Godrej Capital has recently launched its own digital platform – Nirmaan, a platform that provides a range of services to MSMEs, including access to credit, marketing support, legal and regulatory compliance assistance, and upskilling opportunities. The platform is designed to help MSMEs overcome the challenges they face in growing their businesses, such as limited access to markets, capital, knowledge and technology.
Shalinee Mimani, Chief Risk Officer (CRO) underlines some of the challenges faced by Fintechs in understanding credit worthiness of individuals, business owners and MSME’s and fitech based organizations.
Shalinee has worked in all the areas of Risk management including underwriting, policy, portfoliomanagement, and collections for Retail assets across most retail lending products such as Mortgages, Affordable Housing Finance, Personal Loans, SMEs, Auto loans, etc.
Having an innovative approach helps in risk assessment and this is mainly useful while being a data driven organization in the Fintech arena. By leveraging data and new age digital technologies like AI.ML and innovative product design, managing credit risk can be managed effectively. Fintech organizations are adopting ways and aiming to create dynamic credit policy that can be adopted in varied conditions in ever changing market conditions.
We try to understand some of the key answers relating to Fintech’s credit risk assessment policy while participating and collaborating from Shalinee.
An effective ecosystem can be built that facilitate sharing of insights, best practices and resources related to credit risk management.
Managing Credit risk in the Fintech space can be challenging at the same time bring in immense benefit. How do you see that?
One of the primary challenges in the fintech space is digitally assessing the creditworthiness of often underserved individuals or MSMEs, where access to credit is usually limited, reflecting the lack of traditional credit history. This requires innovative approaches to risk assessment and the development of alternative credit models.
Advanced data analytics and machine learning techniques can be used to leverage vast amounts of data available, such as transactional data through various sources – GST, ITR, Banking, etc., and alternative data sources, to build robust credit risk models. These models enable evaluation of creditworthiness more accurately and extend credit to previously underserved population segments.
The benefits also include arriving at innovative product propositions, specifically for MSMEs, where we see that lending must complement the cash flows and business growth of the customer, which in turn, is crucial to credit management.
Having the right kind of technology that allows for real-time monitoring, automation, and a customer-centric approach helping organizations to effectively mitigate credit risk and extend credit to underserved segments of the population.
What should be some of the core strategies in managing credit risk and innovation that companies must pursue for a long-term benefit?
Long-term orientation is necessary for effective risk management specifically for MSME’s. Organizations that have a comprehensive risk assessment framework can easily leverage traditional and alternative data sources to gain a holistic view of the borrower and creditworthiness.
This can be refined and enhanced by evaluating what new data points we could consume to make this more robust. As more and more MSMEs get into the digital ecosystems of banking, payments, and credit, the framework can be further strengthened.
Continuous Monitoring and Early Warning Systems: Real-time monitoring systems to detect early warning signs of potential defaults and take proactive measures to mitigate them.
Embracing Technology and Innovation: Technological advancements and innovation are key to staying ahead in credit risk management. AI / ML models can be leveraged to enhance credit risk models, automate processes, and improve decision-making accuracy.
Strong Governance and Risk-Balance Culture: Since the inception of Godrej Capital in 2020, we have laid down clear policies and procedures, robust internal controls, and a strong risk culture throughout the organization. Compliance with regulatory requirements and industry best practices is a top priority to maintain the trust of stakeholders and ensure long- term sustainability.
These measures promote proactive risk management, enable informed decision-making, and help in capitalizing on emerging opportunities while mitigating potential pitfalls in the ever-evolving credit landscape.
How do you see Fintech and other financial organizations approaching a collaborative ecosystem that can facilitate best practices and resources related to credit risk management?
I believe fostering a collaborative ecosystem among Fintech and other financial organizations is crucial for facilitating best practices and resources related to credit risk management.
For a collaborative approach, Fintech and financial organizations should actively participate in industry forums, conferences, and workshops focused on credit risk management. These platforms provide opportunities to share insights, experiences, and best practices.
Further, Fintech companies often possess innovative technologies and data analytics capabilities, while traditional financial organizations have extensive experience and established customer relationships. By forming strategic partnerships, organizations can combine their strengths to develop comprehensive credit risk management solutions incorporating the latest technological advancements and risk assessment methodologies.
Engagement with regulators and industry associations also contributes to developing a robust regulatory framework that promotes responsible lending practices and safeguards the interests of borrowers and lenders alike. A collaborative ecosystem that fosters knowledge sharing, partnerships, and regulatory engagement are essential for facilitating best practices and resources related to credit risk management.
Digital technologies are aiding to detect financial frauds and crime. How do you see leveraging AI and ML will help all the way to detect and Prevent Financial Crime?
Financial crime is indeed a very critical concern for the entire finance industry. AI and ML can help us significantly. AI and ML enable analyzing vast amounts of structured and unstructured data, such as transactional records, customer profiles, and external data sources, at a speed and scale that would be impossible for manual analysis. Thereby enhancing detection capabilities.
Digital technologies can more effectively identify suspicious activities, unusual behavior and potential fraud indicators compared to traditional rule-based systems. Through real time monitoring and alerts organizations can generate instant alerts for potentially fraudulent transactions or activities by applying predictive models. Real-time monitoring allows for immediate intervention and timely prevention of financial crimes, reducing the potential losses associated with fraud.
Network Analysis and Linkage Detection: By identifying hidden connections, associations and clustering patterns, we can now uncover networks involved in money laundering, terrorist financing, and other organized financial crimes. Network analysis helps identify high-risk individuals and entities, enabling proactive risk mitigation measures.
It is important to note that while AI and ML have significant potential in detecting and preventing financial crime, they could be more foolproof. Human expertise, domain knowledge, and ethical
considerations remain crucial in interpreting the outputs generated by these technologies and taking appropriate action.
Lastly, if you can brief on the recently launched digital platform by Godrej Capital ‘Nirmaan’ and what kind of services it aims to provide?
Nirmaan is a digital platform by Godrej Capital to help MSMEs with an all-inclusive opportunity to grow their businesses to their potential. Carefully curated, Nirmaan packs a range of partners that provide services critical to the growth of MSMEs.
The services can be categorized into:
Grow Your Business • Current Partners – Amazon Global Selling
Ease your Business • Current Partners – Zolvit and Onsurity
Transform your business • MSMEX
With Godrej Capital Nirmaan, we aim to enable millions of micro, small and medium enterprises in the country. We want to facilitate measures, to equip the MSMEs with the opportunity to grow their businesses, plan and manage business operations and transform businesses with knowledge and learning possibilities. We aim to double the MSME’s contribution to the GDP, helping India to become a $5 trillion economy.