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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.