Capturing reliable data about small and micro business borrowers at the field level has often proved a big challenge for lenders.

The process is generally manual, lengthy, paper-oriented, prone to errors at the primary stage and again, at the data entry point at the back office or headquarters.

It often contributes to delayed decisions by lenders, who are not that enthusiastic to service this under-served segment in the first place. And, naturally, it limits any scaling up of such loans even where possible — despite the potential market opportunity of an estimated ₹20-lakh crore.

Artoo, a start-up that offers a digital loan origination system, spotted an opportunity in this segment. If these manual processes could be cut down and if time and costs could be saved, banks and other lenders would perhaps be more forthcoming to explore the market opportunities.

With this backdrop, Artoo built a solution based on a mobile operating system that would capture all the required customer data digitally and come up with a decision quickly.

The information collected from a number of verbal clues would include the borrower’s business details, sources of income, size of family, land holdings, cattle stock, scope for extra income through secondary businesses, repayment capacity, etc.

This information is secured during the course of a 30-40 minute meeting with the customer. If the customer has taken loans earlier that information is also pulled out of credit information bureaus and made available to the field agent.

There are also alerts and pop-ups provided with suggested loan amounts depending on the data provided by the potential borrower. If, for instance, the numbers provided by a borrower about the income he is generating in a particular occupation are way out of line, there is an alert that is triggered for the loan officer, based on the database and analytics.

Quick decisions

The upshot of all this is that the field agent can tell the potential borrower immediately whether he would be able to provide a loan or not. That increases the productivity of the field force by many multiples and reduces the cost of customer acquisition.

Artoo founder Sameer Segal provides some staggering numbers. The actual time taken for disbursing a loan has come down from 20 days to seven days, he said. The cost of acquisition is down 45 per cent while productivity of the field agent has more than doubled.

The return on investment for users, based on their experiments, is up 800 per cent, he added. His claims are broadly endorsed by the experience of Ujjivan Financial Services, a company that acquired a small finance bank licence recently.

Asked about how and why the company chose Artoo, Ujjivan Head of Credit Sneh Thakur said: “About four-five years back when we were scaling up our MSME portfolio, there were not too many players in the IT industry who could have helped us build a digital origination and underwriting platform supporting this business model. We found that Artoo had a strong inclination for financial inclusion and that tilted the choice in their favour. Four years later, it has proved to be a very good choice.”

Artoo has helped significantly reduce time and costs, and increase efficiencies, by digitising the loan origination, underwriting and disbursement processes, added Thakur. Underlining the transformation that has happened at the field level, he said: “Four years ago, field staff found it a bit difficult to move from paper to tablet. Now they have adapted. Today, it has gone to the other extreme. I don’t think they will be ready to do a paper process now.”

Artoo’s digital solution has helped facilitate the disbursal of loans worth about ₹1,200 crore over the past two years, according to Segal. They expect to touch the ₹2,000-crore mark this fiscal.

Segal further said Artoo aims to facilitate improved access to loans by small businesses and therefore has built its business model accordingly.

The company gets a success fee (it gets paid if a loan is given), and not a licence fee (where it would get paid whether the loan is given or not). “Our growth is therefore aligned with those of our clients,” said Segal.

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