Financial institutions that provide loans for agricultural equipment, such as tractors, face significant challenges in loan operations. Unlike traditional loans where collateral is fixed, tractors are mobile assets, making it difficult for lenders to track and reclaim them in case of default. Ensuring timely repayment while maintaining customer relationships is a critical balance that financial institutions must achieve to sustain their business model
Challenges
Our client, a leading financial institution specializing in agricultural equipment loans, faced increasing risks due to loan defaults. Many applicants who obtained tractors on loan either delayed payments or became untraceable, leading to financial losses. The primary challenges included:
- High Loan Default Rates: Many borrowers failed to make timely repayments, making loan recovery difficult.
- Difficult Asset Tracking: Since tractors are mobile, it was challenging to track their real-time location, especially if borrowers became unresponsive.
- Lack of Control Over Assets: In cases of prolonged default, financial institutions had no means to enforce compliance or retrieve their financed assets.
- Operational and Collection Costs: Field agents had to travel extensively to locate defaulters, increasing collection costs and resource utilization
Solution
To address these challenges, the financial institution implemented SIMHA Smart Fleet’s advanced telematics solution, which included a relay-based engine control system integrated with GPS tracking. The key components of the solution included:
- Remote Engine Control: A relay was installed between the ignition and starter motor, allowing the financial institution to remotely disable the tractor’s engine if payments were significantly overdue.
- Live Location Tracking: Each financed tractor was equipped with GPS tracking, enabling real-time location monitoring of the asset.
- Usage Insights: The system provided real-time insights into tractor utilization, helping the financial institution understand how much each farmer was using their vehicle. This data enabled proactive decision-making for loan recovery strategies
Key Benefits
The integration of SIMHA Smart Fleet’s solution led to measurable improvements in asset management and loan recovery for the financial institution:
- Improved Loan Repayment Rate: With the ability to control the tractor remotely, defaulters were more likely to make timely payments to avoid disruptions.
- Reduced Risk of Asset Loss: GPS tracking enabled the financial institution to locate and reclaim tractors if borrowers became unresponsive.
- Lower Collection Costs: By remotely monitoring defaulters, the need for extensive field visits was minimized, reducing operational expenses.
- Better Borrower Compliance: Knowing that their tractors could be remotely controlled encouraged borrowers to adhere to repayment schedules.
- Enhanced Operational Efficiency: Loan officers had real-time insights into borrower locations, enabling smarter resource allocation for collections and customer support.
