Hyderabad-based CredRight,one of the first FinTech start-ups, focused on chit fund sector , has announced to lend Rs 200 Crores to Indian MSMEs in the next 3 years.
CredRight, the data-driven lending platform partners with chit funds and use a reverse auction to distribute pooled funds across India to acquire customers and to underwrite loan for a customer.
In the coming fiscal year 2019-20, the company plans to further invest in technology and grow from the strength of 13 to 35 in addition to lend Rs 50 crores to MSMEs by December 2019, the company said in a release.
The total size of the chit fund business in the country is estimated to be around Rs 70,000 crores with about 75-80 lakh customers.
There are an estimated 1.6 million registered MSMEs in India, as per Ministry of MSMEs 2017-18 report; but they face a major problem in terms of getting adequate credit for expansion of business activities, the release said.
The report pointed out that the MSMEs received only 17.4 per cent of the total credit outstanding. It is very saddening that in a progressing country like India, only 33-34 per cent 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.
“There are around 50 million registered and unregistered MSME businesses in the country 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”, said Neeraj Bansal, CredRight Co-founder and CEO.
“We are looking to provide loans of above Rs 5 lakh to retailers/small businesses like 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,” Neeraj added.
Collateral-based lending models will have to become more flexible and thoughtful, based on cash flows and commitment of the entrepreneur towards the business, he said.
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 unorganised 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.
