How This Company is Bridging India's Debt Capital Market Gap

Reports suggest that there is a $380 billion gap in India's SME credit market

While the funding news of start-ups makes headlines all the time, one particular segment that is often ignored is the SME sector. Applying for loans in banks requires lot of background verification, document submission and of course, patience. And SMEs are usually the ones in need of short amounts of cash, to get through hard business times. Coming to their rescue at such times are alternative lending platforms offering debt capital.

SME Sector is Often Ignored

Understanding that the SME is under-addressed in today’s financial debt scenario, Alok Mittal founded Indifi Technologies – a platform for small business loans. “People have not taken a closer look at SMEs, their cash flows are different and the sector is often unorganised,” said Mittal, and added, “We look at their data and their cash flows. We take in good measures of their credit worthiness before disbursing a loan. Our loans vary within the broad range of Rs 50,000- 50 lakh and we have over 2,000 customers.”

Mittal also points out that reports suggest there is a $380 billion gap in SME credit market in India. “Thus, there is a large potential in this business,” he said.

While Mittal is the CEO of the company, Siddharth Mahanot is the COO and Sundeep Sahi is the CTO.

Partnering With Third Party Agencies for Data

Creating a unique way of functioning, they partner with third-party agencies like travel agencies who can give details about the SMEs credit worthiness. “For example, we partner with a travel agency and we can get to know about the average volume of tickets bought by the client and also how volatile they are. So, we get to know their credit history and their credit decisions,” he said.

Different Than a Bank

Banks too are waking up to the needs of the SME sector and with the use of technology are trying to reach out to these small businesses. Mittal, however, said their approach is different than a bank’s. “What makes us unique is that we go industry by industry. We have a segment specific approach: including travel, hospitality, retail, dealer financing, e-commerce and used cars. We offer more relevant products and ever offer 30-day loans along with collateral free loans. Our credit algorithms are at a much higher level. Banks need a lot of information, thus requiring more time. Meanwhile, we get the data from our partner agencies. In fact, nowadays a lot of banks and NBFCs are using our platform. With the use of technology, the risks in lending are lower,” he said.  

The Challenges

When Mittal started off, he too faced many challenges. “People haven’t figured how to control risk. Also, the credit assessment is not yet a structured process. Even acquiring customers is a difficult task as the SME sector is fairly dispersed throughout the country. We have been able to reach out to many customers because we are doing it successfully through partnerships,” he said.

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