Two seasoned bankers with over 25 years of experience felt that the country’s existing banking infrastructure was not up to those who really needed loans, and decided to take the path of entrepreneurship to fill this gap.
To provide loans to those sectors of society that are usually not eligible for a bank loan, Asim Dru as well as Mahesh Dayani founded SBFC Finance, non-bank finance company (NBFC) in September 2017.
“Banks, both in the public and private sector, serve a segment of clients with the required credit rating and regular income, and usually do not serve small clients. With an increase in the number of new borrowers in new cities, getting a loan from organized lenders is inappropriate, ”says Asem, who previously worked with HDFC Bank.
The diversity of the country creates different types of borrowers, but financial institutions have not been able to build the infrastructure or have the know-how to deal with this segment as they generally do not have standardized credit rating information.
“India has 65 million small businesses across the country and no more than 8-9 percent of these have some form of organized finance. They mostly borrow money from unorganized sources, friends, family or trade loans, all of which are expensive, ”says Mahesh, who also has over 25 years of banking experience at Kotak Mahindra Bank.
The startup is trying to replace this disorganized borrowing with organized financing at affordable rates and believes that this gap opens up huge opportunities.
SBFC Finance offers a combination secured and unsecured loans… These include secured loans to micro-enterprises to meet working capital and maturity requirements. They are provided to MSMEs and self-employed laypeople with collateral.
NBFC also provides loans against gold, as well as small loans for individuals, which are unsecured. There are also commercial and professional loans that are unsecured and short term.
“Our loans help clients start businesses, open premises, hire more people, upgrade equipment, develop products and do other things they need to grow and prosper,” says Mahesh.
In addition, the startup also offers a full range of specialized loan management services, helping institutional lenders manage all aspects of loan servicing, including customer relations, fees, payments, data transfer and storage.
He manages LMS for institutions such as State Bank of India, IndusInd Bank, Avenue Capital, Nippon AMC, SSG, and Dewan Housing Finance Corporation (DHFL).
Asem says, “This innovative offering increases our royalty without any risk to our books and strengthens our position as a niche player in the industry.”
SBFC Finance’s services and products are delivered through an omnichannel model that is a combination of branch and digital channels.
Direct connectivity and local presence through the hub and spoke model gives them valuable insight into consumers in these underserved markets, Aseem says.
Today SBFC Finance is present in 17 states and 100 cities and claims to provide loans at nominal rate with a focus on getting the right loans to the right clients.
“We overcame language barriers and real estate problems and created a robust credit rule engine that delivers profitability across the economy. Once you do this right at the beginning of the path, it will continue to grow, says Asim.
SBFC Finance currently has a loan portfolio of around Rs 3,700 and is forecast to generate a net profit of Rs 100 crores in 21 fiscal years. He pays out over Rs 100 crore monthly.
“Our prudent strategies and focus on profitable growth have helped improve our profit margins. “From capital for growth to overall profitability and asset quality, we maintain strong financial performance,” says Mahesh.
SBFC Finance is backed by Singapore-based Clermont Group and Arpwood with a capital raise of Rs 845 crore that have been with NBFC since its inception. It also has a capitalization of nearly Rs 1,000 crore.
Small business finance comes with its own problems with documentation, unpredictable cash flows, etc. “At SBFC, we have created a robust and scalable business model to overcome these challenges and satisfy the growing financial appetite of these customers,” says Asem.
He further elaborates that SBFC Finance’s broad presence with deep local understanding and relationships with borrowers has helped attract more people into the formal banking sector.
There are also other well-known NBFCs such as Bajaj Finance and Shriram Finance that operate in a similar segment, and there are also new century startups Lendingkart, MoneyTap, etc.
SBFC has developed an ambitious expansion plan in terms of distribution and scale, which will mean adding infrastructure, human and financial capital. “This will result in a 15 percent increase in payments on a quarterly basis over the next 12-18 months,” says Asem.
SBFC Finance Team
The plan must be present in one third of the counties in each state where it is present. To distribute the risk, SBFC Finance ensures that each state does not have a carrying amount exceeding 20 percent.
The future certainly looks bright for SBFC Finance as it penetrates deeply into the market to bring people into the mainstream, which will help expand access to financial services. At the same time, a lot of attention is paid to business metrics.
“Our strong growth in profitability over the past three years is a testament to our ability to develop and launch products that meet diverse needs without compromising asset quality,” says Mahesh.