Edelweiss SME Lending's Head Explains Why Big Data is a Game Changer for the Industry
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There is enough said and written about the issues related to MSME lending. The credit gap is estimated to be close $60 billion and opportunity is waiting to get exploited.
While banking the unbanked SMEs, lenders often complain about lack of data. However, with initiatives like GST, a lot of money from the informal side is moving towards the formal side of the economy and SMEs are starting to realize that it makes sense to be tax prudent company rather than trying to avoid this. This change in mindset has led to an explosion of GST data stack.
In an exclusive conversation with Entrepreneur India, Mehernosh Tata, Head of Edelweiss SME Lending discusses how big data is going to be a lifesaver for SMEs.
Big data plays a large role in the way we analyze things. As we go along, the data is expected to get more refined which would help business build differentiated products for their set of customer. The case is no different for MSME lenders.
In fact, Tata believes in the next five years, it is expected to be a game changer for the industry. Multiple alternative lending models will come to play and some might scale while others might fail. But this will help businesses to understand how big data will shape the industry and lead its way to digitalization.
“Some of these positive aspects are working in favour of banks and financial institutions especially NBFCs as we are fast adopters and fast movers to reach out to the customers and offer them new and innovative products,” he pointed out.
Tata also says the shift has been there. Earlier data has been used to get a historical understanding but now companies are looking at data both on and off side to build predictive models.
For Edelweiss, in particular, data has various connotations. From souring to risk analysis, they use algorithms in various parts of the value chain.
“I would say in lending, data is a combination of two things. Getting data from the source which is GST and another very interesting observation we have is - even the customer who do not have audited financials or are not in the position to share it, bank statements analysis are fairly certain to asses the client and offer a loan facility. What comes out now is the ability to use algorithms and be able to build scorecards which were possibly missing earlier and hence, it is a combination of these two helps us cater to them,” he added.
Scoring it Right
With the growing importance of big data in the lending space, Edelweiss is now building a proprietary risk scoring model. Its SME risk scoring model eliminates the requirement of hard collateral up to 50 lakhs provided the company’s financial data is in place.
“We are working on scores cards and are also assessing other forms of alternative data sources. We are shortly going to launch a GST-based lending programme which will eliminate the need for any other financial data. We are also in the process of coming into a programme where our engines will do a backend check including GST, ITR, PAN within 4-5 minutes," he concluded.