Hello everyone!

Welcome to the 85th edition of The Pattern, a weekly newsletter where we dissect and delve into the latest rumblings from finance, technology, and the economy. Let’s jump right in!

Microfinance has been dominating the news cycle this week. According to a report by credit bureau CRIF, the sector’s outstanding portfolio reached Rs 3,55,300 crore as of June this year - a growth of over 24% from the previous year, and 5% from the previous quarter.

According to CRIF High Mark’s MD Sanjeet Dawar, this growth can be attributed to increased digitisation and regulatory support, and that the sector is poised to become a significant contributor to India’s economic growth.

He’s not the only one with this view - at a recent event, India’s G20 sherpa Amitabh Kant stated that microfinance institutions are integral to ensuring inclusive growth, adding that credit penetration into rural areas will be key to improving India’s credit-to-GDP ratio.

At this point, I want to take a step back and talk about a  piece  we wrote back in 2022 - it talked about the major challenge to MFIs realising their full potential, i.e. its high-touch delivery model and the lack of infrastructure in the rural areas it seeks to serve. 

One of the ways in which to counter this is for microfinance institutions to adopt state-of-the-art technology to improve distribution and data security. Some have been quick to lead the way - back in 2015,  a leading bank became the first in India to fully digitise its microfinance lending till the disbursement phase. It offered mobile-based solutions to its field executives for Aadhar authentication, real-time transaction monitoring, combining psychometric evaluation and credit bureau scores, and more.

While the industry has come a long way since then, with technological penetration becoming increasingly widespread, some concerns still remain - concerns that will have to be addressed in order for the sector to meet the high expectations placed on it.

Just a day ago, State Bank of India (SBI) Managing Director Alok Kumar Choudhary reinforced the importance of cybersecurity and data privacy for MFIs. He urged the sector to come up with an action plan, considering the vast volumes of customer data they have access to.

Perhaps NABARD’s move to digitise 65,000 cooperative societies and build a data warehouse is a step in the right direction. However, it remains to be seen if MFIs can live up to the hopes placed on them - or crumble under pressure.

This is all for this edition. As always, leaving you with some numbers and reads that caught my eye this week!   Between the digits:

• 30%: The percentage by which housing rent in Bengaluru has risen this year

• USD 1.5 billion: The  investment with which Adani plans to kick off the Dharavi project

• 33 lakh crores: The cash circulation in India for Oct 2023, up from 17 lakh crores in Nov 2016

• 481.1 million : The combined viewership  for OTT platforms in 2023 Reading list:

• 7 yrs after demonetisation, realty, households still run on cash

• RBI governor Das pitches linking fast payments of India, Japan

• The Evolution And Revolution Of Financial Lending In India

Thank you for reading. If you liked this edition, forward it to your friends, peers, and colleagues. You can also connect with me on Twitter  here  and follow  FinBox on LinkedIn  to never miss any updates.  

Cheers,

Mayank

All opinions expressed are my own and do not necessarily reflect the views of FinBox or its promoters.