CASE STUDIES – A COLLECTION OF SOME OF OUR MOST CHALLENGING PROJECTS.

MICROFINANCE MARKET ENTRY FOR A FINANCIAL SERVICES CONGLOMERATE (FSC)

THE CHALLENGE

Microfinance lending in India has been proven as one of the strategies to cater to the financial needs of the lower mass market. With a sizable population in the below poverty line segment in the country, this is a market a lot of financial services players including Banks, Development Finance Institutions and Mutual Funds have been trying to cater to. FSC wanted to enter the microfinance market and build a value proposition around the lending product for the low income clientele

THE POSITRON APPROACH

The Positron team worked with the client for two months to initiate the project team to microfinance, lending models and intermediaries functional in the space. Subsequently, Positron created a wholesale and retail strategy for the client that approached the market in a phased manner.

Initial Phase
Understanding the market and clientele. This stage saw the client visiting microfinance institutions, groups and borrowers across the country.

Whole sale lending phase
FSC entered microfinance market by lending to Microfinance Institutions (MFIs). Positron helped the client formulate the wholesale lending policy (lending limits and credit risk metrics). The policy also spelled out lending eligibility parameters, terms of lending and monitoring process. Positron also worked with the client to identify appropriate MFIs and initiate the due diligence process. Positron assisted the client and MFIs to come to mutually acceptable terms in relation to the Credit Facility.

Retail lending phase
Positron helped FSC to understand the retail business model in microfinance and explore the possibility to acquire an MFI to take the long term agenda forward. This phase comprised of defining retail business proposition, geography of operations, suitability of investees and alignment with larger strategic goals of FSC.

RESULTS

Positron has helped FSC build ~ Rs 200 CR lending book in wholesale microfinance. Positron enabled the client to become an effective part of the microfinance ecosystem to enable creation of long term relationships with multiple stakeholders.

BUSINESS STRATEGY FOR FINANCIAL INCLUSION PLAYER (FSC)

THE CHALLENGE

The client is one of the first and few financial literacy players in India. It enjoys a good reputation among financial services players and leverages its understanding of the bottom of the pyramid to create & deliver innovative financial inclusion enabling programs. The Indian financial markets are seeing a change with the central bank becoming more focussed on financial inclusion as well as with non banking players making some modes of entry into the financial space.

Given the need to be relevant and build scale, the client set upon a process of drafting the organizational strategy for the next three years. But not only was it important to define the future course of action, but the client also needed someone to assess the organization’s capability and capacity to deliver this new business strategy. On the basis of these inputs, the client also wants an operating strategy to be able to transition into the new business model as well as assistance in implementing the same.

THE POSITRON APPROACH

The Positron team worked with the client team for 3 months on all aspects including business model, operating strategy and organizational assessment.

• The Positron team first defined the target customer segments and understood the underlying business model changes for these client segments. Positron conducted a customer wise analysis on multiple metrics – relevance of end customer segment need, revenue model & hence investments that can be made on financial inclusion enabling, role of sales & distribution & channel enabling need for financial inclusion.
• Positron then studied the financial inclusion industry status as found from a regulator’s perspective as well as some external surveys. This was used to identify the next potential financial product that will take off from a manufacturer’s point of view as well as interact with the current financial services infrastructure to see how ready they are to provide support in these new products to both the end customer as well as the channel.
• Positron then evaluated the current offerings from an end consumer point of view as well as the participating client segment point of view. This analysis allowed us to assess the gaps in the offerings in today’s context as well as point out the work to be done for the future business model.
• Next the Positron team created the revenue model – based on today’s offerings and simulations for the future business model. This iterative model allowed the client to assess what should be the cost of the offerings and also do a productivity planning for the key resources.
• Positron then conducted a workshop with all the stakeholders to create a buy-in to the new business model from internal stakeholders, discuss the organizational assessment findings and to evolve the operating plan. One of the key requirements of the operating plan was a new organization structure and identification of new roles / jobs.
• Positron then helped create value propositions for the client segments and established contact with at least two players in each segment to get firsthand acceptance of the value proposition as well as validate some of the revenue assumptions. Positron also worked with the client team to define some of the products that will fit the client segments.
• Finally, the Positron team also worked with the client team to present the business model to the investors, build consensus approval for the next steps as well as help define the implementation plan.

