Fino Finance Private Ltd (Fino Finance), a subsidiary of Fino Paytech, has begun offering loans to MSMEs as part of its strategy to diversify its product mix.

This microfinance arm of Fino Paytech has ventured into offering MSME loans with the launch of this product for individual small business owners in Delhi-National Capital Region (NCR), Sudeep Gupta, Chief Operating officer (COO), Fino Finance, told BusinessLine .

"We are eyeing assets under management of Rs 1,000 crore for MSME loans in next four-five years. We plan to raise equity of Rs 200 crore from our parent Fino Paytech in four instalments of Rs 50 crore each year", Gupta said.

The idea is to leverage this additional equity of Rs 200 crore and raise debt for about five times.

Currently, Fino Finance has paid up capital of Rs 100 crore.

For the last seven years, Fino Finance has been in the business of providing Joint Liability Group (JLG) based micro-finance in remote rural areas of Madhya Pradesh, Uttar Pradesh, Bihar, and Maharastra.

"MSME loan is a continuation of our endeavour to pursue growth opportunities. We are giving loans only to unbanked MSMEs to whom nobody in any State is giving loans", Gupta said.

The MSME loans will be a mix of secured and unsecured products. Loan size will vary from a ticket size of Rs 1 lakh -Rs 15 lakh. " Upto Rs 2.5 lakh it will be unsecured loan, beyond that it will be secured loan", he said.

Post Delhi-NCR, plans are afoot to offer MSME loans at Bihar, Maharashtra and Uttar Pradesh. The interest rate on this would vary from 22 percent to 24 percent.Non collateral will be 2 percent additional, he said.

"Next financial year, we hope to achieve Rs 250 crore of business (MSME loans). Next financial year itself we hope to break even", he said.

For providing MSME loans, FIno Finance is targeting small business owners such as those running kirana, garment, hardware, local dairy and beauty parlours outlets among others.

The loans will be disbursed directly to their bank accounts. "As Fino is a Payments Bank too, we can get their accounts opened and disburse in their accounts. We are acting as business correspondent to Fino Payments Bank", he said.

The tenor of the MSME loans will have flexibility to go upto 10 years also.

Gupta said that a pilot on MSME loans was started in Madhya Pradesh earlier this fiscal, the results of which have been encouraging and gave Fino Finance the confidence to launch it in Delhi-NCR.