They were working in an NBFC in its microfinance business. The NBFC, Fullerton India, planned to expand its rural business, for which it had opened a handful of pilot branches. But that was when the financial tsunami of 2008 hit the world, which forced Fullerton to postpone its rural business.

“That is how the two of us said why don’t we start on our own,” recalls Ramakrishna Nishtala, Founder-Director and COO, Vistaar Financial Services Pvt Ltd, a post-graduate in Industrial Engineering, with over two decades in companies such as Eicher and the Hinduja group, before joining Fullerton.

His partner is Brahmanand Hegde, Managing Director and CEO, who has an MSc from the University of Agricultural Sciences, Bangalore, and who worked with ICICI before joining Fullerton.

When Nishtala and Hegde were meeting various people before they launched their venture, they realised that in the classic income pyramid, there were the financially included at the top, and at the bottom, there were those running small, sustenance kinds of businesses who were taken care of by micro-finance institutions and self-help groups. “Just a few notches above the bottom, were these micro-enterprise customers and these people were deprived of capital,” says Nishtala.

Targeting vibrant businesses It is this segment that the duo decided to target through their venture, Vistaar Financial Services, based in Bangalore. According to Nishtala, there are nearly 30 million small and micro-enterprises in the country that are running vibrant businesses, generating cash flows, have been around for some time, but are deprived of mainstream financial assistance because they lack the required documentation. Vistaar took off in April 2010 when they bought the NBFC licence from a company. It has raised around ₹220 crore so far from venture capital and private equity investors, including from Elevar Equity, Saama Capital, Lok Capital, Omidyar Network and WestBridge Capital. Hegde and Nishtala now have a combined “reasonable minority” stake in the venture.

Vistaar looks at micro-enterprises that have an annual income of ₹1.5-2 lakh up to ₹75 lakh to ₹1 crore. It looks at persons successfully running micro-enterprises – for instance, a powerloom – for at least three years that is generating adequate cash flows, and who wants to expand the business.

Credit methodology According to Nishtala, Vistaar has evolved a credit methodology by which it assesses customers. All those running the micro-enterprises have a system of keeping track of the business and Vistaar uses the same documents to assess whether the person or the business can be given a loan.

For instance, he says, powerloom operators maintain delivery challans meticulously because their payment is based on these challans. “We use the same delivery challans or delivery notes to assess what his income is.”

Vistaar has a risk and product team that studies the sector to find out the size of the sector, how many customers there are clustered in an area, the kind of revenues they generate and their key heads of expenditure. Based on this, Vistaar arrives at a template to lend. Vistaar, according to him, sanctions loans of ₹4-5 lakh. There is no cash payment and the loan also has to be repaid over a three or four-year period through the bank. By this, these micro-enterprises will slowly get into the mainstream financial system.

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