Study on ArthImpact Happy Loans

Research Team: Anoushaka Chandrashekar, Shashank Sreedharan
LEAD Centre: Centre for Microfinance (CMF)
Focus Area: Financial Inclusion, Digital Credit
Project Geography: Maharashtra
Partner: Arthimpact
Status: Completed

Background:

ArthImpact offers small monthly loans starting from starting from INR 2000 and up to INR 1 Lakh to small and medium enterprises to smooth over cash flow difficulties during purchase of inventory or store renewal. Additionally, ArthImpact offers Happy Loans (micro credit) to micro-merchants, for as short as 30 days. The main objective of this product is to offer credit to the 6 million Indians that lack access to mainstream banking and furthermore, provide this facility at their fingertips. These loans are not only affordable but also flexible in tenure. Happy Loans also provides credit to those without a credit history – this gives the customers an opportunity to build their credit score for a better loan facility for meeting future needs.

Filling this credit gap is imperative; and it is even more important to understand experiences of the consumer, nature of use of loan funds and further requirement of capital at the consumer’s end. There is also a need to understand the evolution of the market for Happy Loans to address changing needs of the digital landscape.

Methodology:

The study undertaken involved surveys conducted across 4 cities with over 60 Happy Loans clients, including both current and past clients. The cities that were a part of the study were Bangalore, Hyderabad, Mumbai, and Pune, selected based on the volume and variety of Happy Loans clients in these cities.

The survey focussed on gathering client profile characteristics, and also included a qualitative component to assess customer experience and satisfaction along the range of steps in the loan process. Data on impact on businesses & family and financial empowerment due to Happy Loans a was collected and analysed. The inferences made in this report were derived from analysis of both the summary data on customer profiles, business profiles, loan profile and requirements, and qualitative data on loan experience, self-evaluated impact on business, and delivery.

Results: The key findings were that the loan process for obtaining Happy Loans is straightforward; the documentation requirements are easy to navigate, and the overall process is easier and faster compared to banks. Over 50% of the sample reported a loan turn-around time of 4 days or less. The repayment process, done through automatic deduction with each use of the Point-of-Sale (POS) machine, was met with largely favourable reviews, especially in the months following demonetization when there was surge in the volume of digital transactions. There were a few concerns with the repayment process in connection with the the design of the POS machine and cases where deductions continued even after repayment of the loan. Similarly, a vast majority of the sample found that the product had great value for money, with affordable interest rates and negligible application costs. There were mixed reviews on the quality of customer service and overall customer engagement, but 95% of the sample reported satisfaction with their overall loan experience.

Some of the key recommendations from the clients were: (1) repayment flexibility must be increased, with respect to loan tenure, and in terms of choice of repayment style, between EMI payments vs. automatic deduction; (2) loan sizes must increase for significant impact on the growth; (3) strengthening post-repayment processes such as the timely provision of financial statements is essential; (4) building capacity of customer service, and devising an improved customer engagement strategy are also imperative.

On the partner side, important trends observed were: benefits accrued by the partners due to their collaboration on Happy Loans by being able to service the customer base that requires micro-credit, which is often overlooked by lending institutions, but constitutes a very large segment. Furthermore, considering the rapid pace with which the digital financial ecosystem is evolving, the partners drove home the importance of leveraging technology to reap the dividends of widespread digitization and how a product like Happy Loans fits well into this ecosystem by virtue of its simple process and ability to deliver on their guarantee of low turnaround time.

Related Resources
Report: ArthImpact Happy Loans