IFMR Holdings Annual Update 2016 – Sowing Seeds for Transformation

In this Annual IFMR Holdings update for FY2016, Sucharita Mukherjee, CEO, IFMR Holdings, in conversation with a Wealth Manager in the video below, narrates the journey so far and the road ahead. IFMR Holdings invests in, and operates financial services companies in India with the mission of ensuring that every individual and every enterprise has complete access to financial services. As of March 2016, IFMR Holdings and its group companies have reached over 18.5 million people across India, working through its own network and that of its partner originators.

Watch the video below:


Digitising Payment in our backyard

By Rachit Khaitan & Nishanth K, IFMR Finance Foundation

There has been a strong national imperative to move towards a “cashless” economy in India[1]. Despite a substantive impetus from public and private sector forces, the adoption and use of digital modes of payment in the country remains paltry[2]. While the many virtues of going cashless have been widely extolled, there seems to be little understanding of what might be “barriers” that are impeding large scale adoption.

In our endeavour to get a hands-on perspective on some of the challenges and better appreciate issues towards enabling a cashless environment, as part of the i-Innovate initiative, we set up and operationalised a market-prevalent digital payment channel (through mobile wallet) for paying for meals and other purchases at our office cafeteria (our proverbial backyard if you may). The goal of the experiment was to better understand the extent to which popularly perceived barriers in adopting a new mode of payment existed, from the perspectives of the vendor as well as consumers.

Despite the limited nature of this experiment, there are some valuable insights to glean towards for increasing adoption, at least in similar settings

The Vendor Perspective

From the vendor perspective, we perceived significant barriers in terms of the cost of adoption, the on-boarding of new technology, and cash management. We discuss each of these alongside our own experience with helping to implement a solution with the vendor:

Costs of adoption: Accepting digital payment involves fixed and variable costs. To mitigate fixed costs, we provided the vendor with a smart-phone and access to the office Wi-Fi network. The vendor was happy to contribute with a new sim card and phone number, required for registration of a new user account in the payment platform.

In our experience with variable costs, we found that rather than incurring the costs, there was a more significant barrier in terms of completely understanding what those costs might be. After surveying the growing landscape of digital payment platforms in India, we suggested one that recently received a payments bank license and featured low costs of transaction, high existing user adoption, and ease of use. We also understood all costs involved from the fine print in the terms and conditions and explained it clearly to the vendor. After this, we found that incurring those costs were barely a barrier to the vendor, especially when viewed against the benefit of providing customers with an alternate mode of payment.

On-boarding of new tech: Another major perceived barrier for adoption was that point-of-sale operators may not be trained or comfortable using such technology to accept payment in return for their goods sold.

When we set out to explain the nuts and bolts of receiving digital payments using a smartphone to our young cafeteria operator, we found to our pleasant surprise, that he was already well versed with using digital payment platforms and claimed to use it regularly. While we have yet to understand the issues around troubleshooting and exception handling (such as providing refunds), this barrier was found to be largely non-existent in our experience.

Working capital management: As a majority of the economy remains cash-based, a typical small business may accept digital payment from its customers but still has to deal with other parties, such as suppliers and distributors, in cash on a day-to-day basis. This was perceived as one of the most significant barrier to adoption. Fortunately, in our case, the vendor had a diversified stream of revenues from running multiple outlets across the city, which may be why he found it acceptable to collect digitally, despite the possible delay in cashing out to pay cash-based suppliers. However, we understand that this may not be the case for other smaller scale vendors.

The Consumer Perspective

There were several perceived barriers to adoption from the consumer’s perspective. Some of these barriers include:

  • Lack of smartphone for transaction
  • No prior experience with digital payments, or at worst, a conscious distrust of the channel
  • No prior experience with the particular service/app, and/or an unwillingness to start using a new service provider
  • Strong preference for cash for familiarity, convenience, or privacy
  • Inertia to adopt a new mode of payment

Results from our analysis and survey

In the below interactive we share some results from the analysis of transaction data and a survey that we conducted.

Anecdotes from the consumer survey as well as conversations in person provided deeper explanations. Many respondents lauded the initiative for the convenience that it affords them. One respondent stated that with this new service, their cash transactions had reduced to just one or two transactions in a month. Many other respondents however pointed to the need for a longer lead time towards adoption such as this user who stated that “Maybe in another week I will adapt to technology.

Other respondents indicated a strong preference for cash. One respondent stated that “I consider it as a secondary option of payment. In case I do not have cash or change then I will use that service.” Another respondent clearly stated that there is “No need. It has no value addition”. One respondent stated their reluctance to adopt this new payment mode explaining that transacting at the cafeteria was actually a useful way to break down large currency notes into smaller values in order to pay auto drivers (who offer no alternative to cash payment) on their way to and from office.


