Hyderabad-based CredRight caters to the underbanked

Hyderabad: Many small business continue to be in the unorganised fold. As a result, they do not have a record of their financial transactions, which can be used to prove their creditworthiness. City-based Credright, a fintech startup, has facilitated loans to such entities. There is no need for collateral or for a guarantee. The company […]

Hyderabad: Many small business continue to be in the unorganised fold. As a result, they do not have a record of their financial transactions, which can be used to prove their creditworthiness.

City-based Credright, a fintech startup, has facilitated loans to such entities. There is no need for collateral or for a guarantee. The company establishes the credit worthiness using their chit fund history.

“About 73 per cent of the small businesses have no ITIR. Also, most of them are not GST registered. A lot of proprietors do not come under the GST net yet. In such scenarios, it is difficult for them to get credit from financial institutions. We are using alternate data like chit fund history to establish their worth,” said Neeraj Bansal, Co-Founder and CEO, CredRight.

“More than 50 lakh small businesses in South India rely on registered chit funds for meeting their financial needs,” he said explaining the company chose chit fund history as one of the metrics to assess the credit worthiness.

The company facilitates loans from Rs one lakh to Rs ten lakh and the average loan is about Rs five lakh to small businesses. The tenure is three to five years. “These people do not have collaterals and therefore we are just talking about unsecured loans only. Since it is an unsecured loan, we have to figure out their cashflows, and the intent to pay back. Most of the businesses are not digital in nature and their presence is limited to Facebook, youtube or whatsapp. These will not give any further insights,” he said.

“We have seen that most of the small businesses participate in chit funds. We ask them to provide a chit transaction statement and with their consent we analyse their repaying capacity and cash flows. Our analytics engine crunches the data and throws up data. We combine this chit data with Cibil scores and bank data they have. Suddenly the customer, whom the banking industry calls a thin file, will become a thick file as there is a significant data available,” Bansal said adding that it has so far facilitated loans worth Rs 50 crore to about 1,000 small businesses. It is getting about 500 applications every month.

Credright has 18 branches including 12 in Telangana. It aims to take that number to 50 and increase the lending to Rs 150 crore by March 2022. It now employs 140 people and this will be more than 300 by March.
Impact? “The timely credit will help small businesses grow as they will invest in inventory and machinery. This will lead to sustained economic activities,” Bansal said.

Telangana is the front runner in digitising chit data. It can verify the chit groups happening and know if customers are giving the right data or not. The interest rate, which varies with the risk profile of the customers, is around 21 per cent per anuum. It restructured some loans due to the Covid impact. The NPAs are falling due to rise in business levels, he said.

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