Digital loan application app by Arohan Financial Services can be a game changer in Microfinance company

CXOToday has engaged in an exclusive interview with Mr. Arvind Murarka, CIO, Arohan Micro Finance

1. What innovative methods has Arohan Financial Services employed to introduce digital lending within the microfinance sector, and how does this approach distinguish itself from traditional lending practices?

Arohan continues to be a forerunner in the use of innovative technology in the sphere of microfinance in India. Arohan has introduced “first-in-the-industry” digital lending initiative, with apnaArohan (mobile application) in the month of Aug 2021. The idea behind this innovation has been to provide good microfinance customers, with an impeccable track record, the privilege of apply for a loan through the apnaArohan app and get the loan within few minutes of completing the application.

The focus has also been on providing a good customer experience through the apnaArohan app by facilitating communication with the relationship manager, get reminders for repayments, get rewarded for maintaining a good repayment track record and with a grievance redressal mechanism inbuilt into the app.

We therefore call it ArohanPrivilege product and app the is called apnaArohan.

Distinguishing factors:

Some major distinguishing factors from the traditional lending practices:

In traditional lending format, a loan officer would visit the house of the customer and fill in the loan application details and does the assessment of the household in terms of living conditions and income. However, through the apnaArohan app the customer applies for the loan herself. The entire household assessment is done through analysis of the inputs provided by the customer in the app by using machine learning tools.

Secondly, in traditional microfinance model, on the day of repayment the customer has to visit the center and make her repayment – the center timings are fixed and the customer has to reach the center, near her house, to complete the transaction and or inform in case she has repaid the amount digitally. Her presence in the center is very important in this format. In case of ArohanPrivilege customer, she need not visit any center as she has to pay digitally on or before the due date. For a matured regular customer, this is a boon as she saves on the time she needs to spend by visiting the center.

At a fundamental level these 2 are major distinguishing factor and paradigm shift from the process of traditional microfinance lending.

2. Can you elaborate on the specific ways in which ArohanPrivilege’s digital innovations have improved the overall microfinance industry and enhanced the lives of its customers?

• Reduce TAT for underwriting & Disbursement – from the least of couple of days to a maximum of couple of hours.
• Effective savings in customers’ time –  she does not have to visit center meetings for her loan repayment
• Cashless disbursement – reduction in cash related frauds
• Cashless repayment – reduction in cash-carrying risk and fraud
• Enhanced customer experience facilitated by apnaArohan app
• Faceless initiative – dependency on loan officers in knowing the customer gets eliminated through the apnaArohan app
• Absolutely a paperless initiative

3. What positive outcomes have emerged from ArohanPrivilege’s digital lending initiative in terms of its impact on rural and underprivileged communities in India?

Through the digital lending initiative, we are contributing towards the dream of Digital Bharat. With the increasing penetration of smartphones and improvement in the network infrastructure, ArohanPrivilege enables rural & semi-urban customers to avail of financial services ,helping to serve the core agenda of Financial Inclusion.

Our vision statement itself outlines that. It says that “Any Customer From Any Geography is able to avail of Arohan’s Microfinance Loan and Repay it Digitally On Time”. In Arohan we like to say that with this Geography will become History.

So through digital lending, even in rural areas, a microfinance borrower can easily get a loan in minutes and fulfil her need for funds.

4. What are the potential challenges or concerns related to customer KYC (Know Your Customer) and credit history when implementing digital lending solutions for marginalized segments of society?

Through extensive use of technological tools, we have been able to over the challenges of KYC documents. Some common issues that we faced were invalid document numbers, faded / smudged prints, regular wear & tear of the document and so on. By using certain Machine Learning (ML) techniques we have been able to overcome them.

Anybody applying through the apnaArohan app, necessarily has to have a credit history. We analyse the credit history alongwith other set of data points that we collect during the course of the application, helps us to underwrite the loan.

5. How does Arohan’s digital lending strategy differ from conventional microfinance methods, particularly concerning loan application processing, disbursal speed, and customer engagement?

• Customer needs to apply for a loan on their own through the apnaArohan app. The app supports regional languages. In conventional microfianance, a loan officer has to visit the customer’s house and fill up the loan application on the his own mobile phone.
• In conventional microfinance loans groups are formed and such groups become a part of a center, wehereas in digital lending they are all individual microfinance loans.
• In conventional microfinance, the least TAT would be ranging within 2-7 days, whereas in digital lending it would range between – 10 minutes to 2 hours.
• Physical presence of brick & mortar required, whereas in digital it is a centralized support mechanism
• In conventional microfinance, customer engagements are normally once a month through the center meetings when the customer come to repay their EMI. In digital, we follow a strategy of having our relationship manager speak to the customer at least 2 times a month and ensure that the customer is feeling “Privileged”.

6. What distinguishes Arohan Financial Services’ digital lending model from traditional approaches in terms of its impact on financial inclusion, accessibility, and empowerment for underserved populations?

The digital lending initiative has a huge impact on Financial Inclusion. It allows us to onboard customers across those geographies where we do not have brick and mortar branches. It enables us to even reach customers in those states where we are not present. It help these customer to avail credit facilities which otherwise they were not able to get as quickly or easily.

The apnaArohan app is available on the playstore and can be downloaded.

The app empowers the underserved to avail of credit facilities for livelihood without depending on any specific person or institution present in their area to extend credit facility to them. The empowers them to choose the loan amount, tenure and or the EMI based on their ability to repay.

Let us call it digital financial inclusion.

7. Can you elaborate on the specific achievements of Arohan Financial Services with their digital lending initiative, including the number of applications processed and the amount disbursed within just nine months?

It is a new-to-industry intiative and we are going slow. Even their we have received more than 100,000 applications and we have disbursed to around 15,000 customers. All of this is just managed by a team of 17 relationship managers. With extensive use of AI & ML methodologies we have been able to manage the  volume. We ensure that every customer is spoken to for about 10 minutes before the loans are disbursed.

8. How does the ArohanPrivilege application streamline the loan application process and enable loan disbursal within ten minutes, and what impact does this speed have on customers’ financial well-being?

The entire loan application process is based on simplicity. Simple language and screens. The customers do not have to type anything in the app. They have to either select values from a given set or upload images. The basic theory to make it simple in the front-end for the customer (User-Interface) and have complex backend processing to get the desired data to enable underwriting. Once the loan application is complete, we disburse into the bank account of the customer within 10 minutes.

The speed of disbursal helps the customer to immediately fulfil her financial needs. apnaArohan becomes a go-to platform for a customer, if the customer has an immediate need for funds.

1. It is been perceived that the people you serve are not technology-friendly so your list of plans to make them tech-savvy

• To design and develop an application so that a digitally illiterate person can also use it seamlessly
• The mobile application is multi-lingual and hence makes it very easy-to-use
• Vernacular help documents and voice-help eases their journey on the mobile application
• Relationship Manager’s phone numbers are provided on the mobile application to enable them to connect with us whenever they face any difficulty while use the mobile app

All of the above helps the customer to feel at ease. We have received encouraging testimonials from our customers for the above mentioned initiatives.