 "loans, debt")
Amid increasing delinquencies in micro loans, lenders are tapping online debt collection platforms to boost recoveries.
These platforms offer services like call reminders, Whatsapp and SMS notifications to customers and also analytical solutions for field staff engaged in collections.
“As the delinquencies in the microfinance institution (MFI) sector have increased in the last few months, MFIs are increasingly seeking collection solutions that cater to last-mile recovery through digital, calling, and field channels. Given the nature of their portfolios, most MFIs now prefer automated and analytics-driven solutions that allow them to execute their own collection strategies effectively,” said Devarsh Mapuskar, business head, Spocto X, a Yubi Group Company.
Spocto X is an end-to-end debt collection platform focused on digitising the entire collections process.
These platforms provide payment reminders and use Whatsapp and SMS as two-way communication, strengthening engagement with the borrowers. They ensure real-time performance tracking for ethical collections.
For micro loans, regulated entities like banks, small finance banks, and non-banking financial companies (NBFCs) employ business correspondents (BCs) and field agents for some part of their operations. These include disbursement and collection of loans.
Now, these entities have turned towards digital platforms to do the follow-ups and provide additional support to their field agent staff during recovery. Banks and NBFCs also look for field collection mobile apps and artificial intelligence (AI)-based segmentation with risk scoring.
Stress in the microfinance sector doubled during April-September of FY25, with the share of stressed assets in the 31-180 days past due (DPD) category rising from 2.15 per cent in March 2024 to 4.3 per cent in September 2024, Reserve Bank of India data showed.
According to rating agency ICRA, collection efficiency for personal loans reduced from 95 per cent in June 2023 to 93 per cent in December 2023. This is on higher festive spending by customers and relatively low priority of personal loan repayment.
"In the last 6 months, we have understood that there is a huge requirement on the MFI side. Loans have been given to borrowers in different ways and forms by MFIs. This requires a lot of calculations and reconciliations as well as visiting the borrower's houses which are spread across a region," said Anand Agrawal, Co founder and CPTO, Credgenics.
What these online collection platforms do is that they integrate the loan management systems with their platforms so that borrower data flows into their system, and the debt amounts get reconciled based on the pin codes on a daily basis.
“So, the process becomes faster, more efficient and there are no frauds that can take place. The amount which is collected is verified by OTPs which need to be provided by the borrower. Details of the amount collected will be visible for the borrower on a single platform,” Agrawal added.
Although there has been an increase in demand for these online debt collection platforms, the recovery in microfinance lending is still more dependent on physical engagement. This is because customers are more likely to change their mobile numbers faster, microfinance players said.
“Although MFIs may be tapping online debt collection platforms for recovery, our sense is that our business model, being a high touch one, physical engagement, motivation and follow-ups are more effective. While even for our regular clients, only 50 per cent mobile numbers are updated because numbers change very fast. Issues with intent cannot be solved by any online approach,” a spokesperson from a microfinance company said.
Going online
>They also offer analytical solutions for field staff engaged in collections
>Banks, NBFCs look for field collection mobile apps and AI-based segmentation with risk scoring
>Stress in microfinance sector doubled between Apr and Sep to 4.30%
>Debt collection platforms send reminder calls, Whatsapp and SMS notifications to customers
