| 34 Annual Report | 2025-2026 Macroeconomic factors can also influence sector performance. Rising inflation, higher fuel and commodity prices, adverse weather conditions, and global geopolitical developments can affect household incomes and spending patterns. These factors may reduce borrowers’ repayment capacity and impact overall credit demand. Microfinance operations are also vulnerable to local disruptions such as floods, cyclones, public health emergencies, and social or political disturbances. Such events can temporarily affect customer livelihoods, disrupt business activities, and impact collection efficiency. In some cases, loan waiver announcements or debt relief measures may also influence repayment behaviour. The increasing use of technology has improved customer access and operational efficiency across the sector. However, it has also increased exposure to cybersecurity risks, data privacy concerns, and technology-related disruptions. As digital adoption grows, institutions must continue investing in strong information security systems and data protection frameworks. Competition within the financial services sector has intensified with the growing presence of commercial banks, Small Finance Banks, fintech companies, and other lending institutions. This may create pressure on customer acquisition, market share, profitability, and operating margins. As a result, institutions need to differentiate themselves through better customer service, innovative products, technology adoption, and strong risk management. Access to funding is another important factor for the sector. Microfinance institutions depend on timely and cost-effective funding to support growth. Changes in interest rates, liquidity conditions, and capital market sentiment can affect borrowing costs and profitability. Therefore, maintaining a strong balance sheet and effective asset-liability management remains critical. Employee retention also continues to be a challenge. High attrition levels, particularly among frontline staff, can impact productivity, customer relationships, and operating efficiency while increasing recruitment and training costs. Building a skilled and motivated workforce remains essential for long-term success. Despite these challenges, the sector continues to offer significant growth opportunities. Institutions that maintain strong governance standards, prudent lending practices, effective risk management, technological capabilities, and a customer-centric approach will be better positioned to achieve sustainable growth and create long-term value for all stakeholders. WAY FORWARD FOR FY 2027 As we look ahead, we remain optimistic about the longterm prospects of both, the Indian economy and the microfinance sector. The increasing formalisation of financial services, rapid expansion of digital infrastructure, and continued policy focus on financial inclusion present significant opportunities for institutions that combine growth ambitions with strong governance and prudent risk management. In an environment where ‘growth is good, but quality growth is better’, we remain committed to building a franchise that is scalable, resilient, and future-ready. At Arohan, our strategy for the future is anchored on four key pillars. First, we will continue to pursue sustainable and diversified growth. While microfinance remains our core business, we will progressively strengthen our presence across complementary lending segments, including secured products such as gold loans, housing finance, and home-improvement loans. This will help us build a more balanced portfolio, enhance customer lifetime value, improve portfolio granularity, and strengthen the resilience of our business model across economic cycles. As the saying goes, “do not put all your eggs in one basket”; diversification remains a key pillar of long-term value creation and risk management. Second, we will deepen our focus on technology and data-driven decision-making. Investments in advanced analytics, Artificial Intelligence, machine learning, and digital platforms will enable us to strengthen credit underwriting, improve operational efficiency, enhance collections, and deliver a superior customer experience. We are increasingly leveraging data as a strategic asset, enabling smarter customer acquisition, risk-based pricing, predictive portfolio monitoring, and enhanced decisionmaking. Our objective is to create a scalable and futureready institution that combines the power of technology with the trust-based relationships that have always been central to our success. We firmly believe that in the future of financial services, ‘data is the new collateral’ and technology will remain a key differentiator. Third, we will continue to place customer centricity at the heart of everything we do. By expanding our digital capabilities and strengthening our distribution network, we aim to make financial services more accessible, convenient, and responsive to the evolving needs of our customers. As millions of households aspire for greater financial security, entrepreneurship, and economic mobility, Arohan will remain a trusted partner in their journey. Our approach is guided by a simple principle: when our customers grow, we grow with them. Management Discussion & Analysis
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