It’s the first week of the month and you’re flush with funds, thanks to your timely paycheque. But last week was a different story, with your wallet turning size zero what with all those EMIs and living the good life. Considering all your friends are also broke, no use trying to borrow from them either.
Each one of us has faced such a situation some time or the other, and this problem seems to be more so in the case of young working professionals. This is where Kadki steps is a platform that helps people through short-term financial crisis. Working like a secure financial broker, Kadki offers a safe, fast and simple experience for short-term loans.
The aha moment to start such a service came to Purushottam Rameshwar Kadam when, with over five years of work experience in BPOs, real estate, sales and marketing and taking home a decent package, he still faced a cash crunch. “I observed that it wasn’t just just me, but my friends too were in the same boat. Some earning even more than me also faced the same problem.” says Purushottam.
The 22-year-old realised that he and Akshay Prakash Chavan, his 21-year-old engineering graduate friend, were always helping out friends who were broke. The turning point was when one of them sought help for a medical emergency: he had one more week to go before his salary came.
Recollecting the incident, Purushottam says,
We were not in a position to help him with the amount, so we guided him to a local moneylender who charged him an interest rate of 10 percent per month. What struck us was even after earning more than Rs 30,000 a month, this person didn’t have a credit of Rs 10,000 in the time of need.
The situation made such a deep impression on the two, leading them to start Kadki, a service linking the borrower and the lender. However, it was a long haul to persuade the latter to be involved in the startup. Finally they succeeded, drawing from various such cases.
Purushottam points out that most financial institutions take a lot of time to sanction loans because of lengthy procedures and paperwork. The duo decided to prioritise this and developed a software to shorten the process. First, the borrower has to fill basic details and once the request is received, the executives immediately follow up with a phone call to the customer. The process is streamlined such that the money reaches the customer within 24 hours from the time it was sought.
The team, which started with 10 to 20 customers eight months back, now says it is handling more than 600 satisfied customers, with more than 100 requests pending. Moreover, over the last six months, it has been seeing a 99 percent repayment rate. Kadki faced only a few cases of bounced cheques and not a single default, Purushottam adds.
“The clients whose cheque bounced paid us the amount with the late fee and the cheque bounce charge with the next month’s salary. We’re generating good revenues and in a few months, we will break even,” he says.
Over the past few months, short-term lending has been generating a lot of interest in India but the concept isn’t new in the West. What Kadki is following is essentially known as ‘payday loan’ in the U.S., which already has startups and banks providing the same. A report by the Federal Deposit Insurance Corporation’s Center for Financial Research in that country also states that as there are very low default rates, the payday lenders’ market seems to be attractive to investors as well.
In India, while the concept is yet to catch on, there are several startups and ventures entering the space. Blume Ventures and Tracxn Labs backed Buddy offers and short-term loans to college students to purchase e-commerce products on monthly payment plans. The company has partnerships with e-commerce majors, including Flipkart, Amazon and Snapdeal.
There also is the Matrix Partners-backed Finomena, which provides loans to college students and young working professionals. And also P2P platforms like i2ifunding and the Mohandas Pai-backed Faircent.
However, Kadki is more focussed on payday lending. Purushottam points out that the essence of short-term moneylending is urgency. He believes that unlike the others, they have developed a system where in all the legal verification process is completed within a few hours.
Once an individual applies for a loan on the platform, s/he get an email asking for the basic details and the KYC documents as attachment. Within 24 hours, an executive visits the customer, who then needs to sign the loan agreement and hand over a post-dated cheque to the executive. After signing the agreement, within 10 minutes the money is transferred to the customer’s salary bank account.
Kadki is currently based in Pune and is looking to expand to Bengaluru, Delhi and Mumbai. Currently bootstrapped, it is also looking to raise funds for market expansions. According to Purushottam, as of now its current verification system of the executive visiting the customer’s place works for Pune; but with time,and more funds, the team intends to strengthen its technology and also bring in fraud control systems like biometrics and linking with Aadhar.