RESULTS

Positron assisted the client to launch the new business model by looking at the external environment rather than the organization’s own capabilities. Positron helped the client in recruiting key resources, pitch for resources for new model and develop new client segment relationships. Some of the key deliverables that Positron achieved are as follows:

• New client segment
• Improved revenue model
• New organization structure
• CEO recruitment

LEARNING AND DEVELOPMENT SERVICES FOR A LARGE SAUDI ARABIAN BANK

THE CHALLENGE

The Bank has a distinct offering for women customers through over 80 women only branches that is staffed with women managers as well as service staff. Most of the customers typically visit the branch for routine banking transactions. Therefore the focus of the branch staff is also towards service.

Most of the customers do have access to savings that could be invested in evolved financial products but that needs a change of focus of the branch service staff from pure service to cross-sales and service.

THE POSITRON APPROACH

Positron worked with the Bank for 3 months on all aspects including understanding customer satisfaction scores, key problems faced by customers, branch managerial feedback on training needs and finally designing and conducting a two day training workshop. The steps that were taken as follows:

• Positron first undertook a detailed understanding of the customer segment being tapped by the women’s bank and the client characteristics that needs to be kept in mind while servicing them.
• Positron first defined the training needs of the branch employees through a mix of
  • Customer satisfaction survey findings & customer complaints
  • Branch-wise mystery shopping
  • Branch visits and interactions with managerial staff as well as key clients
  • Interviews with overall liabilities business head to understand the cross sales focus as well as product fit with client wallet profile
  • Sales strategy and process followed today so that the new process can be defined in the training program
• Positron then combined these inputs to define the training content & coverage and designed that into a 3-day workshop post the client’s approval.
• The training content has these key elements
  • Self assessment and setting of learning goals
  • Teach sessions on concepts
  • Role plays on key concepts and debrief discussions
  • Group games led application exercise
  • Case study
• The training was conducted among English speaking staff and branch managers.

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RESULTS

Positron assisted the client in creation of sales through service mindset among the women’s banking staff that enables the

• The staff to have the right attitude towards service and understand the cycle of service
• The staff to understand client needs and what’s the response to be applied to meeting them
• The branch managers to understand their own management style through a tool and help them identify specific areas for a change
• Staff to create new prospects through networking and seeking customer referral
• Staff to present the bank’s offerings & solutions

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MICROFINANCE INVESTMENT HYPOTHESIS AND DEAL SCOUTING FOR A PRIVATE EQUITY FIRM (PE FIRM)

THE CHALLENGE

Microfinance Institutions (MFIs) have been a preferred vehicle for investments by Private Equity firms in the growth story in the lower mass market of the population. A significant number of investments had happened during the period 2003-2006 in the sector and the early stage investors had made large returns on their part exits from the sector. PE Firm had studied the sector from a deal perspective and wanted to understand if the potential upside remained and whether it was still a good time to invest in the sector.

THE POSITRON APPROACH

The Positron team works with the client for two months to initiate the project team to microfinance, lending models and intermediaries functional in the space. Key questions answered during this period:

• Methodology of operations, distinction in operating models and working of peer groups.
• Understanding the financial model, cash flows and key levers of profitability of MFIs
• Understanding stakeholders: One of the key components of the MF business is the funding stakeholders (Banks, FI, Donor agencies). This part focussed on the roles and projections of each stakeholder and also looked at the impact of financial crisis.
• Understanding priority sector obligations of Banks and impact on MFIs.
• Understanding the support infrastructure: The support infrastructure consists of issues that are linked to the core microfinance delivery – information technology deployed, financial literacy of end customers, market making for this asset by formal sector financial institutions and action research for development.
• Understanding microfinance ratings – scales adopted by various agencies and focus on parameters relevant for an investment.

