1) Tell us about the company? What kind of work does it do in the Indian financial market?
Credit Fair is an Indian consumer lending fintech start-up building a credit ladder for the next 550 million underserved Indians. We do this by providing 0% or low cost, short term, unsecured instalment loans at the point of sale in the sectors of health, education, electronic vehicles, and home décor through merchant partnerships. Our ticket size ranges from USD150-25,000 and tenure from 3 months to 3 years.
About 550 million Indians are underserved by traditional lenders because they are new to credit (NTC) or do not have a prime credit score. Second, availability of credit at the point of sale is currently enabled through credit cards, penetration of which is less than 4%. Third, borrowers in remote areas are also underserved by traditional banks due to the high costs associated with their onboarding, management, and recovery. Hence, there is a huge demand for formal credit that can be availed through simple processes.
On the other hand, merchants, who are majorly SMEs, struggle with providing a point of sale financing options to their customers as they are often charged high subvention rates, approval rates are very low and the time to disbursement of loans can be as long as five days. This results in the loss of potential sales for the merchants.
2) What was the motivation for creating your company?
I have personally seen the evolution of India’s financial system from informal to formal lending and wanted to facilitate this transition for those ignored by the system. Having experienced the same issue in London, I wanted to find a solution for the underserved in India.
3) What are the parameters that help you decide if someone is a good candidate for loan approval?
We assess both financial and behavioural parameters to develop a credit profile of our borrowers. Among financial parameters, we analyse the applicant’s bank statement and credit history to assess the probability of the repayment of the loan. We also extend loans to new credit customers. Among behavioural parameters, we leverage alternate data such as apps on the phone, transactional SMS and social media behaviour to understand the willingness to pay. Moreover, we conduct identity and fraud checks at various points to establish the authenticity of the candidate.
4) Why did you select these particular four sectors for a loan? What was the thought?
We chose health, education, home décor and electric vehicles as they represent aspirations of our target segment and are large, high growth sectors. The combined annual spend on these sectors amounts to $20 billion. Moreover, some of these sectors are served by very few lenders, thus providing an opportunity to further the mission of financial inclusion.
5) Which sector would you like to expand into the future beyond these particular four?
Our current sectors are vast and offer immense opportunities for growth. Secondly, by developing expertise according to the vertical, we have been able to provide better services than our competitors in terms of approval rate and TAT. Hence, we plan to expand within the current sectors, for example, expanding our offering to k-12 schools in the education sector.
6) What is your vision for the company? How does that vision align with your commitment to provide low-cost loans?
Our vision is to see every Indian have access to the right amount of credit at the right cost and at the right time. By 2025, we aim to positively impact the financial lives of over 1million Indians. This vision reflects in our efforts to enable low-cost loans for ‘Bharat’ i.e. people who are not served by banks and large NBFCs. Over 70% of our loans are No Cost EMIs, hence offering better terms than even personal loans from banks.
We operate in sectors that cater to the millennials i.e people in the age group of 25-40 years. We enable finance to new to credit (NTC) customers who have no credit history so that they can build a credit ladder. We use an auto decisioning rule engine, to constantly improve our efficiency, reduce TAT and transfer the benefits to our customers. Finally, we also plan to launch a P2P lending platform to further lower our cost of funding, hence keep cost low for our customers.
7) How have you distributed your initial funds so far? Do you have any plan to raise funds in the near future?
We have disbursed loans worth over $7M+ so far and are growing despite headwinds posed by Covid. We plan to raise $5M to reach a $15M monthly disbursement rate and a $75M Assets under management in 2 years.