Evolution of Chhimek Laghubitta Digital Points to BranchesApril 9, 2020
Many rural areas of Nepal have Microfinance Institutions (MFIs) branches serving the local population, however, still, there are scattered pockets of settlements without access to formal financial services in many remote areas. To address this issue, Chhimek Laghubitta Bittiya Sanstha started exploring a new approach to expand the reach of their financial services. Establishing a brick and mortar branch wasn’t feasible in such locations as the potential number of clients, and expected business volume was not adequate for a branch’s profitability.
This led to the first women-led technology campaign in the microfinance industry of Nepal. Launched under the partnership between UKaid Sakchyam Access to Finance programme and Chimmek the project’s titled Digital Mahila: Digital Women Channel Partners for Gender Inclusive Microfinance Services. “Most of the MFIs didn’t have a presence in the far-flung locations of rural areas, which should have been the primary focus of such institutions and people of those areas had no option but to avail financial services from informal sources. Chhimek’s partnership with Sakchyam gave us the opportunity and confidence to expand our presence in those untouched locations through Digital Mahila,” said Cholaraj Sharma, CEO of Chhimek.
The Growth Agents
Digital Mahilas of Chimmek started providing financial services to a sizable number of clients not served by the existing branches of the MFI. They work in a small office set up provided by Chimmek called Digital Points. “The door-to-door services being provided by Digital Mahilas have helped our business grow. Customers, who otherwise would not have been within our reach have been able to avail our services,” added Mesh Bahadur Basnet, Project Manager, Chhimek.
Chhimek invested a significant amount of resources in training and coaching their selected clients to take on the role of Digital Mahilas and be capable of effectively serving the clients. Financial Literacy activities and awareness campaigns were conducted to help Digital Mahilas onboard new clients. The various interventions and approaches helped in the gradual increase of the client base of the Digital Mahilas. And this naturally led to the rise in the loan portfolio of a Digital Point.
Conversion to Branches
Gradually, Digital Mahilas required more resources to maintain the quality of the portfolio and serve the growing client base. Based on the portfolio size, Chhimek started assigning dedicated staff to help Digital Mahilas monitor the portfolio quality and provide other necessary support.
“The substantial growth in the client portfolio and business activities in certain areas being served by Digital Points indicated the potential for the operation of a full-fledged branch. Through Digital Mahilas we got the opportunity to test the market scenario and their performance gave us the confidence that we can operate profitable branches in those remote locations. So, our management team decided to convert such digital points to branches,” informed Basnet.
Chhimek carried out the process of establishing a branch in locations served by digital points in different ways. In 2074/75 three digital points in Banke – Belbhar, Khajurakhurd and Bageswori — were merged into Bageswori Branch. After two years, 2076/77, the Aathbis Dandagaun Digital Point in Rukum was converted to Naglad branch while three digital points in Dang — Panchakule, Purandhara and Baghmare – were merged to form a Panchakule branch. Factors such as the number of clients, the proximity of Digital Points to the nearest branch are taken into consideration before deciding the branch establishment model.
Status of the Digital Points in terms of savings amount and loan outstanding against the industry average is presented in Figure 1.
“Digital points acted as a barometer for us to gauge the efficacy of establishing a branch in the periphery/geographic location. In a way, it helps us get a sense of the volume of financial products and services the target market requires and consequently help set our business plan,” Basnet added.
While the working modality of a branch and a digital point is similar, the difference lies in the loan disbursement and cash holding provision. Before the conversion/merger of digital points, a Digital Mahila working from a Digital Point could disburse loans of up to NPR 50,000 at centre meetings. However, a Digital Mahila working through a branch can disburse up to NPR 5,000 at a centre meeting; loans of a higher value are disbursed through the branches. Talking about the effect of this change on the client Neema Oli, Digital Mahila at Panchakule branch said, “Now we have to follow the modality of a branch and most clients have been informed about this change. They often request that we follow the older loan limit, but we counsel them. Now that there is a branch nearby, they don’t have to travel far for their big-ticket loan requirement and other additional services.” As for the Digital Mahilas, Oli added, “At the end of every month we had to travel to our monitoring branch for updates and staff meeting, with this branch we don’t have to do that anymore.”
While Digital Mahilas provided basic financial services, the clients of these areas had to travel a long distance for many services provided by branches, but now they can get most of those services from these newly created branches nearby. The clients served by Panchakule, Purandhara and Baghmare digital points no longer have to travel to Tulsipur branch which is almost 20 km away to process a high-ticket loan, as there is the new Panchakule branch. For many clients now their first point of contact is a branch and not a digital point and thus they can easily avail additional services such as remittance.
Buddhi Ram Chaudhary, who joined Chhimek 10 years ago as a Trainee Assistant is now Branch Manager of the newly formed Panchakule Branch, he had served the same role at Tamghas Branch as well. “I have experienced working at a regular branch, and one converted from a digital point. It is easier to work in a branch upgraded from a digital point than a newly established one. The former already has a good client base as 60-80% business target is already covered by Digital Mahilas. Now as a branch manager I am here to maintain the quality and goodwill of our organization so that our clients can get more and quality services”.
As of mid-January 2020, a total 81 Digital Mahilas are working at 66 Digital Points serving 27,481 beneficiaries in the various regions of the country. The outstanding loan of clients of Digital Points is around 4% of the total loan portfolio of Chhimek. The efficiency of Digital Mahilas have significantly improved over the years; in April 2018, a Digital Mahila used to serve 185 clients, while today the number has grown to 340 clients.
Chhimek plans to continue operating through Digital Points in the far-flung areas but will look at converting points to branches where it is feasible. Based on the experience of Digital Mahila initiative in the last three years, Chhimek sees the concept of Digital Mahila working for a long time in the hilly regions with difficult topography and sparse settlement. While they see the possibility of more points upgrading to branches in Terai Region. “We will continue to serve the clients of remote parts through Digital Mahilas and will explore additional areas where we can establish more Digital Points. Digital Mahila program has been effective in increasing financial access to women across Nepal, while it has also empowered our members,” Sharma reiterated.
Text by Omkar Pandey and Priya Tamang