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Weathering the Storm : Ujjivan Best Practices

Change and to reposition Ujjivan for the future

Index

Formative Years

Industry Crisis & Our approach

Industry Crisis : Gaps in People Management

Ujjivan’s response during crisis

Post crisis : The Need for Change

Guidelines for Change Leaders

Change Management Programs Post Crisis

Conclusion

Lessons

Formative Years: 2005-2010

Mission: financial inclusion of the urban & semi-urban poor

Started our operations with 18 month pilot - November 2005 in Bangalore

Our mantra - rapid expansion and break-even by the 4th year of operations

Break-even in 2009-10, wiped-out start-up losses, dividends & bonus for employees

Key Metrics

2005-2006

2006-2007 2007-2008 2008-2009 2009-2010

CAGR

(5 months) 2005-2010

Loan (Rs. Crores) 0.2 8.4 36.5 169 370 555.83%

Customers 1,110 22,220 68,033 295,903 620,624 386.27%

Branches 3 13 37 127 230 195.90%

States 1 1 4 11 13 89.88%

PBT (Rs. Crores) -0.5 -1.4 -2.9 -0.8 11.9 NA

PAT (Rs. Crores) -0.6 -1.5 -3 -0.7 9.6 NA

Story of Robust growth

Industry Crisis & Our approach

Uninterrupted growth - first half & ability to raise funds in second maintain portfolio book size

Collateral damage in credit portfolio and pro-active credit management

Prudent Strategies that helped us emerge from the crisis unscathed:

Exclusion of AP & other vulnerable areas

Effective Business & HR practices helped during & after Crisis

Impressive financial & business performance in 2010-11

Key Metrics 2009-10 2010-11 CAGR

Loan O/S (Rs. Crores) 370.1 625.1 69%

Customers 620,624 991,584 60%

Branches 230 351 53%

States 13 20 54%

PBT (Rs. Crores) 11.9 17.7 49%

PAT (Rs.Crores) 9.6 11.4 19%

Industry Crisis : Gaps in People Management Poor Staff & Customer Connect

Nil or Poor communication in a by a hostile media reports on crisis, led to high degree insecurity among staff & customers

MFI had lost customer connect. Seen as a ‘low cost money lender’. Led to customers not standing by the MFIs in face political & administrative onslaught.

Job Insecurity

Loan disbursements and recovery ground to a halt : paralysis of basic business

Delayed salary payment & stopped incentive : led to frauds

Rumors

Mismanaged staff & competition spread rumors of closure non home stated based MFIs, death of promoters & led to staff default

No communication on assessment of crisis & direction from own company led staff to believe rumors building a vicious cycle.

Ujjivan’s response during crisis

• Loan Disbursements to existing customers

• Social Development Program

• Prudent Cash Management

• ESOP at all levels based on performance

• Awards for Service Quality Champions

• Communication at all levels : staff meetings

• FAQ for Employees & Customers

• Salaries: On time

• Benefits : Staff Loans & Advances as usual

• Performance Bonus Payments

Salaries & Benefits – as usual

Higher Employee Connect

Mission intact

Other Initiatives

Post Crisis Analysis: The Need for Change

Aggressive & uncontrolled growth brought crisis – “Prince to Frog”.

Overextension of credit led to coercive collection - the key factors of crisis

Ill-conceived Andhra Ordinance brought entire MFI sector to door of collapse

Drying up of bank funding

Post the crisis and dramatically changed regulatory & business environment. Led to need to make fundamental changes in business operations remaining true to our mission of providing financial services to the poor.

This & next financial year we will undertake number of major changes in the way conduct business.

The leadership teams both regional & national have the important tasks of leading the changes. It will be a important challenge & experience for each of us to develop as change leaders.

Guidelines for Change Leaders

Meticulous planning & execution taking the feedback from all parties involved: staff & customers.

Establishing a team with clearly defined responsibilities with time lines. Team work under a leader has to work like a well oiled machine.

Buy-in and involvement of key players - staff & customers. Communication & interaction clearly discussing why we are undertaking the project, what is the benefit to the customer, Ujjivan & staff are extremely important.

Selecting the timing of executing the change is very important this includes being completely ready: right staffing, training, infra-structure and the need to execute the project as a part of the overall strategy/plan of Ujjivan.

Those executing the project must have clear understanding of the constraints & regulations within which we operate.

HR Change Management Actions - post crisis

Equipping Staff through Training

Domain refresher programs for Field Staff /Managers on changes in products & process

Exclusive Productivity Workshops at branch level

Right Staffing:

A 3 months Performance Improvement Plan to weed-out poor performers

No retrenchment /Allow natural attrition

Managing Branch Mergers:

Lead by Chief Operating Officers; HR Manager pre & post visit

Fortnightly Review by respective functions (HR, Admin, Distribution,…)

Clarity on Roles & Responsibilities of new branch set-up

Change Management Programs - Post -Crisis

Increased Operations Efficiency

New core banking technology & DMS Project;

Customer Retention – Monthly Meetings & ‘Mera Loan’

Field staff increased efficiency programs to double customer handling

New Product Lines post Malegam Committee recommendation

Quality Control of Operations

Diversifying Source of Funds from banks

Increased Social Development Programs

Introducing Credit Bureau checks for credit approval

Financial Literacy Programs to Customers to manage their debt

Sankalp – covered over 70% of customers in 3 months

Diksha – led by service quality

Conclusion

PAST: Our strategy to focus on urban & semi-urban poor and grow nationally has built a solid base

LAST YEAR: Coming out of the crisis stronger and acknowledged as one of the best MFIs is a testimony to our past track record, professional management and good governance

PRESENT: These two years are going to be periods of change & steady growth.

FUTURE: We expect to grow at a steady pace in 25-30% range, which will position us ideally in the future for a conversion to a bank for financial inclusion.

Lessons Do not be complacent look at both direct & collateral damage

Honest Communication: evaluation of problem, how it impacts us & plan of action

Be pro-active and pre-empt any damage

Honest evaluation of all that went wrong and corrective action to be taken.

Buy in of all employees & customers of changes being made key to successful execution

Keep the faith : do not dilute the original mission.