Subsequently, Positron created an investment hypothesis based on:

• Investment landscape in the sector – players in the market, existing valuations and ability to scale up.
• Regulatory perspective – ability of PE Firm to invest in NBFC MFIs, capital requirements as per Reserve Bank of India norms
• State level regulations, macro indicators of performance and client level indicators available
• Value proposition to PE Firm: investment horizon, ticket size and stake available with promoter.

RESULTS

Positron has helped PE Firm understand the sector and invest in two MFIs.

CUSTOMER RETENTION AND INCREASING DEPTH OF RELATIONSHIP WITH EXISTING CUSTOMERS FOR A RETAIL LOANS NON-BANKING FINANCIAL COMPANY (RETAIL NBFC)

THE CHALLENGE

Retail asset backed lending is carried out based on the income of the borrower and loan to asset value (LTV). The product is distinct for Car Loans, Commercial Vehicle and Construction Equipment finance. Retail NBFC was no different in its approach though geographically it has larger concentration in Eastern and Central India. It operates mostly in non-metro cities and towns as well as peri-urban locations with a hub and spoke model of servicing. The different verticals of business – Car loans, Commercial Vehicles, Construction Equipment and tractor loans have distinct staff at each location mostly sourcing borrowers through tie ups with new vehicle dealers. The borrower profile is people with business income and no clear proof of income – truck owners, small fleet operators and traders.

Retail NBFC had grown it business significantly during FY 2004 and FY2005. Most of the advances made during that time were for purchase of new trucks and vehicles for trade with tenure of 5 years. In 2010, Retail NBFC had a large number of clients who were completing their loans and relationship was expected to close.

THE POSITRON APPROACH

Positron worked with Retail NBFC for a three-month project during the start of the financial year. The activities undertaken are as follows:

• Positron analysed database of clients with loans maturing during the financial year and categorized them based on location, repayment behavior and quantum of loan being serviced currently.
• Positron then visited select regular repayment clients in three type of branches – feeder spoke branch, small town origination branch and Tier III City branch (co located with dealerships). Client insights on process, pricing, collection practice and competitor offerings were mapped and analysed.
• Positron met field staff and credit offcers to asses areas of high Turn Around Time (TAT) and regular problems/ bottle necks in the existing sales/ credit process.
• Positron created offerings for this set of clients in three areas –
  • Smaller value loans to existing regular customers – for example car loans to commercial vehicle clients
  • Loan against existing value of collateral at higher pricing and valuation of vehicle
  • Loans for purchase of new vehicles to customers whole loans were expiring at lower interest rates
• Positron also created an outbound calling set up in association with the client to contact specific customers who can be targeted with the above offerings. The call center set up process required Positron to define customer selection parameters, enable changes in the core banking software to give view access to the call center desks, recruit staff members for calling and managing the call center. Positron also did the induction training of the call center employees on product and soft skills.
• In order to assess the effectiveness of the call center, Positron designed an Assessment plan that could be tracked by various product verticals
  • Product parameters mentioned by the call center in the sales request form would be analysed against the visit report generated by the sales team
  • Call center productivity mapped on the basis of contacts/ calls made during a month as well as conversion of leads assigned to final loan disbursements.
• Positron redesigned the sales process for the existing client offerings with lower KYC requirements, better TAT of closure and lower rate of interest for good repayment track record.
• In order to create acceptance of the call center originated process amongst sales fulfilment teams, Positron created an incentive program for closure of loan requests from the call center contact lists. This also reduced the loss of leads generated.

RESULTS

Positron assisted the client in deriving value from a customer who has a proven track record and significantly lower cost of acquisition. The project resulted in:

• The clients borrowing again also had a better service from the Retail NBFC due to lower requirement of documents for KYC etc.
• Launch of 3 higher profitability products and process definition for the new products
• Launch of a 7 seat call center for origination of leads
• Portfolio growth of over 100% in one year in the new product lines.

DEBT RAISING FOR A FINANCE SERVICES ENTITY LENDING TO AFFORDABLE PRIVATE SCHOOL

THE CHALLENGE

The client is one of the first lending organizations that lends to Proprietors and owners of Affordable Private Schools (APS).

