Reaching the underserved

In India, a loan officer crosses town to approve credit for a young man who needs a two-wheeler for transit to work. Another heads to a village to open a group micro-loan scheme to help women set up new businesses, while in India’s “grain bowl” district, a farmer secures a loan for a new tractor at a local dealership.

Variations of these “anytime, anywhere banking” scenarios are taking place across India and are an essential part of economic recovery in one of the world’s most populous nations, where gross domestic product per head is just US$2,000 a year.

Using Google technology, Mumbai-based L&T Financial Services has been able to fast-track credit approvals, unchaining loan officers from their desks so they can broaden their client base through hybrid work and provide much-needed loans to farmers, or micro-loans to rural women entrepreneurs.

For the agricultural sector, which employs some 60% of India’s population and accounts for almost 20% of the country’s economic output, this is a game changer for financial inclusion. India’s underserved rural markets have long suffered from gaping credit gaps, although access to organised finance is gaining substantial ground.

“Access to formal credit is crucial to stimulate growth in rural communities,” says Dinanath Dubhashi, managing director and CEO at L&T Finance Holdings.

Indeed, 86% of India’s 100m farmers tend to just two hectares (five acres) of land, or less, and their small scale means that they are often overlooked. They want to modernise, but face bigger hurdles than commercial farmers to get loans, and so struggle to survive. The matter is so pressing that India’s prime minister, Narendra Modi, has committed to doubling farmers’ income.

L&T spotted an opportunity to serve the underserved.

“Our role as a lender is to provide access to funds and democratise credit,” says Mr Dubhashi. “Digitisation is helping underserved communities access organised credit for improving livelihoods, rather than having them depend on the unorganised sector.”

Advanced data analysis captured digital opportunities by going beyond credit scores to predict a potential client’s ability to pay off a loan. For agricultural loans, for example, L&T is looking at feeding long-term farm data into Google Cloud’s BigQuery data warehouse. Algorithm-based analytics use rainfall and crop yield in a loan assessment. Suddenly, someone with good credit history, dismissed by other lenders because of their small tract size, becomes quite promising for a loan.

Once loan officers have pre-screened applicants, they spend a day meeting several on site. Farmers remain present on their land to carry out essential tasks and the mobile lenders can review several using a Google Cloud-based app that even works offline in areas with poor connectivity. Loans can be approved in less than a minute in rural areas and disbursed within 24 to 48 hours.

In the three years since adopting this in-the-field loan approval technology, customer acquisition has jumped by 35-40%.

This transfer of money into the hands of farmers and to India’s army of rural women entrepreneurs – whether for a papad business, a sewing machine for at-home tailoring services or a new dairy farm – is helping underserved communities become part of the mainstream through technology, enabling incomes and living standards to rise in more corners of the country.