In the digital lending space, the distribution of small ticket-size loans holds immense significance. It demands both technological advancement and substantial operational expenses, particularly concerning labour, to expedite the process, notably for small vendors where obtaining accurate and reliable data is essential.
Amidst such challenges, the PM SVANidhi scheme stands out as an exemplary and efficient method for disbursing loans to vendors. While undoubtedly challenging, facilitating loans through this scheme represents a commendable endeavour in the digital lending landscape.
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Talking at the Business Today Banking & Economy Summit held at GIFT City, Gandhinagar, Asheesh Pandey, ED, Bank of Maharashtra, said that the government is coming up very heavily to serve the underserved. So, on that basis, if you look at the ticket size, it is very small. If you need to serve them, your only option is to either double or triple your staff, given the costs involved. However, this might not be feasible as all tasks must be completed within 2- to 3 minutes. Hence, it’s crucial to keep this in mind. However, lower loans are profitable if you operate very effectively and efficiently.
He further said that the 3 pillars are very important when you target a small ticket size. First, you need to have digital technology in place; you cannot do it manually.
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The second is the information or data available. So, you need to have all the data and the underwriting done through straight-through processing (STP).
The third very important point, which I think all of us will agree on, is that ticket sizes are too small for the event. The most important thing is collections. One should have a very robust collection mechanism. You cannot even go for a collection simply because I need to collect it with everybody now. So, how you are using machine learning and AI-based algorithms and the data, where you are keeping the records in accordance with good-good or bad-bad, really classifying the data to that level becomes very important.
While understanding how PMSVANidhi served as an exemplary model for disbursing small ticket-size loans, he said we also need to figure out how to schedule appointments efficiently with vendors, whether through calls or other means, even if the person might not be entirely cooperative. We need to address this and perhaps adjust our approach for better results. Should I consider asking questions that ensure clarity and receptiveness, especially upon follow-up interactions? All these questions become important parts of releasing the second dose of the loan. In that context, PMSVANidhi serves as an exemplary model, offering loans ranging from Rs 10,000, then Rs 20,000 to Rs 50,000 to street vendors, based on their financial history and utilisation of digital transactions.”
The PMSVANidhi functions with a straightforward objective – to provide affordable working capital loans to street vendors so they can restart their post-lockdown livelihoods. The loans are categorised in stages, ranging from Rs 10,000, then Rs 20,000, to Rs 50,000, decided on the basis of their financial history and utilisation of digital transactions. This was a significant move as, traditionally, the informal nature of their business usually leaves street vendors out of the ambit of conventional bank loans, leaving them vulnerable to money lenders’ high interest rates.
The scheme was launched on June 1, 2020. It is a pioneering micro-credit facility for street vendors across India severely affected by the COVID-19 pandemic.
