CredRight, one of the first FinTech start-ups focused on facilitating loans to chit fund subscribers, announced the launch of its branch network at Bengaluru, Hyderabad, and Warangal. Very soon the operation will start at Coimbatore too. The latest expansion will even shape up the future employment opportunities for professionals in these cities.
In the next 24 months, CredRight plans to reach out to more than 6000 customers at Bengaluru, Hyderabad and Warangal and serve the Chit Funds Subscribers by facilitating loans from Banks/ NBFCs – with a targeted monthly disbursement of more than INR 250 million.
CredRight aims to disburse loans of more than Rs. 500 million by end of March 2020. CredRight, the data-driven lending platform, facilitates loans to Micro & Small Enterprises. Given little or no financial history and informal/unrecorded transactions, such enterprises are often turned down by Banks & NBFCs but CredRight is able to build a better credit profile using chit repayment history of these enterprises and helps them avail loan from INR 100 thousand to Rs. 3.5 million. In the coming fiscal year 2019-20, the company plans to further invest in technology and grow from the strength of 20 to 50.
Neeraj Bansal, Co-founder & CEO of CredRight, said
There are around 50 million registered and unregistered MSME businesses in India that face a nearly $300 billion credit gap. The lack of adequate finance due to shortage of organized lending from banks and other formal institutes along with absence of transparency poses severe challenges in front of MSMEs to obtain loans.
We are looking to provide loans of above Rs. 5 Lakh to retailers/small businesses like vegetable vendor, chicken or barber shops and above Rs. 10 Lakh to SMEs. In the last year, the loan band ranged from Rs. 1 Lakh to maximum of Rs. 35 Lakh with an average of Rs. 9.5 Lakh
Many of the banks hesitate to offer loans to small scale units seeing the growth of non-performing assets in the past. Collateral-based lending models will have to become more flexible and thoughtful, based on cash flows and commitment of the entrepreneur towards the business. So, what are the options left for such unserved and undeserved enterprises? Can such MSMEs be able to start and run their businesses or will they be discouraged to shut down?
CredRight brings unsecured loans as well as fill the deficit of financial data via chit records. So, customers who are unserved or underserved currently can avail loans from CredRight and make monetary use of their available Chit data. Also, CredRight’s end-to-end process is digital so customers can apply and receive money via the app in 3 days. On the other hand, CredRight offers local language/vernacular services via the app as well as call centres making the process easier and comfortable for the customers to avail loans.
The Indian chit fund business is estimated to be around Rs. 700,000 million with about 75-80 Lakh customers. There are an estimated 1.6 million registered MSMEs in India, as per Ministry of MSME, Govt. of India 2017~18 report; but they face a major problem in terms of getting adequate credit for expansion of business activities. The report pointed out that the MSMEs received only 17.4% of the total credit outstanding. It is very saddening that in a progressing country like India, only 33-34% of firms from MSME sector have an access to banks and institutional financing channels while rest of them resort to informal channels like friends, family and other personal channels for raising loans, says ASSOCHAM report.
An organized approach in Chit Fund lending can surely decrease the pressure since this has long been the predominant instrument for financial inclusion in India – even before microfinance. CredRight has experienced a huge credit pull from small vendors, start-ups, shopkeepers, agencies dealing in commodities and those engaged in numerous other trades in the unorganized sector. The growth of unsecured loans is a reason for hope for the new entrepreneurs, particularly high-skill professionals and those who can part finance their businesses.
By tapping the huge database and strength of the chit fund sector, the Hyderabad-based CredRight is expanding rapidly in extending loans to the small and medium enterprises. With a few players in the segment, the company hopes to tap into the huge unmet demand for credit/ loans in the MSME segment while addressing the problem of getting them and making the procedure simpler.
CredRight is a disruptive fintech platform, driven by an inspiring mission to empower Micro & Small Entrepreneurs [MSEs] which do not have access to organized credit from financial institutions [like Banks and NBFCs]. To meet their working capital needs, MSMEs often subscribe to rotating savings and credit associations [ROSCAs] and chit funds where the average wait time is 5 months given the high volume of bids from subscribers. Dependence on informal sources like money lenders is high.