This fintech startup is enabling financial inclusion for women and first-time borrowers
The COVID-19 pandemic has had an interesting impact on women. Research reports have suggested that while the work-from-home model helped some women focus better on their professional endeavours, it relegated others to taking over household responsibilities and made their professional lives a second priority, especially if they happened to be married.
Rimmi Zariwala from Mumbai fell into the second category. Her in-laws, who used to take care of her daughter while she was busy running her boutique cupcake store, expected her to take over household duties when the pandemic forced her to shut down for some time.
But Rimmi wanted to take the time to focus on building out her online cupcake-making workshop venture, as well as get into D2C with products such as DIY-at-home hot chocolate mix, cupcake starter mix, and mug-cake mix.
After investing all her savings in the business, when she asked her family for more funds, they refused, saying she should take the time to focus on household chores and looking after her daughter. Exhausted of fighting for her right to work, but not dejected, Rimmi turned to MSME financing platforms to look for funding.
She took on a collateral-free loan of Rs 30 lakh from an online MSME financing platform and plunged headlong into expanding her business.
“If it wasn’t for the platform, I would’ve been forced to give up my business. That funding saved me from a lifetime of playing the role women are traditionally expected to play — a homemaker, which is not how I was raised,” she tells YourStory.
“Funnily, my in-laws never asked their own son to quit his job, “father” our daughter, or take care of them,” she remarks.
MSME financing platforms have truly become lifelines in a myriad of ways — from saving generational businesses from going under, to helping businesswomen assert their own professional and financial freedom, and so much more.
Digital lenderis one such company. In FY 2020-21, NeoGrowth extended loans to 1,197 women — or 16.4 percent of the total borrowers — as per its Social Impact Report.
“Another generation of women will have to wait for gender parity, as the impact of the COVID-19 pandemic continues to be felt, and the time needed to close the global gender gap has increased by a generation from 99.5 years to 135.6 years,” NeoGrowth said, citing data from the World Economic Forum’s Global Gender Gap Report 2021.
“NeoGrowth removes the gender bias from the loan disbursal process, welcomes women entrepreneurs and helps improve their livelihood, thereby, playing a vital role in the upliftment of the women entrepreneur’s community,” it added.
And it’s not just women. Over the last year, the fintech startup has extended credit lines to first-time entrepreneurs, retailers, restaurants, apparel shops, pharmacies, medical clinics, and grocery shops too, all of whom played important roles in getting people through the pandemic.
What NeoGrowth does
Founded in 2013 by Dhruv Khaitan and Piyush Khaitan, who together have founded and managed a number of tech companies to serve the SME segment, NeoGrowth Credit is headquartered in Mumbai, and present in 24 other cities in the country.
It is a digital lending platform that specifically targets micro, small, and medium enterprises. It offers a range of secured and unsecured credit products, for different sizes of businesses.
Where it gains a leg up on banks is the documentation and underwriting process.
Not every MSME engages in proper bookkeeping, and that has historically precluded them from taking advantage of loans. Furthermore, the lack of formal documentation makes financial organisations wary of engaging with such businesses too, mostly due to regulatory requirements.
NeoGrowth solves this by simply using the digital payment records of a business, as opposed to financial performance statements most banks insist upon. This also helps those with fewer assets or inadequate credit history access loans, especially if their business is booming and they’re able to show an adequate number of transactions.
“Our product design is centred on the business model of the retailers as digital payments give a good sense of the business potential, seasonality changes, and customer footfalls in terms of underwriting. Also, this excludes any individual factor from the equation and focuses on the business potential, in terms of underwriting,” Arun Nayyar, CEO of NeoGrowth Credit, tells YourStory.
The startup claims to have financed over 20,000 customers to date. In FY 2019-20, it says it lent Rs 1,450 crore to its customers.
Solving for MSMEs’ pain points
NeoGrowth’s solution for MSMEs solves three main problems they face trying to apply for a loan:
- Lack of collateral — MSMEs, due to the uncertainty associated with their topline, don’t make for the most reliable borrowers. So, banks often ask for some form of collateral to insure themselves against any loan defaults by MSME owners. Only a handful of the people that operate in this segment own any mortgageable property, which shuts many doors for them.
To tackle this problem, NeoGrowth offers collateral-free business loans that are based on a host of other factors, including digital transactions records.
- Insufficient credit history — Most MSMEs today are first-time borrowers, forced to look for financing options due to the pandemic, which means most don’t have any credit history that banks can use to get a fix on their credit repayment behaviour. NeoGrowth underwrites loans using digital transaction records, which does not require borrowers to have any sort of credit history.
- Long process — Loans involve an inane amount of paperwork, which can be a deterrent. Moreover, even once the process is done and funds are allocated, the disbursal can take weeks. Online platforms such as NeoGrowth help MSMEs access this capital quickly. The application process is also digitised to make documentation easier and hassle-free.
“Our mission is to fund small businesses by leveraging the digital ecosystem. Our financing not only helps our clients grow but also creates a positive impact. More than half of the retailers, although they are creditworthy, are denied finance on the basis of traditional underwriting methods,” says Arun.
“We help advance sustainable development and address societal challenges like lack of access to capital, lack of support for entrepreneurship, and gender inequality (when accessing capital via credit).”
Of the 20,000 customers on its platform, NeoGrowth says over 5,000 are from Tier-II cities, and 15,000 from Tier-I cities.
The startup has raised Rs 500 crore in equity funding, and twice the amount as debt. Omidyar Network, Aspada Investment Company, Khosla Impact, IIFL Seed Ventures Fund, among others, are its investors. In FY20, it recorded revenue of Rs 333 crore.
Its competitors include, , , , and , among many others.
Going forward, the startup said is looking to expand into Tier-III areas, and adding more serviceable locations to its list.
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Edited by Saheli Sen Gupta