By: Vidyut Perti, head of strategy, marketing & partnerships, Shubham Housing Development Finance Company
About 80% of all people employed in India work in the informal sector, with limited access to financial services. Securing a loan to buy or improve a property, even in the urban centres, is a dream beyond the reach of many of these workers, who lack a credit history.
Shubham Housing Development Finance has been working hard to provide housing finance solutions for thousands of families with informal incomes through an innovative credit programme that goes beyond filling in the usual formal paperwork. Shubham offers home loans to buy or build a house, as well as loans for extensions and home improvements. Its staff members meet face-to-face with families to learn about their life story: where they come from, what they do, and how they earn, spend and save. In doing so, they become a bridge between the formal housing finance sector and the families seeking better and safer homes.
In eight years, Shubham has built a network of 84 branches across 78 cities and has disbursed a total of US$300m in loans. Shubham knows the model is working: 35,000 families who were thus far excluded from the financial market have been able to afford better, secure homes. In addition to this, Shubham has managed to gather substantial data on the people applying for loans, the type of properties they want mortgages on, and the finance offered by credit companies. All this information has been used to grow the business – attracting more customers, and improving loan processing and collection efficiency.
Spurred on by its successes, Shubham wanted to understand even better how its customers’ lives had improved because of their efforts. As a result, Shubham joined Business Call to Action’s (BCtA) Impact Champions Programme to gain deeper insights into how financial inclusion was impacting families, and whether the business had other indirect effects on their lives. As part of the programme, Shubham surveyed 132 households, interviewing 550 people in five Indian states. The survey included brief, simple questions assessing changes in access to finance, household expenses, education, health and the householders’ outlook for the future.
To maximise the benefits of impact measurement, it has to be a continuous exercise with clear goals laid out at the outset. Inspired by its own success, Shubham is motivated to demonstrate to organisations within India and abroad that profitable companies can indeed make a positive difference in the lives of their customers.
They found that families who had tried applying for a loan prior to becoming a Shubham customer had had their loan application rejected due to lack of credit history and documentation. Two-thirds also found the loan process much easier after having gone through it once with Shubham.
Customers also reported experiencing other unintended impacts: 96% of those surveyed said they were no longer afraid of being evicted from their homes, improving their mental health and sense of financial security. The extensive analysis undertaken by Shubham to understand a family’s finances and cashflow also helped two-thirds of their customers improve their incomes and manage their incomes better.
One of Shubham’s customers, Nena Ram, who built his own house in Ajmer, a city in the north-western state of Rajasthan, after receiving guidance from the company, explains how it has positively impacted himself and his family: “I feel proud to be a homeowner. Having worked hard to build my own house, I am thankful that I came across Shubham Housing Development Finance. The satisfaction of being able to provide a stable future for my children is immense.”
While Shubham continues to build its vision of being the mortgage lender of choice for families with informal incomes, it has also realised its positive impact goes well beyond simple home ownership. This message is provided to its employees through regular training sessions to show them the difference they are making through their work.
Shubham is now further integrating impact measurement into its operations by making it routine practice to listen to, and act on, customer feedback.
Shubham is also planning to scale its inclusive business, in part thanks to what it has learnt through its impact management process. Shubham plans to double loan disbursals to $150m this year, compared to $85m last year, and build analytical tools that help the company gather real time data to be able to make business decisions based on reliable impact data.