Micro credit process and challenges
- 1. DOCC Project at ICECD Ahmedabad Micro-credit Process and Challenges Pranav Kumar Singh | PGP-16-205 PGDM, Finance, SPJIMR
- 2. Objective and Scope Project Objective Study of the Micro-credit process and challenges. Finding solutions to the problems through design thinking techniques Raw Material Suppliers Competitors Entrepreneurs and members ICECD faculty and staff ICECD senior management ICECD trainers Banks, Govt. Public & Pvt. MFIs Potential Project Stakeholders Villages & other markets • Recommendations & solutions • Limitations of study & solutions • Observations and Findings • Data Analysis – Quantitative & Design Thinking Techniques • Primary Research – Questionnaire formation, Field visits & interactions with ICECD faculty • Finalizing project objective • Secondary research / Literature Review Stakeholders Analysis Limitations Recommendations Objective & Scope Primary Research Secondary Research
- 3. Secondary Research Public Sector banks network 33% 27% 21% 19% Rural Semi-urban Urban Metro Source: RBI: Database of Indian Economy Source: IMF Financial Access Survey Data, 2015 Various initiatives taken in the recent past for Financial Inclusion 1) Pradhan Mantri Jan Dhan Yojana (PMJDY): To provide every household with a bank account and basic insurance cover. As of June 2016, 221.8 million accounts (with total balance of INR391.53 billion) have been opened 2) Specialized Payment Banks and Small Finance Banks: RBI granted licenses to 11 payments banks and 10 small finance banks which are expected to become operational during 2016–17. 3) MUDRA Bank: Launched to fund and promote microfinance institutions (MFI) by providing loans to small businesses. Loans amounted to INR713.12b, disbursed to 17.3m borrowers Access (Saving, remittance, credit – consumption and business) Financial Inclusion Awareness (Utilization of services with proper know- how) Financial exclusion in MSE sector 5% 2% 93% Instituitional sources Non- institutional sources Self- finance/no- finance Extent of financial inclusion in the MSE sector is very low Ratio of a country's national debt to its gross domestic product (GDP) MFIs as partners of Banks Many banks lend to small borrowers through MFIs in order to meet their priority sector lending targets Need for operational Efficiency MFIs can’t charge more than 10% over the cost of loans taken from banks while fixing the loan price for small borrowers and hence, profitability of MFIs depends heavily on their operational efficiency Analysis Limitations Recommendations Objective & Scope Primary Research Secondary Research
- 4. Primary Research 2 3 1 ICECD faculty Questionnaire • Personal Information • Business Information • Finance Information • Capital Investments • Working Capital • Business Financials • Experience of Loan through SHGs, banks, MFIs etc. • Cashless mode of transaction Villages visited: Baska, Asoj, Jarod, Saij, Borisana, Kalol No. of members interviewed: 40 (23 for data collection) • Focused group discussions & one-on- one interviews • Open ended questions to get their experiences, problems and suggestions ICECD staff interaction on following topics: • Evolution of micro-credit facility • Their micro-credit process • Associated Challenges • Service which requires frequent follow-ups • Data maintenance and degree of automation in process Questionnaire Interactions Analysis Limitations Recommendations Objective & Scope Primary Research Secondary Research
- 5. Quantitative Analysis (1/3) Independent Variable Scale Independent Variable Scale Independent Variable Scale Age Nominal Loans_availed_Y_N Scale long_process_loan Ordinal Marital_Status Nominal Loan_amount Scale social_issues_loan Ordinal Qualification Nominal Repayment_Schedule Scale ignorance_shg Ordinal Status Nominal Interest Nominal fisc_discipline_SHG Ordinal Family_size Scale Awareness_fin_sources Nominal training_SHG Ordinal Earning_members Scale Sources_used Nominal admin_issues Ordinal Family_income Scale Mortgaged Nominal mistrust_SHG Ordinal Family_income_ord Nominal Failure_in_EMI_pymnt Nominal exploitation_SHG Ordinal Family_Savings Nominal loan_purpose Nominal weak_fin_SHG Ordinal Business_Owned Nominal working_capital Scale fin_assist_SHG Ordinal Earning_since Nominal first_month_income Scale dom_prob_SHG Ordinal Running_business_prio Nominal current_month_income Scale health_prob_SHG Ordinal Business_Nature Nominal aasets_business Nominal Illiteracy_SHG Ordinal Ownership Nominal assets_value Nominal selection_SHG Ordinal Spec_skill_training Scale bank_account Nominal politic_interfer_SHG Ordinal Competitors Scale storage_money Ordinal SHG_members Scale Initial_Investment Scale doc_loan Ordinal freq_meeting Nominal Borrowed_Investment Scale legal_iss_loan Ordinal Self_Investment Nominal follow_up_loan Ordinal • Dependent Variable – Current Month’s Income • No. of Independent Variable - 55 • Sample Size - 23 • Method Used – Step-wise Regression Summary of Analysis Analysis Limitations Recommendations Objective & Scope Primary Research Secondary Research
- 6. Design Thinking Techniques - Findings & Observations (2/3) Empathy Map 1) Neeta Prajapati, Borisana, Clothes trading: Whats App and FB user with group mates 1) Maneesha, Kalol, Ladies purse- making: Husband help for latest designs through internet 1) Asoj: Fund either through family borrowings or self but no loans becoz of fear from quotations Panna Patel, Saij: They have couple of queries to be clarified post-training while doing business Gujarati will be preferred for info. gathering and app-usage SPOC charges for online app will be acceptable New business challenges should be clarified through ICECD 1) Vulnerability due to competitors doing same business 1) Current suppliers charge high and materials can be procured at lower cost 1) Reluctant to apply for loans due to fear of repayments, documentation and follow-ups Sessions to solve business related queries and loan process will help Extremely keen to learn cashless transactions and online banking SPOC model is implementable and is willing to volunteer Rashidaben, Jarod: Need of focused training for availing financial help DO FEEL SAY THINK Analysis Limitations Recommendations Objective & Scope Primary Research Secondary Research
