the implications of any default. Seven days before the monthly instalment is due, the system sends details of the amount due to the agent who originated the loan (and therefore receives commission on the basis of the borrower’s monthly repayment). This report encourages and helps agents remind customers that instalments will be automatically swept from their savings account, and thus it is important to ensure funds are available.

Suvidhaa and Axis bank are so pleased with the results of the pilot-test that they are already planning to scale-up the lending operations to 100,000 borrowers within a year, with a significantly larger roll-out, including into smaller towns and rural areas to follow thereafter. The overdraft variant, too, is all set to be launched and larger, business loans for the top 15% of Suvidhaa customers, who typically already have an e-KYC-enabled account. With 35 million customers, the majority of which have no other “digital footprint” beyond their transaction history with Suvidhaa, the organisation is well poised to leverage technology to democratise credit on a huge scale.

[1] People like Sheetal often do not have any digital footprints for lenders to be able to assess and evaluate the credit worthiness.