Two seasoned bankers with more than 25 years of experience felt that the existing banking infrastructure in the country had not reached those who really needed credit, and decided to take the path of entrepreneurship to fill this gap. .
To extend credit to sections of society that would not normally qualify for a bank loan, Aseem Dhru and Mahesh Dayani based Financing of the SBFC, a non-bank finance company (NBFC) in September 2017.
“Banks, both public and private, cater to a segment of customers who have the required credit scores and regular incomes, and typically don’t serve thin file customers. With additional new borrowers in emerging cities, credit from organized lenders is not appropriate, ”says Aseem, who previously worked with HDFC Bank.
The diversity
The diversity of the country itself creates diverse types of borrowers, but financial institutions have not been able to create the infrastructure or do not have the know-how to handle this segment as they usually do not have the conventional information on credit scores.
“In India, there are 65 million small businesses across the country, and no more than 8-9% of them have some form of organized finance. They mostly borrow from unorganized sources or from friends and family or business credit and it all comes at a steep price, ”says Mahesh, who also has over 25 years of banking experience with Kotak Mahindra Bank. .
The startup is looking to replace this unorganized borrowing with organized financing at affordable rates and it believes this gap is a huge opportunity.
Types of loans
SBFC Finance offers a mix of secured and unsecured loans. These include secured loans for microenterprises to meet working capital and term loan needs. These are served to MSMEs and independent non-professionals with guarantees.
The NBFC also provides loans for gold and also small personal loans, which are not guaranteed. There are also business and professional loans, which are unsecured and short term.
“Our loans help clients start businesses, open premises, hire more people, upgrade their equipment, develop products and do the other things necessary to grow and prosper,” says Mahesh.
In addition to this, the startup also offers a full range of specialist loan management services, helping institutional lenders manage all aspects of loan management, including client relationships, collections, payments, porting and data storage.
She manages the LMS for institutions such as State Bank of India, IndusInd Bank, Avenue Capital, Nippon AMC, SSG and Dewan Housing Finance Corporation (DHFL).
Aseem declares: “This innovative offer strengthens our fee income, without any risk on our accounts, and strengthens our position as a niche player.
Omnichannel model
SBFC Finance’s services and products are delivered through an omnichannel model, which is a combination of branch and digital channels.
According to Aseem, the direct connection and local presence through a hub-and-spoke model provides them with valuable information about customers in these underserved markets.
Today, SBFC Finance is present in 17 states and 100 cities and claims to lend at a nominal rate, with the goal of providing the right credit to the right customers.
“We have overcome language barriers and ownership issues and built a robust credit rules engine, which translates into unit economy level profitability. Once you get it right at the start of the trip, it just keeps on snowballing, ”says Aseem.
SBFC Finance currently has a loan portfolio of approximately Rs 3,700 crore and is expected to achieve a net profit of Rs 100 crore for fiscal year 21. It disburses over Rs 100 crore on a monthly basis.
“Our cautious strategies and our focus on profitable growth have helped to strengthen our profitability quotient. From growth capital to overall profitability and asset quality, we have maintained a healthy financial position, ”said Mahesh.
SBFC Finance is backed by Singapore-based Clermont Group and Arpwood with an equity injection of Rs 845 crore, which have been part of the NBFC since its inception. It is also capitalized at nearly Rs 1,000 crore.
Understanding Customers
Small business financing comes with its own challenges around documentation, unpredictable cash flow, etc. “At SBFC, we have put in place a robust and scalable business model to overcome these challenges and meet the growing financial appetite of these clients,” says Aseem.
He further clarified that SBFC Finance’s extensive presence with in-depth local knowledge and relationships with borrowers has helped attract more people to formal banking.
There are also other established NBFCs like Bajaj Finance and Shriram Finance that operate in a similar segment, and there are also new-age startups Lendingkart, MoneyTap, etc.
SBFC has put in place an ambitious expansion plan in terms of distribution and scale, which means adding infrastructure, human and financial capital. “This will translate to an increase in disbursements of 15% each quarter for the next 12 to 18 months,” says Aseem.
The SBFC Finance team
The plan must be present in one third of the districts of each state where it is present. To keep the risk distributed, SBFC Finance ensures that each state does not have an accounting size, which is greater than 20%.
The future certainly looks bright for SBFC Finance as it makes deep inroads into the market to bring people into the mainstream, boosting financial inclusion. At the same time, the focus is on trading indicators.
“Our strong profitable growth over the past three years is a testament to our ability to design and launch products that meet a variety of needs without compromising the quality of assets,” said Mahesh.