- 7. Design Thinking Techniques (3/3) IMPORTANCE DIFFICULTY Low ROI Strategic Quick Wins High ROI SPOC facilitated video conferencing Online loan disbursement and repayment Credit score generation Market survey through data- analytics Database deployment Best lender suggestion ICECD Mobile App Self explanatory video library FAQs section Difficulty and Importance Matrix Pain Points Key Stakeholders Design Principles Functional Benefits Emotional Benefits Desirability Viability Feasibility • High processing time for loans • Difficult to get quotations • Lots of doubts & queries • SHG management issues • Poor financial literacy • Market saturation, low sales • Entrepreneurs and people needing finance for business • ICECD faculty, mgmt and staff • Banks, MFIs, SHGs • Potential Entrepreneurs • AEIOU technique for Look- Ask-Try • Webbing and Laddering (asking why, why else, how) • Empathy Map for observation • Rapid Prototyping of App • Database for storing details of loans, training and members doesn’t exist • Calling is the only way to resolve doubts, check loan application status • Overcharging by suppliers • App creation is afforadble • Internet connectivity available in rural areas due to Reliance Jio • Migration to database is possible • Query videos are available • Good usage of smartphones, internet among women entrepreneurs • Tech knowledge can be given by training • Based on future needs app can be modified • Easier access to application forms • Easier resolution of queries • Automation with database for loans queries, trainings and member details • Better connect with suppliers & customers in the nearby markets • Easier loan tracking • No hesitation in clarifying doubts • Enhanced confidence due to easy access to solutions, markets, etc CONCEPT POSTER Analysis Limitations Recommendations Objective & Scope Primary Research Secondary Research
- 8. Recommendations (1/3) ICECD Mobile App FAQs section to make them self sufficient in handling common business and microcredit issues Self explanatory video library for common concerns and ease in understanding SPOC facilitated video conferencing sessions with experts for large audience having with same problems Online loan disbursement and repayment apart from cheque payment Credit score generation to make the loan sanctioning decision more risk-free through use of Data Analytics Credit Scoring Database enhancement by adding market survey results Competitive interest rates offered in banks and their locations with user reviews Graph and charts for analyzing data 1 2 3 4 5 6 Database Features Analysis Limitations Recommendations Objective & Scope Primary Research Secondary Research
- 9. ICECD Mobile App (2/3) Query logged Received by ICECD and recommen dations are found Replied through App or phone call Follow-ups taken as required Issues Handled Query redressal Process Loan Cycle Re-apply for loan Applying for loan Tracking loan status Doubt Clarification Contacting ICECD 01 02 03 04 05 Applying for Training 06 Video Library illustrating the process 08 Accessing and updating details 09 Holding Video Conference Future Plan (after database setup) 07 Connecting with Suppliers and Customers Analysis Limitations Recommendations Objective & Scope Primary Research Secondary Research Mock-ups
- 10. Road Ahead (3/3) Pilot Project Go- Live Phase Dry Run Final dry run with automated features with app and system Final cut-off and go-live to new system 1) Implementation and Issues: Deployment of app and finding required improvisation by using it in business operations in selected areas 2) Feasibility study for database deployment and arriving at table structures and system features Analysis Limitations Recommendations Objective & Scope Primary Research Secondary Research 1) Testing: Incorporating the suggested improvisation and doing sanity testing 2) Database deployment: Installing database and forming table structures with past data Migration & Dry- run 2 DOCC Project 1) Requirement gathering and analysis 2) Design and Coding
- 11. Limitations Significant Elementary level of digital literacy expected among entrepreneurs Medium Consistent manual monitoring of raised queries is expected until database deployment Ignorable Regression for quantitative analysis deals with sample size of 23 responses Minor Further Automation can be done with database management Considerable Village should be enabled with basic level of Telecom and IT infrastructure Importance For better usage of autonomous features like “connect to supplier” minor understanding of English language is needed Analysis Limitations Recommendations Objective & Scope Primary Research Secondary Research
- 12. Video
- 13. Thank You
- 14. Appendix: References 1) Modelling Credit Risk for SMEs: Evidence from the US Market: https://www.iiiglobal.org/sites/default/files/18modellingcreditrisk.pdf 2) Risk Rating and Credit Scoring for SMEs: http://www.ebrd.com/downloads/news/2_rr.pdf 3) Challenges in Microfinance: an EY perspective: http://www.ey.com/Publication/vwLUAssets/EY_- _Challenges_in_microfinance/$FILE/ey-challenges-in-microfinance.pdf 4) Evolving landscape of microfinance institutions in India: https://webforms.ey.com/Publication/vwLUAssets/ey- evolving-landscape-of-microfinance-institutions-in-india/$FILE/ey-evolving-landscape-of-microfinance-institutions- in-india.pdf
- 15. Appendix: Mobile App- Loan Application & Tracker Screens Loan Screen 1 Loan Screen 2 Loan Screen 3 Loan Screen 4 Loan Tracker Back to recommendation
- 16. Appendix: Mobile App- Sign-up & Log-in Screens Back to recommendation
- 17. My Queries Section Connect with Suppliers FAQ section Contact-us section Appendix: Mobile App- Other Imp. Functions Back to recommendation