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No dearth of demand on credit side, disbursed credit worth INR 5 billion: Flexiloans Co-founder

Manish Lunia, Co-Founder, Flexiloans, an online lender for MSMEs in India, said that it has crossed a milestone number of disbursing over INR 5 billion of unsecured business loans across the country with its unique digital-only model. The Mumbai-based company, which has disbursed over 16000 loans across 1000 cities and towns in the country, says that there is no dearth of demand on the credit side. The company caters primarily to micro, small and medium-sized businesses.

Launched in 2016 by Ritesh Jain, Abhishek Kothari, Deepak Jain, and Manish Lunia, the company has witnessed a 200% growth in disbursals, 10 X growth in customer acquisition since March last year. The company also boasts of 45% repeat lending from the existing customer base. Steadily moving towards its goal of tapping the untouched segments of our country, the online lender provides quick and hassle-free working capital. The company offers a wide range of financing solutions to the MSME businesses under working capital loans, vendor financing and line of credit. IBS Intelligence spoke with FlexiLoan’s co-founder Manish Lunia on the company roadmap for the next two years. Edited excerpts:


How has the online lending market shaped up in the last few years?

Digital Lending market is currently at about USD 2 billion, up from about USD 1 billion in 2016. Significant traction and market niches discovered by various FinTech startups across the country have made this space very exciting, holistic and game-changing.


What is the biggest challenge in the online lending market at present and how can technology help solve that?  

Technology and customer awareness have substantially reduced the information gaps, speed of analysis of applications and disbursals/collections. Technology will drive the next level of sophistication in terms of be-spoke lending offers based on customer data, payment track record and other independently available critical information on the borrower from sources like Bureau, Taxation platforms, etc.


What is your view on the current credit crisis in the market? When can we see the credit on the demand side picking up?

Veterans in the industry have witnessed variations of the credit crisis in multiple forms in the last two decades. This time, this is more liquidity squeeze driven versus actual stress at a retail level. However, prolonged periods of tightness are impacting the overall market and customer level liquidity situations that need to be arrested quickly. There is no dearth of demand on the credit side, barring in a few sectors. This is more of a supply squeeze than demand-driven squeeze.


How is the current crisis impacting Flexiloans’ business?

We are one of the market participants of this large credit industry and thus are naturally impacted on the sidelines. However, we have used this strength to build our liability capabilities, viable customer journeys and efficiencies across the board. Also, our strong performance and gearing ratios have been comfortable for several financial institutions who have extended multiple lines of credit to us in the last six to nine months as well.


How are you using AI and data analytics for customer acquisition and onboarding? How has the cost of customer acquisition come down with the help of technology?

Giving the best customer experience at low costs could seem paradoxical, but for the AI technology and data science capabilities deployed by reaching out to over 100,000 new applicants monthly within the shortest duration has been made possible. Our customer acquisition costs have come down by 50% over the last year digitally.


What is your customer segmentation and which segment has been impacted because of the slowdown?

We have a unique mix of retailers, traders and small businesses in the service sector that constitute a large majority of the customer base spread over 50 sub-industries and over 1000 cities and towns across Tier II-IV towns in India. We have strong customer segments of sellers, who sell on any e-Commerce site in the country via our partnerships or any PoS machine users that give us access to over 50 million merchants on a combined basis.

We have limited exposure in the auto and no exposure to the real-estate sector that are majorly hit by the recent slowdown. Overall, our micro-entrepreneur customer base has not seen significant declines in business.


What is the biggest mistake that you did while starting up and how did you rectify that?

I think we have made several mistakes and learned from each along the way to rise stronger and become wiser. Each of these experiences has made us more agile in our decision-making processes.


Any pivots in the business model? If yes when and why?

We have not had any major pivot in the business model and have stayed true to our vision and mission of providing “Quick and Hassle” free loans to MSME businesses in the country. Starting with partnering with e-Commerce ecosystem partnerships for lending to sellers on these platforms, we expanded to loans against PoS (point of sale) transactions, loans against invoices and today get a significant chunk of our business through organic means. Each of these strategic changes has made our overall proposition to the customer and ecosystem partners – a very potent combination.


How has your business grown in the last two years and what led to growth?

We are just about three years old and have grown 500% in terms of disbursals and loans disbursed over the last two years.  Strong technology and data science focus have ensured the high productivity and digital nature of our offerings.  A tight leash on NPAs and costs, laser-sharp focus on serving only target segment customers has helped grow us sustainably.


When can we expect Flexiloans like to turn profitable?

Fintech NBFCs like us can get profitable much faster with the right mix of risk-based pricing, cost optimization and tight credit and risk controls along with efficient liability management.


What are your funding plans?

We raised one of India’s largest seed fund round about 2.5 years ago at INR 1 billion. With strong cost management and efficient gearing, we have enough growth capital for now. Having said that, equity raises are important for young NBFCs like us to propel to the next level and we keep exploring interest showing by various domestic and international PE/ VCs, fund houses and Fintech giants.


 Any plans on foraying into the overseas market?

While our technology and data science assets, credit models and service modules are worthy and capable of being universally applied, we believe the Indian lending markets are far from being penetrated and will continue to build expertise here in the foreseeable future


Could you share some interesting insights on the consumer lending side?

* 90% of our customers are eligible for a loan of INR 1 million or lower thus speaking volumes about the vast market opportunity.

*50% of our customers have never taken a business loan before approaching us. This shows the depth potential in the market and the under-serviced MSME pool.

*24% of our loans are to women entrepreneurs and they tend to perform a tad better than other loans

*15-20% of our customers have no Bureau history and are introduced to the world of Formal credit by us

*We get leads from over 4500 cities and towns in India from over 100,000 MSMEs per month and that shows the growing digital persona of the MSME customer

* 95-96% of the repayments happen via new-age digital payment instruments.

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