The internet revolution and the availability of cheaper mobile devices have propelled the growth of digitally literate communities and enabled traditional microfinance institution (MFI) borrowers to evolve into more tech-savvy, social media friendly and experience-driven customers says a special report titled ‘Rejuvenating Microfinance in India – Embracing Digital’ brought out by Micro Finance Institutions Network (MFIN), the association of 58 NBFC-MFIs and 39 associates including banks, small finance banks (SFBs) and NBFCs, and the knowledge partner KPMG.
The report finds that traditional branch-led, field officer-driven models are proving to be expensive in a pricing cap regime and MFIs have now begun to adapt to new technology trends for faster loan origination, efficient customer service and flexible loan requirements using alternate channels, the report adds.
FAST-TRACK TRANSITION
While the MFI sector has managed to grow its gross loan portfolio (GLP) to `2.31 trillion as of September 2020 from `0.34 trillion in 2014, at a CAGR of 30%, the sector has also seen a surge in the number of micro-lending startups and financial technology (fintech) entrants. The entry of these new-age players, says the report, has enabled the sector to fast-track its transition to a more efficient digital model that has the capability to serve a larger population at lower costs. NBFC-MFIs that command the second-largest share of India’s microfinance portfolio have been at the forefront of this transition.
While fintech companies have traditionally played the role of disruptors in this sector, some fintech companies have since turned into enablers for traditional MFI players.
Some of the key findings in the report:
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