In our experiment, we tried to identify (and mitigate, wherever possible) the barriers that might impede the adoption of a new digital payment platform and understand the experiences of the vendor and its consumers. Our backyard laboratory (i.e. our office) comprised a consumer sample of financially and technologically literate consumers, a vendor willing to accept an additional small transaction cost, and a tech-savvy POS agent.

In the short time period of assessment (ten days), we found that more than half of all transactions turned digital! However, consumer adoption was slow with only 24% of cafeteria users getting on board. Our experience suggests that even savvy and highly likely adopters might be having a preference for cash for its familiarity, its convenience, or its anonymity, that digital payment in its current form is not able to substitute for.

Our experience also suggests that when a vendor offers payment through one particular payment provider, those consumers that are not already users on that platform may be reluctant to maintain balances in multiple payment wallets or even to sign up on multiple platforms using their mobile numbers and email ids fearing a spam explosion. Finally, even with all other barriers notwithstanding, our experience suggests that consumers could simply need more time, more persuasive marketing, and perhaps more active handholding to mitigate the inertia of adopting an unfamiliar new technology.

The advent of payments banks and the Unified Payments Interface (UPI) are set to lower such barriers to adoption with cash-out as a feature, an ability to carry out real-time mobile-based interbank transactions, and a much larger network of digital payment senders and recipients. These developments thus hold great promise for Indian merchants and consumers to leapfrog into the fold of digital financial services.

[1] PM Modi emphasis need for digital payments, Livemint (May 2016): http://www.livemint.com/Politics/jucQ9NUkKOnm4btxAMGk3N/Mann-ki-baat-Modi-urges-for-cashless-economy.html
[2] RBI estimates that 96% of all the retail transactions in the country are conducted using cash, Microsave (June 2016): http://blog.microsave.net/offline-payment-acceptance-a-puzzle-and-an-opportunity/


From Looking to Seeing

By Kshama Fernandes, CEO, IFMR Capital

I met today with the promoter and CEO of one of our newer Small Business Loan Originators and visited some of their end borrowers in Bombay. I heard an interesting story of their very first client not too long ago. This was a sandwich vendor who runs a makeshift stall outside the Bombay Stock Exchange (BSE) and has been supplying sandwiches to the entire BSE crowd for years. Imagine a business with a captive clientele in one of the oldest and the largest exchange in India. One would think the vendor must be an attractive credit opportunity for any sensible lender. Well, it so happened that the gentleman had no access to formal credit for decades despite being located on Dalal Street – traditionally considered the nerve center of India’s capital. Till the day a credit officer from our Originator discovered him. As expected he had little to prove his credit worthiness. So the credit officer spent two days standing next to his little stall and counting the number of sandwiches he delivered to the BSE building from morning to evening. This was followed by a personal assessment through a Q&A session, a visit to his home and a few conversations with neighbours. Using the sandwich-movement-activity based cashflow and other observations, the credit officer built the sandwich vendor’s P&L and B/S. The vendor was given a one-year loan of INR 9 lakh. He repaid the loan in 6 months and reapplied for a larger loan, tapping into a formal source of finance for the second time in his life.

The CEO told me that when he left behind a promising career in a mainstream commercial bank and decided to get into a more interesting and possibly a higher margin business, he thought he would have to go to far flung areas of the country in search of those who had no access to credit. He was wrong. He found many such down the street from his office. I visited some of them today.

India is indeed a promising land. We simply need to look a little closer and go a little deeper into the lives of people around us – people whom we always ignored because we never thought they had potential. We need to stop looking and start seeing!


In Conversation with Kalpana Pandey, CEO, CRIF High Mark

In this blog post we feature a conversation between Bama Balakrishnan, CRO, IFMR Capital and Kalpana Pandey, CEO & Managing Director, CRIF High Mark. CRIF High Mark is one of the four credit bureaus that operates in the country.

What are your thoughts on the evolution of Credit Information Companies in India and your experience in this space?

Kalpana Pandey

Kalpana Pandey

India had one Credit Information Company (CIC) from 2004 till 2010. CIC(R)A 2005, the regulation for CICs, came into existence in 2006-07. Pursuant to that, CRIF High Mark (then High Mark) along with two other companies got license to operate as CIC in 2010.

CRIF High Mark was founded with a vision to create a comprehensive and all inclusive credit bureau. The Andhra Pradesh microfinance crisis of 2010 underscored the need for a bureau coverage for the sector, so we took the opportunity to partner with various participants of the microfinance industry and launched India’s first Credit Bureau for Microfinance lending in March 2011. We now operate World’s largest Microfinance Database and over past 5 years, we have supported this sector with reliable information on over 10 crore credit decisions.

