{"id":620,"date":"2017-09-25T08:24:25","date_gmt":"2017-09-25T08:24:25","guid":{"rendered":"https:\/\/staging-uat2.loanframe.com\/resources\/?p=620"},"modified":"2025-04-28T08:54:41","modified_gmt":"2025-04-28T08:54:41","slug":"why-fintech-startups-are-wooing-indias-small-businesses-forbes","status":"publish","type":"post","link":"https:\/\/www.loanframe.com\/resources\/category\/press-release\/why-fintech-startups-are-wooing-indias-small-businesses-forbes\/","title":{"rendered":"Why Fintech Startups Are Wooing India\u2019s Small Businesses | Forbes"},"content":{"rendered":"
\n \"Loan\n<\/div>\n\n\n\n

Why Fintech Startups Are Wooing India\u2019s Small Businesses | Forbes<\/h1>\n\n\n\n

For the past 50 years, small and medium-sized enterprises (SMEs) and micro, small and medium enterprises (MSMEs) have powered India\u2019s economy, especially in rural and semi-urban areas. But they often fail to get adequate financial support from government agencies, banks and financial institutions, according to the SME Chamber of India<\/a>.<\/p>\n\n\n\n

India\u2019s booming fintech market could be their savior.<\/p>\n\n\n\n

A faster way<\/strong><\/p>\n\n\n\n

Manjunatha BN runs a music store called Sri Sai Musicals in Bangalore. He needed a loan of $7,800 (5 lakh rupees). Unsure of getting one from a bank, he decided to approach Bangalore-based digital lender Capital Float. To his surprise, he received his loan in no time.<\/p>\n\n\n\n

Based on financial statements, bank transaction history and e-commerce transaction behavior among other data sources, his loan was processed. \u201cThe entire experience was surprisingly fast and pleasant. Officials from the company are ready to help anytime. I\u2019ll definitely approach them if I need another loan,\u201d he says.<\/p>\n\n\n\n

Fintechs specializing in micro-financing are gaining the trust of Indian SMEs and MSMEs.<\/p>\n\n\n\n

Stanford University graduate Sashank Rishyasringa cofounded Capital Float<\/a> in 2013 with classmate Gaurav Hinduja. The company develops tailored credit products for SMEs such as a mobile app for India\u2019s kirana<\/em> (small neighborhood retail) stores.<\/p>\n\n\n\n

By using a customer\u2019s Aadhaar number and electronic KYC, Capital Float offers loans to kirana<\/em> stores in less than three minutes. Other products include finance for online sellers and taxi drivers, Merchant Cash Advance (loans against card swipes) and Invoice Finance term loans. Rishyasringa says, \u201cThe biggest issue is raising working capital. We wanted to build a lending platform for small businesses using multiple data sources.\u201d<\/p>\n\n\n\n

Credit underwriting remains a major challenge in the SME sector. Loan officers in India use outdated methods to assess an SME owner\u2019s credit-worthiness. Through proprietary technology using big data, transaction history on e-commerce websites, psychometric questionnaires, and social media behavior, Capital Float disburses loans in an accurate and fair manner. \u201cMany Indian SMEs don\u2019t maintain balance sheets, so we survey alternate data sources to assess credit-worthiness,\u201d says Rishyasringa.<\/p>\n\n\n\n

The AI element<\/strong><\/p>\n\n\n\n

Gurgaon-based Loan Frame <\/a>is one of the few Indian fintechs using AI to offer micro-lending options. An ecosystem of web and mobile applications interact with each other, managing workflow between borrowers, introducers, partners, operations and lenders. AI and machine learning algorithms examine a borrower\u2019s profile to evaluate credit worthiness in minutes.<\/p>\n\n\n\n

Following a 60-second eligibility check, borrowers can apply for a loan.<\/p>\n\n\n\n

\n

Currently, for unsecured business loans, we take one or two working days from the time of application completion to loan sanction. We want to move towards a turnaround time of a few hours, using advanced algorithms for borrower assessment,<\/h2>\n<\/blockquote>\n\n\n\n

explains Shailesh Jacob, founder and CEO of Loan Frame. Applicants can upload the necessary documents for their loan application on Loan Frame\u2019s website or Android\/iOS apps.<\/p>\n\n\n\n

\n

Unsecured loans are least paper-intensive,<\/h2>\n<\/blockquote>\n\n\n\n

says Jacob.<\/p>\n\n\n\n

Compared to SMEs, MSMEs are further under-represented in India and face a bevy of issues with financial institutions.<\/p>\n\n\n\n

