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Last updated: 25 Dec, 2018  

Happy.9.thmb.jpg Banks, large NBFCs fail in customising loans to micro entities: Happy Loans chief

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SME Times News Bureau | 25 Dec, 2018

In an exclusive interview with SME Times, Manish Khera, Founder and CEO of Happy Loans, a pioneer in providing digital micro loans to individuals, said that banks and traditional NBFCs have barely attempted to customize their loan products for microenterprises.

Unlike banks and large NBFCs, smaller NBFCs can test innovative lending models and dynamically change their approach as needed. This is where NBFCs have an edge over the big-pocketed PSBs, he added.

Manish Khera, the founder and CEO of Happy Loans, has been an impact entrepreneur in the banking space for the past two decades. His aspiration to make India digital and finance more inclusive has led to the incorporation of ArthImpact Finserve (parent organization of Happy Loans), an end-to-end digital lending platform for Indian microenterprises. Manish Khera is an advocate of socially-relevant businesses that are also financially viable. He has received much praise for his role as one of the thought leaders in the financial inclusion and micro-finance space in India. He has been honored and recognized as "Young Global Leader" by World Economic Forum. Manish has also been recognized by E&Y as the "Entrepreneur of the Year" and has been awarded the Forbes India Leadership award for "Outstanding Start-Up".

Excerpts of the interview …

Please tell our readers about Happy Loans, about its brand name and entrepreneurial journey.
Over 600 million people in India do not have access to credit from mainstream banking institutions. We believe that one size doesn't fit all and that is why we have created sachet loan products called 'Happy Loans'. These loans can be availed for a period as short as 90 days and for an amount as less as Rs. 2,000. The approach leverages alternate data sources and has reduced the overall turnaround time down to 60 seconds – shortest anyone in this segment has ever achieved. This innovation has been made possible with Artificial Intelligence and Machine Learning algorithms that analyze over 1,000 variables in real time. They also capture behavioral data to assess a borrower’s creditworthiness for future loans.

Please tell us about the services/packages you offer.
We cater to microenterprises falling within the income bracket of Rs. 1 lakh to Rs. 5 lakh per annum. Happy Loans address two major pain points of any MSME borrower, i.e. unavailable or limited credit history and the overall turnaround time (TAT) of a loan. We do not rely on the traditional credit score of a borrower. We record the transactional information of POS machines and/or mobile wallet used by him or her. Apart from it, all that a loan applicant needs is a PAN Card as well as Driving License or a Voter ID card.

Using this cutting-edge approach along with Artificial Intelligence, we have effectively reduced the overall TAT to anywhere around 60 seconds to 5 minutes. This is while extending a more evolved and completely seamless digital experience to our customers. We have additionally designed an automation solution for our partners to exchange real-time data using our proprietary API, which takes less than 7 days for our partners to implement.

There is reportedly a big ongoing tussle between Centre and RBI with regards to MSME loans ... your views.
The recent rift between Centre and RBI involved multidimensional factors that have both short-term and long-term implications. It will not be fair to speak about some while leaving the others completely unaddressed. Governance, whether it is of a company, a regulatory, or a nation, is not an easy job. The RBI and the Centre might’ve had opposing views. However, both of these views, when you look at them individually, are quite genuine.

Is lack of capital the only reason why banks reject loan applications, or there is too much red tape, which is in fact a bigger problem as far as small loans are concerned?
Capital is not as big of a concern for banks. The challenge for them lies in an outdated approach and red-tapism. Banks find it increasingly hard to profile microenterprises with their limited or completely absent credit history. As we have mentioned earlier, one size does not fit all. Information of microenterprises is available albeit in different forms and needs to be validated differently as well. Banks and traditional NBFCs have barely attempted to customize their loan products for microenterprises. So, they need to change their lenses and offer a solution that specifically suits MSME’s needs through the available data set.

Like PSU banks, NBFCs too are concerned about risks before giving loans. But, why then PSU banks lag far behind NBFCs in this regard?
Indian PSBs are currently battling NPAs to the tune of Rs. 6.16 lakh crore. This considerably limits their risk-taking abilities and thereby, they necessarily have to avoid any kind of adventurism. However, lending via conventional approach, especially in the MSME segment, is very inefficacious. The relatively smaller NBFCs can test innovative lending models and dynamically change their approach as needed. This is where NBFCs have an edge over the big-pocketed PSBs.

Please tell us about the small business credit scenario at present.
With fintech platforms and private banks in the game, the credit market is undergoing through a massive transformation which will also continue in the coming years. Credit will get commoditized eventually with the infusion of technology, payments innovation, and data digitization. A lot is likely to move even at the regulator's end. We need to just wait and watch how the market develops.

What are your future plans?
We are ramping up operations to cater to a wide profile of partners with varied businesses besides POS & BC network. We also plan to customize our product for these varied micro businesses & their requirements. We will be disbursing more than 7 lakh MSME loans by 2020.

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