CRIF High Mark now is a full-service credit bureau providing coverage for all borrower segments – group lending, individual lending and MSME/Commercial lending. We now work with not only MFIs but also Banks, NBFCs, Housing Finance Companies, RRBs, Coop Banks etc.

RBI since the last year onwards requires all financial institutions to report to all credit bureaus. This means CIBIL must be getting microfinance data, High Mark must be getting data from banks, HFCs, etc. Have you seen good progress in this process?

In addition to Microfinance data, as mentioned earlier, CRIF High Mark was receiving data from major Banks, NBFCs, HFCs, Coop Banks, and RRBs on retail, agri, rural, MSME and corporate lending even prior to 2015. We were missing data from a few players. Since the RBI Jan’2015 notification, these missing gaps have been filled up for us. Similarly, CIBIL must be getting microfinance data.

All systemically important institutions are now compliant with this regulation, and sharing data with all credit bureaus. The smaller cooperative banks and NBFCs are gradually signing up as members with CICs. Data sharing will be the next step for such smaller institutions. Each bureau deploys a filter criteria while uploading data from the files shared by Member institutions into its database. Our technology helps us differentiate ourselves in absorbing the maximum data out of those files and making sense from weaker data.

Bama Balakrishnan

Bama Balakrishnan

Our understanding is that compliance in this regard is still catching up – institutions are going through the process of registering with all the bureaus and would in due course commence sharing data regularly.

The other part which I wanted to understand is, what is your sense of the readiness of credit bureaus in being able to process this kind of information – such as the JLG data – which is different from traditional retail lending?

Where do you think the gaps might be even as institutions start reporting – do you think more needs to be done in terms of capacity building, technology, infrastructure by the bureaus to make sure that they can actually use this information and irrespective of which bureau the lending institution is pulling the report from, they would still get the full picture of indebtedness?

All large players are members of all credit bureaus and have shared data with all CICs. The smaller players while are registering with the bureaus, however these players do not have the IT wherewithawal and have higher dependence on their IT vendors – they have challenges with sharing of data, they will share data once their vendors are able to help them. Our Data Ops team hand-holds such smaller institutions through this process supporting them with mapping of data, file structure and best practices.

As regards data sharing, RBI has standardized the data sharing formats, and all institutions are expected to share data in these formats. CRIF High Mark’s data format was chosen as the format for group lending. Minor additions have been made to this format to cover reporting of SHG data. All these changes are now made in consultation with a Technical Working Group formed by RBI for this purpose.

One has to realise that the input data is becoming similar for the CICs, but each bureau brings its own differentiator through its underlying technology and products. Now CICs give Credit Score in the same range (300-900) to make it easier for people to understand.

In addition all of us expect an overlap between SHG and JLG — we found 40-45% overlap between the JLG and SHG customers on tests we did on data from a few banks. Banks, NBFCs and MFIs are entering into each other territories. So as a user, one should be able to get comprehensive view of customer in a single report. Though the group lending format is different from retail lending format, we are able to process these independently but bring them together to give one picture of the customer. We already have products to provide such full picture of Indebtedness of a customer across SHG data, JLG Data and Individual lending.

We have seen some KYC issues with microfinance customers where we see customers using multiple KYCs with different institutions. We know that bureaus may use relationship information to triangulate data but this may be approximate. With UID coming in and MFIN’s push to ensure authentication through UID, do you see the situation improving in terms of better triangulation of the identity of a customer?

When we launched our bureau for the microfinance segment, objective identifiers such as Voters ID etc were not consistently captured. Even names and addresses were not captured completely. Our technology worked on whatever was available (including relationship names) to bring out most relevant results.

Over the past five years, data quality has crossed many levels – IT systems are better, processes have improved, field staff is sensitized — objective KYC IDs come in now but are largely limited to Voters ID, Aadhaar and Ration Card. MFIN’s push to seed Aadhaar in every new loan being disbursed is seeing fantastic results.

Fragmentation of customer’s data across multiple KYC ID is not unique to Microfinance sector. It is observed in Retail lending space as well since PAN, Passport and Driving License ID are valid KYC IDs. Our bureau systems are tuned to handle these situations to provide comprehensive and also accurate credit reports.

The technology is not biased towards only objective KYC ID, it makes sense of data available across all fields – even single names, partial Voter ID, partial addresses etc – to bring best possible matches. Having said that, it doesn’t mean we would not use KYC ID – better KYC regime will certainly help. Today, we provide millions of credit reports every month with very minimal errors. We constantly invest in fine-tuning our technology, learning from the newer data that we see and the reported errors. With much better availability of a consistent KYC ID (such as Aadhaar) will minimize these errors.

