Founded in August 2015, Loan Frame is a fintech SME lending marketplace focused on solving the financing problem for millions of small and medium enterprises (SMEs) in India. Loan Frame enables SME lending through partner lenders, by providing them the technology to efficiently originate and assess small business borrowers.
- Shailesh Jacob, Founder and CEO
- Rishi Arya, Co-Founder and CFO
- Akshun Gulati, Co-Founder and Head Corporate Development
Start date: January 2016 | Location: Gurgaon | Fund Raised since starting up: $2.25 million | Employees: 30+
How did you come about setting your focus on this category? Please tell us a little more about the company’s beginnings as well.
I have been an early stage investor in some U.S. fintech start-ups. After the successful exit of Copal Amba to Moody’s I was looking for a large and complex problem to solve. Working with fintech start-ups enabled me to understand how we can apply technology and new business models to make financials services a lot more efficient. We thought that we could apply these new age technologies to improve access to credit to Indian small businesses.
There is a huge opportunity to make a significant difference to SMEs who are currently underbanked. There are over 50 million small business establishments in India and only 10% among them have access to institutional credit. We wanted to trim this gap by providing low cost, simple and fast loans to small businesses
What transformations have you undergone as a company since starting up?
Today, we have an experienced management team, processes and technology, with the help of which we can scale to be one of the largest SME lending players in the country
Since starting up and raising an initial round of funding, our first task was to assemble a great management team that is passionate about fintech lending. I think we have assembled one of the best teams in the industry.
After that, we have built all our technology from scratch. Today we have an ecosystem of web and mobile applications interacting with each other, managing workflow between borrowers, introducers, partners, operations and lenders. We have launched three new apps in last 3-4 months.
Our credit assessment tools and machine learning technology that we use to automate SME credit assessment is world-class. The tremendous importance that we place on credit assessment has enabled us to build zero NPA SME lending portfolios for our lending partners.
Also, we have achieved positive unit economics and over time will look to scale up to achieve profitability at the company level.
Thoughts on the present Indian fintech landscape? How does it compare to the rest of the fintech majors in the world like Hong Kong, Singapore, United Kingdom, Sweden, etc. according to you?
We think that India can become one of the top 3 fintech markets of the world. Unlike developed markets such as U.S., Europe etc. where finance services are readily available, financial inclusion and access to credit is still a challenge and presents a huge opportunity in India.
Which are the sectors in Indian fintech where you think there are untapped opportunities? How does it fit in with your product and growth plans for the immediate future?
Most financial services / fintech sectors, such as payments, consumer and SME lending, general insurance categories, wealth management etc, are currently at a nascent stage and have an enormous growth potential. With cashless initiatives by the government and the continuing smartphone revolution we have a unique opportunity to increase penetration of financial products and making sure that majority of Indian households are financially included
SME lending market in India has an immense potential. According to Credit Suisse’s report, Indian SME lending is expected to grow from US$178 bn in 2016 to US$846 bn by 2026. With this huge demand for credit, coupled with upcoming digital infrastructure such as India Stack (Aadhar, eKYC, e-signatures and UPI), GST launch, increasing internet users (600m by 2020), smart phone penetration (520m by 2020) and decreasing data costs, the number of SMEs coming to formal lending channels will be very significant
Please tell us a little about your funding journey – the requirements & objectives in mind when you decided to raise a round/s; the fit you found or were looking for with your investors; what would you be looking for in the future as the business grows?
When we were setting up Loan Frame, we had raised one round of capital of $2.25 million led by reputed VC firm, Vedanta Capital, represented by Parag Saxena. Other key investors and advisors include Sanoch Management, represented by William Campbell, former Chairman of Visa International and former CEO of Citigroup, and Toos Daruvala, co-CEO of MIO Partners. All of our investors brought significant experience building companies especially within financial services across economic cycles and we thought this was very important for a lending business.
We are among one of the few start-ups that have positive unit economics, and our asset light model has enabled us to be capital efficient throughout our journey. We see interest from both Indian and foreign investors and will partner with those that share in our vision to build the largest SME lending fintech platform in the country.
What advice would you give to other fintech entrepreneurs?
I would say that this is the best time to be a fintech entrepreneur in India. For fintech entrepreneurs, especially focussing on lending, I would advise that it is vey easy to lend the money, however, make sure you can collect enough to make it a profitable venture for all parties involved.
The article was authored for FintechAsia on Sep 12, 2017