Many sectors including the Financial Services were hit badly by the pandemic but with digitisation and risk management practices in place, companies can strengthen their ‘resilience’ to come out of unprecedented events like the pandemic, said Sanjiv Bajaj, Chairman & Managing Director, Bajaj Finance Limited at AIMA’s 50th LeaderSpeak Session.
The economy had recovered from the shadow of the pandemic and the GDP growth had bounced back. There had been major growth in every segment of the economy and consumer confidence had improved significantly. But the omicron variant of covid hit the economy again, hence the economy map had to be redrawn. Digitisation came as a revolution even in the financial services sector, as everyone opted for digitised transactions of money. The arena of financial services had to be broadened to offer lending, saving, insurance and investment products at all levels of the economic pyramid.
Digital financial inclusion should not only be a means for tracing and tracking people to sell with sufficient income and sell more to them but also for the government and for the government to collect more taxes. Formal Financial Services can help if everyone can save, borrow and invest more efficiently and thus improve the earnings and spending capacity, which is critical for sustaining a high rate of GDP (Gross Domestic Product).
One of India’s finest Financial Services entrepreneurs and thought leaders, and a pioneer in financial digitalisation, Sanjiv Bajaj rightly addressed AIMA’s 50th LeaderSpeak Session on the topic- ‘Beyond Covid-19 Pandemic: Redrawing the growth map for a digital, resilient & financially inclusive economy’.
Sanjiv Bajaj started off by saying that “we’ve seen the mother of all situations in the last year and a 1/2”. Financial Services as a business, whether it’s about lending, insurance, or asset management, it’s all about managing risks smartly. It is about managing a claim or a collection process. He said that Bajaj Finance collects about 20-25 million payments a month from all kinds of loans. A Lockdown can freeze the entire collection apparatus. The pandemic created a significant amount of shock in the industry. NBFCs (Non-Banking Financial Companies), Insurance Companies had certain capabilities put in place where they were able to quickly put in place the right measures to manage in the 1st Lockdown but the 2nd Lockdown again affected businesses.
On the other hand, the last 5 years have seen significant innovation on the asset side of Financial Services with the Fin-Techs emerging, and Insurance Platforms like Policy Bazaar where you can buy a whole range of products from. Without private equity, so many of these new entrepreneurs would not have been able to access capital. But those investors also need to make their money on a 10-year lifespan and then exit. Hence, their focus is on building a business rapidly and leaving it to the next set of Investors and Management to bring in some amount of profitability. When a pandemic hits, a lot of businesses like those ramp up on sales and very little on risk management practices.
That is when the government played a significant role with loan policies, and provided liquidity support to MSMEs (Micro, Small, and Medium Enterprises) with schemes that improved the health of the Sector. The better players came out much stronger from it.
So, with all the lockdowns happening, has there been a resilience not only of the Financial Services but of consumers also? Sanjiv Bajaj said that as far as the consumers are concerned, many who belong to the middle class and above lost their jobs last year while some got badly affected, health-wise. So, consumption of products was less. But consumers got back to buying again after the 2 Lockdowns. However, people with lower income suffered economically in addition to suffering on the health side. Even local and small-time entrepreneurs suffered a lot economically in the 2nd Lockdown, if not the 1st.
However, finally sighting the resilience of his own company, Bajaj Finance Limited, Sanjiv Bajaj said that with digitisation and risk management practices in place the company was able to sustain the Lockdown. He explained that the company built resilience by being agile, by being extra capacious (building capital, equity and prudence). He further said that digitisation for Bajaj Finance, has very much become a way of life. He stressed that the data architecture of digitisation has to be superior enough to capture all kinds of deals right from pre-sales to selling the policy and Bajaj boasts of such type of digitisation. There is a lot of work that has gone around the Cloud, around how Bajaj manages data. He said that the heart of all that was creating a culture that is run on disruptive innovation; having youngsters ideating for the company, having a non-hierarchical structure, making mistakes and learning from them.
Watch the full session- https://www.youtube.com/watch?v=YtoOY0tvneU&t=560s