Bharat Financial looks to reduce cost with digital loan processing system

JAIPUR: Bharat Financial Inclusion, formerly SKS Microfinance, has started rolling out Aadhar-based digital lending system to ensure a loan getting sanctioned and disbursed within minutes.
The micro lender launched this service at a village called Deogaon, 70 km away from Jaipur, and expects this, along with its other digital initiatives, to reduce transaction cost by about 70 basis points in two years.

Bharat Financial lends at 19.75% a year, the lowest rate in the MFI space.

The second largest MFI in terms of outstanding loans expects the cost to income ratio to fall to 40% in two years from 47% at present.

The roll-out of the technology relies on a three-step process -- Aadhar-based and online customer documentation process, credit bureau authentication and e-signing.

"This will be rolled out across India by June 30," chief operating officer KV Rao said.

The system will cut down time taken for loan approval from seven days to seven minutes. The linking of Aadhar number also helps crediting the loan directly into borrowers' bank account.

The MFI is also experimenting using kirana stores as rural distribution service points for dispensing cash to the borrowers.

Rao said that if this becomes successful, this would ensure last mile connectivity in every sense and the field workers need not carry cash with them for disbursement or at the time of repayment by borrowers.

The MFI which had failed to get a small finance bank license unlike it's rivals such as Janalakshmi Financial Services can't access low cost public savings for funds, limiting it's capacity to reduce fund cost.

Earlier in an interview, chief executive officer MR Rao had said that the company would aim to bring down overall cost by improving operational efficiency.

"We have been working on to leverage technology for the last cople of years and the government's digital push has created a platform to use it effetively," said Ritesh Chatterjee, who is driving the change in process and quality.

Bharat Financial has 66 lakh customers across one lakh villages in 16 states.