The Indian economy has been hugely affected by the outbreak of COVID-19. Among the many industries, NBFCs have faced unprecedented challenges and a liquidity crunch. The lack of credit and increased operational costs made the situation more intricate for companies to sustain.
However, fighting against all odds, Pahal Financial Services Pvt Ltd has made its way through by granting loans to the bottom of the pyramid section. With over a decade of experience in the company and under the influential leadership of the Managing Director, Ms Purvi Bavsar, they are close to achieving the astonishing vision of providing loans to over two million women.
As the industry is getting back on foot, Pahal Financial Services has planned and implemented various strategies for having a smooth roadmap ahead. In an interview with Insights Success, Managing Director Purvi Bavsar sheds light on the journey of the company and the challenges it faced in the financial niche.
Give us a brief overview of your journey in your respective company.
It all started with an intent to do something more meaningful, scalable and impactful. From being an employee to being an employer after working for 17 years with various large corporates and banks, we started by acquiring a small portfolio of a trust and merging it with an acquired NBFC. It was a very small beginning indeed. From just being in one state with 12 branch operations to now eight states and more than 200 branches across the country, we are spreading our wings further.
We had to go through the turbulent times during demonetization as we were comparatively smaller in size and, hence, fragile. We also utilized the difficult times during the first and second waves of COVID to convert ourselves from being a traditional microfinance institution to a more technologically-enabled and digitally-focused one.
Pahal has reached a balance sheet size of close to 1000 crores with more than 1700 people working in 200+ branches spread across eight states and is technologically well poised to take advantage of the changing landscape.
Tell us more about your company, its vision, and the key aspects of its stronghold in the microfinance space.
We started with a vision to reach out to two million women borrowers at competitive rates. Our vision also included achieving internationally acceptable returns on investments to attract mainstream capital in the segment’s service at the bottom of the pyramid.
We were one of the few microfinance companies to emerge from the western hemisphere, and we continue to have a strong market presence in Gujarat. So far, we have reached out close to a million borrowers.
From a business leadership perspective, what is your opinion on the impact of the COVID-19 pandemic on the microfinance industry?
Since microfinance is all about reaching out to financially excluded and vulnerable communities and people, the impact was very devastating.
However, fighting and getting back to normal was the only option for survival for our customers. The impact has been very severe during the first two waves—right from losing some close family members to the pandemic to losing their livelihood and going through the pains of migration in some cases.
At an organisational level, we had never encountered a problem of this magnitude before, and hence every day was a new or unknown challenge. This included everything right from taking care of our own people to reaching out to customers in need to managing the operational expenses in such a delicate situation and managing funders or investors.
- Medium-term impact
The cost of operations has increased for most players considering the efforts required for collection. Credit costs have gone up compared to the track record of microfinance organisations. The cost of funds has been favourable for some time due to the availability of funds under government schemes for medium and large MFI’s.
- Long term
The sector is on the cusp of recovery and is well-placed to deliver a very healthy growth rate in AUM and earnings, coupled with expected new RBI regulations.
What efforts did you take during the pandemic to sustain operations and ensure the safety of your team at the same time?
For us at Pahal, the safety and well-being of our people and customers are at the centre of everything that we do.
To sustain the operations, we –
- actively engaged with customers through tele-calling at a central and branch level to start with.
- created training videos to educate staff and create awareness among customers about the COVID protocol and guidelines announced by RBI regarding the moratorium.
- Once the vaccination programme was announced, ensuring our staff was vaccinated was a priority.
- Engaging with the funders or investors.
- Managing our cash position on a daily basis to ensure that we have at least 2-3 months of run-way at all times.
- One of the most important things was to align the systems to deal with the moratorium and related changes.
During the pandemic, we took some immediate steps for our staff, like –
We reached out to all our employees on a regular basis to ensure they were safe and gave them confidence about the job security and continuation of their remuneration, even when there was a lockdown and they were not able to work. We did not lay off even a single employee or rationalise their salaries. In fact, against all the odds, we ensured we paid their salaries on time.
We also increased the health insurance and life insurance cover for our employees, and this timely decision has been of great help to our people during the most difficult times.
In addition to the insurance benefits, we also started to take care of our employees’ families for one year in the unfortunate event of death.
What is your opinion on the necessity for microfinance companies to align their offerings with technologies like AI and ML?
Given the dynamic external environment, it is critical for microfinance firms to adapt to newer technologies and ways of working. This is soon going to be more of a compulsion than a choice that one has.
As an established industry leader, what would be your advice to the budding entrepreneurs and enthusiasts aspiring to venture into the microfinance space?
I always say that financial services, including microfinance, is a business of relevant credit and efficient collection, not money distribution. This business also requires a lot of patience as the ticket sizes are smaller and geography is difficult. However, the satisfaction of creating an impact and being relevant and available to the bottom of the pyramid customers, particularly women, is worth all the effort and pain!
How do you envision further strengthening your company’s stronghold in 2022 and beyond?
We will further strengthen the company by –
- Adding newer geographies
- Adding newer and more focused products that are more relevant to our customers. This is one of the most critical pieces considering the changed market and customer requirements in a post-pandemic scenario and to capitalise on new opportunities available in the market
- Moving to cashless and digital collections
- Continue to upgrade the technology to enhance the customer experience
- Build more robust credit evaluation systems
- Continue to remain focused on Risk Management and Compliance
