The Aadhaar Payment Bridge System (APBS) and the NPCI's *99# service have made digitisation of cash based operations possible in which customer's Aadhaar numbers are collected and sent to disbursing bank for onward direct credit to account using APBS system.
The Aadhaar enabled transactions is expected to digitise nearly 8 crore disbursements and 90 crore repayments annually in the micro finance industry, a report today said. Even as digitisation continues as a back-end process, financial products in the Indian micro finance industry are high on human touch, involving cash based disbursals and repayments, The Bharat Microfinace Report 2017 said. “Digitising cash based operations has the potential to bring a host of benefits to MFIs (micro-finance institutions). It mitigates cash carrying risks and improves operational efficiency by saving time for frontline staff,” the report said.
The Aadhaar Payment Bridge System (APBS) and the NPCI’s *99# service have made digitisation of cash based operations possible in which customer’s Aadhaar numbers are collected and sent to disbursing bank for onward direct credit to account using APBS system. “With this it is expected that the 80 million annual disbursements and the over 900 million repayment transactions will be digitised,” the report said. An endeavour of National Payments Corporation of India (NPCI), it aims to popularise this process with the MFI industry across the country, the report said. “To ride along with current digital payments revolution, MFIs have to take a step ahead and digitise the industry as it will take the digital revolution to the last mile customer of the country as MFIs have a good rural outreach and working closely with more than 40 million rural women,” it said. Digitisation will help MFIs to cut operational cost, transit risk as well as connect rural mass to digital banking. India’s micro-finance industry grew by about 18 per cent in year ended March 2017 to over Rs 46,000 crore, excluding small finance banks that moved from being MFIs to SFBs, as per the report.
On the challenges faced by the industry during last fiscal, the report said demonetisation was a reality check for MFIs to mange organisational stress as businesses of their clients were disrupted in near term after demonetisation. “MFIs which have significant exposure in Maharashtra, Madhya Pradesh, Uttar Pradesh, Uttarakhand and Karnataka continue to experience problems in their loan portfolios,” as per the report.
In 2015-16, six MFIs–Equitas, Ujjivan, ESAF, Suryoday, Utkarsh and Janlakshmi, graduated to small finance banks. On the geographical mix, MFIs operates in 29 states, 4 union territories and 563 districts in India. In all 21 MFIs with a large outreach operates in more than five states, of which 4 leading operate in more than 15 states. Of this, 34 per cent (57) are in two to five states, while 54 per cent (90 MFIs) have confined their operations only to one state. Supported by NABARD, the report is an annual feature of The Association of Community Development Finance Institutions commonly referred as ‘Sa-Dhan’.