Claudia Cruz Leo

Location / Country: Hyderabad, India
Organization: Vaya

CLAUDIA CRUZ LEO: "Vaya is a for-profit microfinance institution (MFI) based in Hyderabad, India, the capital of the Indian state of Telangana. The organization is the brainchild of former SKS Microfinance1 CEO and Tufts alumnus, Dr. Vikram Akula, who now serves as Chairperson for the organization and is a constant source of guidance and inspiration for Vaya staff. Vaya sees itself as “a next- generation financial inclusion organization”, as it provides financial services with a focus on integrating digital finance technology through the use of tablets for loan management.2 The firm’s aim is to enhance the livelihoods of underserved low-income women, mainly in rural areas, through the provision of financial services and financial literacy training. Vaya is operational in six states in India and is currently the only microfinance firm present in Telangana following the Andhra Pradesh crisis in 2010.

Throughout my nine weeks at Vaya my focus was on individual lending. Being a traditional microfinance firm, Vaya currently only offers group lending, or joint liability, products. After an initial discussion over Skype with the organization’s Chief Financial Officer (CFO), I realized individual lending would be a priority area for the organization. This hunch was confirmed after I arrived in Hyderabad, following an annual all-staff retreat in which senior management stressed that the organization going forward would begin to transition into individual lending.

My direct supervisor and I developed a work plan with three goals for the summer:

1. Investigate individual lending products and underwriting practices in India and around the world;

2. Design a survey to administer in the field and gain a solid understanding of the demand for individual lending products;

3. Recommend entry or delay into the individual lending market and propose a road map for next steps.

“In addition to conducting independent research, I worked closely with various department heads at Vaya (operations, finance, training, data management, and human resources). I made two visits to the field to speak with and understand the composition and needs of Vaya clients and staff. I also spoke with key staff members at competing microfinance organizations, e.g. Ujjivan Financial Services, Muthoot FinCorp, and others, to understand the approaches others in the industry were taking towards individual lending. My final recommendation was based on the Indian context with regard to individual lending (products and process); client demand; and the firm’s level of readiness.

Apart from this main research effort and market analysis, I also helped Vaya staff begin to think through how to design a credit absorption index to assess new clients’ creditworthiness, although this work was preliminary. “

IMPACT:

i. Vaya’s Staff

Vaya’s CEO was very thankful for my efforts in helping the organization move one step closer to cracking the individual lending puzzle. My research, which combined an academic and fieldwork approach, provided the organization with the groundwork and tools for conceptualizing an individual lending product and the new underwriting process. This is something for which the organization did not have the resources, human and financial, to do carry out on its own.

ii. Vaya’s Clients

Various colleagues at Vaya told me in my first days at the organization that their clients had been clamoring for individual loan products. Many of these women had already successfully completed various loan cycles with Vaya and other microfinance organizations, reaching the maximum amount they could borrow at one time under RBI regulations, and therefore wanted expanded opportunities to access larger chunks of capital to grow their businesses. I spoke to women who felt this way on my field visits. Others, interestingly enough, no longer wanted to be responsible for other group members’ repayments. The recent demonetization effort further exacerbated this issue as many women were unable to meet their repayment schedules, putting undue pressure on their peers to meet their repayment obligations. Although my ultimate recommendation was to delay the launch of individual lending products, I emphasized the need for the organization to put in place the necessary processes and seek the needed expertise to meet these women’s needs.