One question on the recent trends of people trying to build platforms for lending using traditional and non-traditional data and algormithic underwriting. Do you think the Indian market is ready for these business models and secondly, do you see this transforming the microfinance lending business? We know that there is not much data, but do you think there is a possibility that with credit bureau data building up and more of it becoming available, people could think about such a business model where there is not much data available other than payment track record. Is that a possibility you have seen people starting to explore?

Our country has just seen use of traditional data (formal lending data). There is defintely an opportunity in exploring use of non-traditional data such as telephone or mobile data, utility bill payments. Many countries have seen benefits of expanding the coverage of population within the bureau with use of such non-traditional data. There have been studies highlighting linkages of such non-traditional data especially payment data with individual’s credit behaviour.

There was an RBI Committee to evaluate the possibility of getting utility data and telecom data into Credit Bureaus. The committee concluded that Telephone use data is meaningful, would help in the cause of inclusion and it should be brought into the credit bureau system. Some legal and regulatory amendments are required to enable telecom service providers to share data with CICs.

Many FinTech start-ups are bringing in novel ideas around providing alternate means of scoring customers and also on algorithmic lending. The success of these models are to be seen, but such new ideas is certainly driving more innovation in the lending related technologies. Most of these businesses are digital in nature, so they may not really be targeting the same customers as that of Microfinance institutions.

We are closely following these developments. RBI is also keenly watching the space, and has already taken initial steps in understanding the various models.

Looking forward, in the backdrop of small finance banks and payments banks that are about to enter the system and the increasing thrust towards financial access driven by various initiatives both by the regulator and the government, as a credit bureau, how do you see the road ahead and some of the key challenges that bureaus in general have to contend with going forward?

Small Finance Banks are none other than existing Microfinance players who will now be diversifying as Banks. They are not new to Credit Bureau environment, but will now expand beyond Microfinance lending and also beyond lending. They will now require Credit scores for Individuals as well as for MSMEs.

For Microfinance sector, the code of conduct guidelines may require a revisit. It currently applies only to NBFC-MFIs, but since Banks and other players are also competing in the same space, we suggest to make these guidelines applicable to all players into direct JLG lending. This is assuming more importance given many MFIs will be SFBs over next few months.

Payments Banks are not into lending so right now they cannot work with a credit bureau. But the payment data generated by Payments Banks is also a strong source of alternate data. Payment data from Payments Banks can expand information coverage across very large expanse of population, and could certainly supplement credit underwriting.

Credit Bureaus will have to constantly evolve to keep up with these changes, and to remain relevant. Newer businesses will have newer needs. Alternative data will require to be merged with the traditional data to make better sense for the customer. The road ahead seems very exciting.


Contrasting the Regulatory Landscape for Credit Bureaus in India, USA and Australia

By Vineeth Maddi, IFMR Finance Foundation

In this post we have put together an infograph below that highlights some of the aspects pertaining to credit bureau regulatory landscape in India, USA and Australia.


  1. https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=14576
  2. https://www.consumer.ftc.gov/articles/pdf-0111-fair-credit-reporting-act.pdf
  3. https://www.legislation.gov.au/Details/C2016C00278/Download
  4. http://www.alrc.gov.au/publications/53.%20Credit%20Reporting%20Provisions/content-credit-information-files
  5. http://www.alrc.gov.au/publications/53.%20Credit%20Reporting%20Provisions/content-credit-information-files#_ftnref40
  6. Insurance companies use credit information to determine premium
  7. Currently being used for postpaid connections, http://www.livemint.com/Money/DAIkDVGe3G5hnFx0V40dSP/How-the-others-interpret-your-credit-score-report.html
  8. https://rbidocs.rbi.org.in/rdocs/Content/PDFs/69700.pdf
  9. https://www.oaic.gov.au/individuals/privacy-fact-sheets/credit-reporting/privacy-fact-sheet-29-who-can-access-your-credit-report
  10. https://rbidocs.rbi.org.in/rdocs/Content/PDFs/69700.pdf
  11. https://www.oaic.gov.au/individuals/privacy-fact-sheets/credit-reporting/privacy-fact-sheet-36-when-will-the-information-on-your-credit-report-be-deleted
  12. Section 18, CIC Act 2005
  13. http://www.alrc.gov.au/publications/59.%20Access%20and%20Correction%2C%20Complaint%20Handling%20and%20Penalties/complaint-handling
  14. http://economictimes.indiatimes.com/wealth/borrow/cibil-may-soon-give-one-free-credit-report-a-year/articleshow/53263370.cms
  15. Section 612 of FCRA 1970
  16. http://www.creditsmart.org.au/getting-free-credit-report