A Buffalo Today, A Thriving Business Tomorrow

My work at Vaya is well underway. In fact, today I reached the two-week mark! The work thus far has been fascinating, not only because of all I have learned about the evolution of microfinance - in India and around the world - but also because of the opportunity I have had to learn from industry leaders with many years of experience, to witness day-to-day operations, and to meet the very clients microfinance institutions (MFIs) like Vaya serve.

My focus this summer will be on individual lending, and by the end of my nine weeks in Hyderabad I should be able to deliver: 

  1. An overview of the existing market, products, competitors, and client needs
  2. An individual loan product design, associated process flow, and the required underwriting mechanism
  3. A weighted index to asses clients’ credit absorption, and
  4. A road map for the execution of the launch strategy

This week I had my first field visit, in the company of two colleagues, to see the group-lending mechanism in action. We traveled roughly two hours outside of Hyderabad, to a small town called Narayankhed. Narayankhed is the first village Vaya ever worked in. It is no coincidence that it is also where Vaya Chairperson and Tufts alumnus, Dr. Vikram Akula, opened his first microfinance branch when he headed SKS Microfinance (now known as Bharat Financial Inclusion Ltd., or BFIL).

My colleagues and I left Hyderabad before the crack of dawn in order to arrive in time to join one of the early morning center meetings. Vaya’s women borrowers come together biweekly at center meetings to confirm their commitment to the group, pay their installments, and plan for future loan disbursements. It was fascinating to see how organized the women were, ready to turn in their groups’ collective installments to the field officer, who expertly thumbed through the cash to verify the amount while using her work tablet to take attendance and record installment figures. At less than 15 minutes, the meeting was as efficient as could be, allowing the women to get to their morning work and home duties without much inconvenience.

After the meeting, I had the opportunity to meet with two of the women borrowers and hear from them about their experience with the lending process.

Vaya borrower Sutina graciously let me take a photo with her and her buffalo. / June 21, 2017.

Vaya borrower Sutina graciously let me take a photo with her and her buffalo. / June 21, 2017.

Sutina (pictured above) recounted how she had saved INR 25,000 on her own (roughly USD 310) and then borrowed another INR 20,000 from Vaya to purchase a buffalo - the price was INR 60,000 (USD 930) but she was able to buy it for 50,000 (USD 775)! She milks about 6 liters from the buffalo per day and sells it to make a few hundred rupees. In a week’s time she has made a significant amount in profits, given that the buffalo grazes and the costs to feed it are minimal.  Her confidence and pride in her work is remarkable. In addition to the income she receives through the buffalo, Sutina also mentioned that she often works as a day laborer - this means she goes out to look for work in agriculture or infrastructure projects in her town or other nearby towns. This is the most precarious type of work but can help rural families make ends meet.

I also met with Ghousia, who owns a kirana (small grocery) shop in Narayankhed. With the loan she was able to obtain through Vaya, she purchased a space big enough to set up her kirana and her husbands’ car repair shop - a modest establishment by Western standards but enough space to allow her husband to work from their village, rather than having to travel two hours to and from Hyderabad for work as he once did. Ghousia’s self-confidence shone through - so much so that she complained to me that she wanted me (Vaya) to offer larger ticket size loans so that she could expand her shop! I am working to help make that happen, more so now that I have Ghousia’s grievance cemented in my memory. 

Vaya recently went from operating as a bank correspondent (BC), whereby it operated as an agent for a local bank called Yes Bank, to what the Reserve Bank of India denotes as a NBFC-MFI, or a non-banking financial company/MFI. Whereas as a BC Vaya is dependent on Yes Bank to be able to provide funds to its clients, now as a NBFC-MFI, it will be able to do so on its own - cutting loan application and processing times from as much as two months to a matter of days.

The individual lending model that I am exploring will also allow Vaya to serve the needs of mature clients that have gone though various loan cycles and obtained the largest ticket size loan it offers but who still need more capital to grow their businesses; it will also address the concerns of borrowers who - because of the larger ticket sizes and their growing financial literacy and confidence - no longer want to be liable for fellow borrowers through the joint liability group scheme.

For these reasons and many more, crafting an individual loan product is the next logical step in the company’s progression and clients’ growth.

During my trip, I also visited one of Vaya’s branch offices in Narayankhed, to get a closer look at all of the back-end work that most never see. Stay tuned for my next post on it!