Aye Finance<\/a>, founded by bankers Sanjay Sharma and Vikram Jetley, provides financial support to Indian MSMEs. Sharma says, \u201cBy deploying a differentiated industry cluster approach, our underwriting algorithms and psychometric scoring tools can highlight patterns that enable quality lending. Our cloud-based automation further optimizes origination and servicing processes, making it economical to offer small-size loans appropriate to the segment.\u201d To address accessibility and last-mile connectivity hurdles, Aye Finance works out of 72 branches across India, mostly in Tier 2 and 3 cities.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Indian SMEs and MSMEs can now procure working capital loans online by producing valid identity proof like Aadhaar. (Photo Credit: NARINDER NANU\/AFP\/Getty Images)<\/p>\n\n\n\n

India has more than 600 fintechs in lending, payments, insurtech, blockchain and regtech, with investments growing from $25 million USD in 2013 to $364 million USD in 2015, says Swissnex India<\/a>. Fintechs are finding more takers across all age groups and demographies.<\/p>\n\n\n\n

\u201cBanks and fintechs are natural partners\u201d<\/strong><\/p>\n\n\n\n

So, will banks play a diminished role in the future? The founders of all three startups disagree.<\/p>\n\n\n\n

\n

We have a highly collaborative approach with banks. We work with banks looking to diversify their product or geographical footprint in unsecured and secured SME credit. Using technology to lower operational costs, we\u2019re helping them grow their loan books too. Lenders including state-owned banks are approaching us for SME portfolio partnerships.<\/h2>\n<\/blockquote>\n\n\n\n

says Jacob.<\/p>\n\n\n\n

Rishyasringa says that banks and fintechs are natural partners in lending: \u201cSMEs are becoming data-rich but remain credit-poor, giving us a chance to leverage data to reach the last mile, which is usually ignored by banks.\u201d<\/p>\n\n\n\n

Capital Float has a new plug-and-play platform that allows banks to co-lend with them at no extra operating cost. Through this arrangement, banks provide 80% of the loan to a customer, while the remainder is financed by Capital Float. They have collaborated with five financial institutions for co-lending including IDFC and IFMR, and are expecting two more Indian banks to join their platform next month.<\/p>\n\n\n\n

Winning customer confidence<\/strong><\/p>\n\n\n\n

This is first time that small businesses are being wooed by advanced technology offerings to scale their businesses, and the founders say customer reactions range from disbelief to shock. Sharma says, \u201cWhen they make their calculations and find that our interest rate works to flat 1.3% monthly, versus their existing borrowings at around 3-4% interest, customers are pleasantly surprised. This gets our relationship with them started on a solid foundation.\u201d<\/p>\n\n\n\n

Many SMEs are relieved that they needn\u2019t deal with reams of paperwork to procure a loan. In addition, the flexibility of being able to apply for a loan from anywhere is a big incentive, adds Jacob.<\/p>\n\n\n\n

Rishyasringa says, \u201cwe thought SMEs would take time to warm up, but their response has been quick and positive.\u201d He wants to make loan procurement stress-free and easy in India by actively addressing connectivity hurdles and enabling customer literacy.<\/p>\n\n\n\n

\n\n\n\n

The article<\/a> was authored by Sindhuja Balaji  for Forbes on Aug 25, 2017.<\/p>\n","protected":false},"excerpt":{"rendered":"

For the past 50 years,\u00a0small and medium-sized enterprises\u00a0(SMEs) and micro, small and medium enterprises (MSMEs)\u00a0have powered India\u2019s economy, especially in rural and semi-urban areas.<\/p>\n","protected":false},"author":2,"featured_media":622,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[2],"tags":[],"class_list":["post-620","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-press-release"],"acf":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.loanframe.com\/resources\/wp-json\/wp\/v2\/posts\/620","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.loanframe.com\/resources\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.loanframe.com\/resources\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.loanframe.com\/resources\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.loanframe.com\/resources\/wp-json\/wp\/v2\/comments?post=620"}],"version-history":[{"count":6,"href":"https:\/\/www.loanframe.com\/resources\/wp-json\/wp\/v2\/posts\/620\/revisions"}],"predecessor-version":[{"id":847,"href":"https:\/\/www.loanframe.com\/resources\/wp-json\/wp\/v2\/posts\/620\/revisions\/847"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.loanframe.com\/resources\/wp-json\/wp\/v2\/media\/622"}],"wp:attachment":[{"href":"https:\/\/www.loanframe.com\/resources\/wp-json\/wp\/v2\/media?parent=620"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.loanframe.com\/resources\/wp-json\/wp\/v2\/categories?post=620"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.loanframe.com\/resources\/wp-json\/wp\/v2\/tags?post=620"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}