APS is a segment which caters to children of low income households. Traditionally these schools have enrolments from a specific catchment (mostly based in urban slums and semi urban locations) and cater to the primary schooling requirements. These schools are capital starved due to the low amount of fees and lack the ability to build suitable infrastructure and teaching ability. Positron client steps in filling this gap by extending loans for various small and medium term projects like setting up labs, computers, adding classrooms etc.

THE POSITRON APPROACH

The Positron team works with the client through the financial year in this mandate. At the start of the financial year, the target based on the number of loans to be made and disbursement cycle is divided into a quarterly requirement. Positron Team undertakes the following activities:

• Selecting, approaching and successfully introducing lenders.
• Present case to prospective lenders, meet lenders on behalf of the client. Since lending to APS is a relatively new concept – this includes discussing the market scope, entity background and target segment to the Banks and Financial Institutions
• Assist the client and lending institutions to come to mutually acceptable terms in relation to the Credit Facility
• Render and perform such other services and activities as may be required to carry out the transaction – would include discussions on term sheets, negotiation on rates and collateral
• Assisting the client with the documentation in respective Credit Facility.

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RESULTS

Positron assisted the client in raising debt required as per their business plans for the first year of operations. Now Positron continues to assist the client achieve debt raising targets on a quarterly basis.

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CREDIT PORTFOLIO AUDIT & CREDIT POLICY DESIGN FOR A WHOLESALE LENDING ORGANIZATION

THE CHALLENGE

The client is one of the first and largest wholesale lending organizations that lends to underlying financial institutions for lending programs for income generating poor women.

Any organization that lends to the poor usually does not get easy access to capital from the financial sector. Hence this wholesale financial institution was formed with the intent of supporting grass roots organizations that lend to the poor women who are doing small home based businesses for income generation. Over the years, the regulator’s focus on priority sector lending has encouraged banks to lend to these organizations directly but they would do so for large established players or those who have already demonstrated scale. So over the years, the client focussed on start ups and nurturing organizations to scale. Given this dual focus of financial and developmental agenda, there may have been lapses in the credit policy and process and now the client wishes to redefine the credit policy as well as identify cases that don’t meet the credit norms and relationships needs to be phased out.

THE POSITRON APPROACH

The Positron team worked with the client team for 4 months on all aspects including policy, process and product.

• The Positron team first defined the financial metrics on which each borrower would be rated on. This process quickly classified the borrowers into three segments – good credit profiles, fence sitters and negative credit profiles.
• After segmenting the borrowers, fence sitters and negative profiles were identified for which the detailed application and appraisal documents were audited. For the good credit profiles, the process and exposure limits were checked.
• Next the Positron team sat with the relationship managers for all the fence sitters and negative cases to under stand additional metrics of evaluation if applicable else evolve a process of phasing out.
• Based on the above findings and process a detailed credit policy was designed defining both the credit norms as well as the process to be followed in a) first time visit b) regular data monitoring and c) appraisals for subsequent loans or for monitoring
• The new credit policy was discussed with the credit team and finally along with some modifications was placed to the Credit Committee for approval. This then became the new credit policy of the organization.
• To wrap up the project the Positron team also identified the people needs – both in terms of recruitment as well as the training needs of the credit staff

RESULTS

Positron assisted the lender to improve its credit department’s quality so as to prepare for a period of rapid growth that was expected to be launched in the next 6 months. Some of the key deliverables that Positron achieved are as follows:

• Arrive at a credit portfolio with acceptable credit profiles. Identify potential delinquent cases and save write offs.
• Define a new credit policy designed for scale as well as financial robustness
• Define credit products targetted at segments
• Define credit process that will make an optimum use of existing people profile while creating a financial healthy loan book.

CUSTOMER ENGAGEMENT SOLUTION FOR A TRADE ASSOCIATION OF A FINANCIAL SERVICES PRODUCT

THE CHALLENGE

The Indian Consumer is still very intimidated with innovative financial products especially those which are linked to stock market hence their engagement levels are very low. Hence despite being tempted by the high returns offered by some of these financial service products, most consumers don’t invest in these products or invest for the wrong reason. The players and the regulator realise that one of the key influencers to this investment process is communication tools or investing documents that can improve the engagement process of the investor dramatically. Some of these documents are mandatory and some being optional in nature. This was a unique initiative where the regulator also collaborated on the project. The basic problem was that all these communication tools use language and adopt a format that acts as a barrier to the retail investor.

