Manish Khera, former CEO of Airtel Payments Bank and former MD of Fino Paytech Ltd, has begun another chapter in his entrepreneurial journey. The new venture, ‘Arth Impact’, is an NBFC set up with the express purpose of doing digital lending to the bottom-of- the-pyramid customer.
Manish promises a turnaround time of 30 seconds – provided you have a bank account and Aadhaar card and one or two other basic identification documents.
The target audience for this loan, Manish says, are really two types of customers – 1) Micro-entrepreneurs such as small shopkeepers, grocers, early jobbers, delivery boys, etc. 2) The migrant and semi-skilled worker – typically those who work as waiters, drivers and handymen.
This group of people may require anything in the region of Rs 15,000 to Rs 50,000 as loan – which is a gap in the market since for some lenders the ticket size is too small and for others, the cost of managing margins on that ticket size is expensive. Interestingly, while micro-finance companies target this segment, they do so under the umbrella of what is known as ‘joint liability group’ or JLG – where there is a group liability or a peer appraisal and guarantee as happens in self-help groups.
Manish feels that the joint liability group may now be outliving its utility or at least outgrowing its construct. He thinks that the real challenge in building a lending book based on proper risk assessment will happen only with individual lending – and not based on group guaranteed lending or lending based on collaterals as is happening currently. He points out that the joint liability group was required earlier because information about the rural customer was scarce and lending to a group helped since each person would guarantee the others in the group. This worked in rural areas where everyone was known to each other The same model, didn’t work in urban areas – since such intimate knowledge of each other was missing, he said.
Manish said his business model is constructed in such a way as to minimise operational costs incurred under a conventional financing arrangement. So customers will likely discover them through a digital medium (perhaps an application downloaded from Google playstore) and credit assessment will be done at the back-end – and not at the branch. Similarly, risk management and collection will be done using new developments in the ecosystem.
Asked about the possible pitfalls in lending to this customer profile and the mixed experience of many other companies in this space, Manish said they will operate on the fundamental premise that people are good borrowers. He explained that he was optimistic because credit would add value to such customers and the alternate mode was very high cost. They would, therefore, prefer to avail of their services and be diligent in repayment.
Manish’s business model seeks to break free of another of the axioms that has governed the microfinance model – that of lending only to women borrowers. Manish says, he will be ‘gender neutral’ in lending. So, men, here may be a chance to establish your track record!
The venture is expected to roll out before December-end, Manish said.
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