My Diwali wish-list for the Microfinance segment (Hope; Optimism and Righteousness)

2 Years back I was supporting IDFC FIRST Bank Vaidyanathan V in their micro-entrepreneurs journey as part of their FAME Challenge where they wanted the bank to gain traction in the rural-lending segment (unsecured lending space). Today the whole industry is reeling under significant stress for obvious underwriting issues. In the same regard, I was having deep-conversation with industry veteran and SVADHAN CEO Krishna Chandran V

Today's auspicious day of Diwali and Lakshmi Pujan has always signified 

😃 Hope

😃 Optimism

😃 Win of righteousness over evil

👉[Choosing the right over easy!] When asked with Vaidyanathan V (VV) if they are lowering their portfolio in MF space, they have been quite vocal about the importance of MFI segment for the formalization of credit for BOP (Bottom of the Pyramid) {ref. VV's interview to ET dated Oct'28}

I will put Krishna Chandran V's (KCV) words and my thoughts in a wish-list for the segment :-

1️⃣ No need for ever-greening - technical term being "netting off" loans just to show lower stress when the real stress is high

2️⃣ KCV mentions the actual NPA % is double of quoted; my conversations with multiple lenders ground force highlight the same. Actual quoting is key to right measures

3️⃣ Differentiated sales and underwriting squad is the key (significant hope and optimism is present in the statement)

4️⃣ Commercial banks remain the major / only source for MF lending through middle layers (significant hope that the banks remain invested in not just portfolio yields but broader implications as highlighted by VV)

5️⃣ We have seen what happened with the Chinese lending app scheme, Reserve Bank of India (RBI) oversight remains critical

6️⃣ Finally organizations like SVADHAN as they call themselves "Swiggy of MF" remain critical for stronger underwriting and efficient marketplace where lenders and MF customers meet

Wishing everyone a very happy Diwali and Samvat 2081:)