Sasidhar N. Thumuluri, MD & CEO of Sub-K Impact solutions, providing financial services solutions in the non-urban regions is also serving as a lending marketplace for MSMEs. The marketplace said the impact of the second wave is being felt across small businesses. Edited Excerpts:
Q. How’s the demand for loans across your MSMEs customer base?
According to our assessment, there is an increased demand for micro and small business loans. However, the modus operandi this time around is different. Previously, the majority of our prospective customers were interested in taking a loan to expand their businesses. Now, several of them need capital to revive/restart their businesses which have been negatively impacted by Covid-19. The loans now seem to be used more for working capital rather than capital investments.
Q. How’s the impact of lockdown panning out on these MSMEs?
Although the impact of the second wave on the economy is yet to be understood fully as the pandemic is still raging, the fact that it has hit consumer confidence harder is a matter of concern, as demand could remain muted for a longer period. Demand for non-essential goods and services had drastically fallen in April and the downward trajectory is expected to continue in coming months as people are being forced to shut their businesses due to the lockdown. Small businesses are also getting affected due to their absence in the digital marketplace. As brick-and-mortar businesses face critical challenges imposed by the pandemic, the majority of small business owners have no option but to wait for the situation to improve.
Q. How’re the tie-ups with banks and NBFCs? How does the loan cycle work?
Sub-K has tied up with several banks and a few NBFCs to facilitate loans for MSMEs. Recently we have ramped up partnerships to cater to the working capital needs of agriculture and allied enterprises. Since agriculture and allied business fall under the category of essential services, we feel focusing on that sector will help revitalise the economy. Efforts are on to expand the partner pool to enable us to source loans for a variety of needs in the MSME segment. Sub-K’s MSME Loan cycle is completely digitised. End-to-end process automation starting from lead generation to loan collection has benefited both Sub-K and its customers.
While many micro-enterprises do not have documented income or reliable collateral, we have been able to develop processes to seamlessly blend data captured on-site with online integrations and generate a risk score. Since we deal with new-to-bank or new-to-credit customers, this in-house risk score proves critical to make credit decisions by our partners. With respect to collections, customers are encouraged to pay digitally. Missed payments are followed up through calls and visits by field agents.
Q. Geography and Industry split across MSMEs? Average loan amount, interest rate?
We’ve total Rs 1100 crore assets under management with over 500,000 customers. We serve over 50 plus types of businesses and spread across 20 states.
The loan amount is typically between Rs 30,000 to Rs 10,00,000 and the nominal interest rates varies between 14-24%.
Q. What are your Growth plans ahead?
By March 2025 we aim to be the leading fintech marketplace for the underbanked segment with a target of 10 million individual and enterprises across 25,000 touchpoints and over $1 billion loan book.