No cash, all digital: Vaya Finserv's strategy for microfinance game

Vikram Akula, once the poster boy of India’s microfinance sector, is making a comeback with investments in Vaya Finserv in 2014 almost six years after he left SKS Microfinance.

Akula isn’t involved in daily management at Vaya but the company has built more than a Rs 1000-crore portfolio in five years. Akula is its non-executive chairperson and co-promoter.

A group of corporate professionals from diverse backgrounds--micro financiers like Akula, technocrats, bankers and management experts--started Vaya in 2014 as a tech-enabled banking correspondent company. In 2017, the company became a non-banking finance, microfinance (NBFC-MFI).

In a sector heavily dependent on cash, Vaya has not disbursed a single rupee in cash to become India’s first all-digital microfinance platform. 

Jagadish Ramadugu, co-founder, managing director and chief executive officer, called Vaya a techno-rural company. His description is apparent in the office space of the company.

“We instructed the interior designer to keep the work station a low-cost one, showcasing the ethos of Vaya, which is the blending tradition with modernity. Hence, we have mostly brick and glass structures, signifying blend of tradition and modernity” said Ramadugu. The company recently got Great Place to Work certification.

Ramadugu, who has held senior positions in Asian Paints, Coca Cola and led Spencer Retail’s semi-urban and rural expansion, believes in investing in people and technology.

“Initially, when we started, we sourced the best talents from across sectors. Very few MFIs would do that. For example, our head of data analytics was an experienced professional from J P Morgan.  Most MFIs will not hire someone like him from the IT sector due to cost concerns,” he says.

Typically, the microfinance model involves extensive paperwork and cash transactions. Also, there is a lot of time gap between filing loan application and actual disbursements due to credit bureau check. Vaya does real time credit bureau checks through a cloud-based application and a hand-held device. Hence, the client is informed on spot if she is eligible for a loan or not. Further, the loans are disbursed into bank accounts directly, although repayments are done in cash. For those who don’t have a bank account, the company assists in getting one in the nearest bank branches. Further, customers get instant SMS alerts and have access to a dedicated call centre for loan-related queries.

However, Ramadugu believes, the traditional model of microfinance, which is group lending, is here to stay. “We are using technology to supplement the processes. Underwriting model, risk assessment and work flow of loan management are all digitized but group lending forms the core of microfinance,” he said.

That the strategy to invest in people and technology is working is apparent from the numbers. The loan portfolio of the company grew from about Rs 44 crore at the end of March 2015, to about Rs 1200 crore at present. The company is expecting the portfolio to cross Rs 1500 crore by the end of this financial. It is aggressively building its own book, as a large part of the portfolio still is still on account of banking correspondent operations. Vaya’s own loan book increased from nil to Rs 419 crore between FY 17 and FY19. The company’s profits increased from about Rs 5.6 crore at the end of FY17 to nearly Rs 28 crore in FY19. Geographical expansion too came in sync with growth in profits. Vaya is present in about six states, covering 700 thousand customers, with plans to expand in two more states in the coming days, said Ragadugu.

(Note: SKS Microfinance became Bharat Financial and is now part of IndusInd Bank.)

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