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Financial Inclusion at the Bottom of the Pyramid Providing Housing loans to India’s Bottom of the Pyramid Customers
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Mahindra Home Finance provides housing loans to India’s underbanked and underserved customers residing in Rural areas. By providing housing loans to customers that are ineligible for loans from other financial institutions, we improve their standard of living which would not have been possible otherwise as other Financial institutions focus on the ‘richer’ urban and semi-urban customers. Instead of relying on income documents (which our customers do not possess), we rely on our own assessment through field investigation and observation. Our unique business model enables us to serve India’s poorest, under-banked and under-served customer who cannot avail loans from most financial institutions.
By giving housign loans to more than 125,000 families so far, we have transformed their lives. The fact taht 40% of our new business is generated through references shared by existing customers shows that these customers accept our business model. In a survey done on our customers at various stages of the loan cycle, over 80% of the customers have rated us at and above 4 out of 5 on satisfaction scores. Once a house is made, they are able to have marraiges, a better lifestyle, and moreover, families are able to avoid ill health through construction of toilets financed by us.
Due to unavailability of documents, majority of banks and financial institutions do not serve the customers we cater to. We follow a unique credit, legal, and technical appraisal system designed specifically for these customers so that we can assess the customer’s income and the quantum of loan he would be able to afford. As customers have irregular flows of income, we have introduced monthly, quarterly, and half-yearly repayment schedules. Our fixed rate of interest helps them understand the EMIs due, as they lack banking knowledge. Assistance is provided to customers to procure their legal and property documents from local governments.[/one_half_last]
Customers in Rural India have their own needs and priorities which makes it hard to treat them like Urban customers. The cost of reaching out to customers, evaluating them and servicing is extremely high due to geographical spread and low-ticket size. We have tried to avoid this by working in clusters which would have been helpful if we had done this from the beginning. We hope statutory bodies and government would stop focusing on ‘cost of credit’ to the under-served and rather look at encouraging ‘flow of credit’ through appropriate measures. This itself would lead to lower cost of credit at some stage because of competition.
Serving ‘Bottom of the Pyramid’ customers is not a CSR activity. we have proved the adage of “Fortune at the Bottom of the Pyramid”. Serving these customers should be treated as an adjacency of an existing business but the model should be re-evaluated and redesigned to suit specific requirements and challenges of this customer class. ‘Dumbed down’ versions of existing business models and services are unlikely to work and would be the reason for failure for any urban or semi-urban player entering this market. Also, hiring locally ensures employees have a good understanding of the local markets.[/one_half_last]
Mahindra Home Finance
Anuj Mehra is the Managing Director of Mahindra Rural Housing Finance Limited (MRHFL). He has been associated with the company from its inception in April 2007. Anuj Mehra completed his post-graduation from Indian Institute of Management in Ahmedabad in 1982. He began his career with Lakme Limited in Sales and Marketing before taking over as the All India Sales Manager of the Pharmaceutical division of Lakme Limited for a brief period. Then he worked with ITC Classic Finance Limited, 20th Century Finance Corporateion and Centurion Bank Limited before joining Mahindra Gesco Developers Limited taking responsibility for their Marketing portfolio.