October 25, 2016
Bengaluru, India

We hosted a panel discussion on Oct 25, 2016 at our office to discuss the ground realities and nuances of lending to small enterprises. In our panel discussion, we brought together 3 different approaches of lending to this segment - Small Finance Bank (Ujjivan), NBFC (Vistaar), and a FinTech (Capital Float). Our panellists were Samit Ghosh (MD & CEO, Ujjivan), Ramakrishna Nishtala (MD & CEO, Vistaar), Vaibhav Singh (Business Head, Capital Float), Murli Manohar (National Business Manager, MSME, Ujjivan) and Sameer Segal (CEO & Founder, Artoo) who moderated the panel.

We discussed 3 topics followed by a round of Q&A.

First, we discussed the needs and constraints of MSMEs in lending. The panellists agreed that MSMEs are a heterogeneous segment, where 96% lack access to formal finance and operate entirely in cash, amounting to an almost non-existent digital footprint. Most borrowers are first-time loan applicants and credit literacy and due diligence on the end use is critical. As MSMEs are one-man shows, most loans are applied for outside business hours.

This brought us to the next question on how can we perceptibly improve the customer experience. While the general consensus was that faster loans drive better customer satisfaction, FinTech firms argued in favor of instant loan qualification while traditional lenders felt it is worth taking 1 - 2 weeks to assess credit and reduce risk. Panellists also touched upon tailored financial products, such as line of credit that can meet short term working capital needs. “The key question is how do you engage with the customer more deeply and not just as a one-time lender but as a financial partner or advisor by adding more value to his business”.

Our discussion concluded with thoughts on the role of technology and whether the loan officer will become redundant. While it cannot replace the loan officer, it should eliminate the low risk, low reward activities, empowering the loan officer to move up the value chain and take intelligent decisions on the field. For example, if we know the average Gross Margin for a Grocery business is 15% and the entrepreneur is claiming it to be 30%, we could alert the loan officer, enabling him to take better decisions. “This is technology in real time, supporting him to make intelligent decisions”.