A lot of the information being shared in these documents today is from an investor protection point of view, however the current knowledge level of the investor makes it diffcult for him to derive any benefits from it. One of the key challenges then is to design the communication tools to reflect investor protection but also investor awareness and education needs in the investment process.

THE POSITRON APPROACH

Positron adopted a phased approach to this project where the outcome was to be new document templates:

• Positron first defined the consumer’s investing journey for this basket of financial services and mapped the stakeholders who were relevant in terms of both influence as well as action and identified the key triggers that can impact the engagement process of the consumer.
• Positron then designed a market research survey comprising of a qualitative phase and a quantitative phase. Positron assisted the client in defining the brief, evaluating the multiple proposals and finally supervising the research process. Positron had to interview some of the eminent / influential stakeholders to get a direct feedback.
• Positron then examined the current documents and identified the changes based on the insights from research. In conjunction with the client team, Positron designed the new document templates.
• Positron in conjunction with the client team sponsor made a representation to the Regulator on the changes that were sought to be made in the investing documents for this industry.

RESULTS

Positron assisted the client in an indepth evaluation of the existing investing documents, an understanding of the consumer perspective and finally redesign of the new document templates.

Some of the key deliverables from this initiative were:

• Consumer Insight regarding the engagement process of the consumer with the category
• Consumer insight regarding the distributor’s role and its impact on the quality of engagement
• Feedback from various stakeholders such as distributors, trustees etc on information documents
• Evaluation of existing investment documents
• New document templates with an improved engaging quality

LEARNING DEVELOPMENT SERVICES FOR A LARGE MUTUAL FUND HOUSE

THE CHALLENGE

The mutual fund industry typically suffers from a third party service problem – as in most of the service delivery is through a third party like an R&T agent. This makes the MF company’s service staff less confident about the service delivery and usually they end up with a haphazard approach. Also given that the company provides services through a national footprint, there are uneven service deliveries across locations due to inconsistent people quality as also changing customer expectations.

However mutual fund is a continuous relationship product. A customer is typically a customer for life. So in order to make the customer make repeat purchase, each service encounter has to be a faultless one. One of the key challenges then is to train the service staff to provide service in a confident and effective manner. Positron was asked to inculcate a feeling of confidence in service delivery among front line service staff and contact centre with over 15 cities outreach.

THE POSITRON APPROACH

Positron is working with the company for the last 6 months on this Learning intervention for improved service delivery. The steps that Positron adopted were as follows:

• Positron first defined the overall learning intervention framework for service delivery keeping in mind a broad spectrum of needs from a typical financial services consumer across multiple touch points.
• Positron then audited multiple touch points and customer encounters to arrive at the service delivery gaps which acted as the inputs for finalizing the training intervention.
• The learning intervention was conducted for 40 service staff in a two day workshop that comprised of teach sessions, video clippings, role plays, case studies, games and other application exercises.
• In order to assess the effectiveness of this intervention, Positron designed an Assessment plan that comprises of two elements:
  • Positron designed an Assessment form that was to be filled in by the Supervisors of the service staff. Supervisors were debriefed on the assessment plan and over a month’s time period, the assessment results were collected and analyzed.
  • Positron designed a Service case study which was administered to all the service staff who undertook the intervention. Their approach to the case study was analyzed to assess the learning effectiveness of the training.
  • Positron also met a sample of the staff to conduct assessment of the staff’s pre-program and post – program attitude and behaviour.

RESULTS

Positron assisted the client in creation of a truly customer aligned service organization. Some of the key deliverables achieved from this initiative (as assessed by the Client) were:

• Increased self confidence among the service staff
• Improvement of communication effectiveness of the service staff
• Improved turnaround times for complaints or client queries
• Structured approach towards service delivery