Bharat Financial Inclusion goes digital with instant loan approval based on Aadhaar, CIO News, ET CIO
The Hyderabad-based firm is one of the largest microfinance companies in India with a presence in 18 states covering 1,00,000 villages, serving its 63.65 lakh female members. It provides unsecured loans to individuals, usually women, to finance income-generating activities such as Kirana stores, poultry farms and tailoring workshops. 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 instantly grant loans.
In the new system based on biometric authentication enabled by Aadhaar, members can apply for a loan instantly. At the start of a weekly meeting at the loan center, Sangam’s loan manager/officer announces the names of members who are eligible to take out the loan. He then asks each eligible member if they would like to take out the loan that day. If the member is interested, he can apply for the loan instantly.
His data will then be sent to the credit bureau for approval. The credit bureau status report/update is received within 10 seconds and the customer is notified of their eligibility status. After obtaining member consent, their loan is processed for disbursement. If the member has a bank account registered with Bharat Financial Inclusion, the loan amount is credited to his account on the same day.
The transaction occurs on the Sangam manager’s tablet. The member is prompted to place their 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 authorization to the credit bureau. Once the member has been verified, they are deemed eligible for the loan. All this happens in just 15 seconds. If the member is eligible, the Sangam manager fills in the loan form according to his needs and takes his signature. He then gives him a true copy of the application form, collects the insurance and loan fees. This completes the instant loan disbursement process and the loan is credited the same day.
The digital initiative aims to provide sustainable competitive advantage and customer delight. This will increase the ease of doing business and help the MFI take the big technological leap towards cashless transactions.
With the instant loan approval, he will be able to dispense loans easily. “Usually, if a member attends a center meeting today, she doesn’t know if she will get a loan until next week. Although she is eligible for the loan by our company standards, we still require approval from a credit bureau. The offline procedure would take time. And if she needs immediate funding, she will explore the market for a loan during the waiting week. By giving him instant approval, under the new system, we are preventing him from entering the contest,” says Ritesh Chatterjee, Process Manager, Bharat Financial Inclusion.
The digital initiative offers the MFI a surefire way to enrich their data with the government-certified Aadhar program. “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 from Aadhar. This will ensure that we are engaging the right members on board. For example , if a member owes more than Rs 1.5 lakh to another MFI or is registered with 3 other MFIs, there is no point in involving them, they will provide little in terms of business opportunity. This is where Aadhaar-based authentication helps the microlender to screen customers based on their credit history,” says Srinivas Peddada, CIO, Bharat Financial Inclusion.
The system has been successfully tested in Bhubaneshwar and Puri branches. And the response has been overwhelming. Over the next year, Bharat Financial Inclusion aims to provide biometric devices and a SIM card to all of its 10,000 Sangam managers. In the long term, the financial benefits realized through the initiative will be passed on to the members.