Rural lending startup SarvaGram reached 20K underbanked Indians in 3 years. Here's how

Mumbai-based rural lending startup SarvaGram provides a plethora of loan services, and works with three underbanked but creditworthy segments of the population - agriculture allied; micro, small and medium enterprises (MSMEs); and salaried (permanent or contractual) households.
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Kantilal Daundakar is an onion farmer in Shirur, Maharasthra. When the COVID-19 pandemic hit, the acute shortage of labour rendered him helpless overnight. Realising that depending on manual labour alone is not a wise thing to do, Kantilal started using the seed cum fertiliser drill machine made particularly for onion crops in the region. 

“When we used to transplant the onions with our hands, the cost of operation per acre was about Rs 7000 to Rs 8000, which could even go up to Rs 10,000 with weeding, tilling and other necessities. Now the cost of operation is about Rs 2000 - Rs 2500 per acre, which includes sowing, fertilising etc,” says Kantilal. 

He attributes this success to SarvaGram, a startup which helped him finance the buying of the drill machine. Launched in June 2019 by bankers Utpal Isser and Sameer Mishra, the Mumbai-based startup leverages a tech distribution model for assessing the creditworthiness of the consumer.

“The idea of SarvaGram germinated from the words of Dr Verghese Kurien, known as the ‘Father of the White Revolution' in India. He said, “India’s place in the Sun would come from the partnership between the wisdom of its rural people and the skill of its professionals.” It is the execution of this idea that is at the core of SarvaGram’s mission,” says Utpal. 

SarvaGram provides a plethora of loan services like housing loans, gold loans, consumer durable loans, personal loans, farm loans, and business loans, with loan amounts ranging from Rs 1 lakh to Rs 25 lakh

“Our operations have us working closely with three underbanked but creditworthy segments of the population - agriculture allied, micro, small and medium enterprises (MSMEs) and salaried (permanent or contractual) households where the chief wage earner is employed full-time and draws a monthly salary,” says Utpal. 

“We have already developed and positioned proprietary tools for a variety of customer segments to automate our lending exercises. The gold loan and consumer durable loans are Rs 20,000+. Personal loans range between Rs 1 lakh to Rs 5 lakh. We also provide unsecured loans upto Rs 3 lakh,” he adds.

According to the founders, the startup has served about 20,000 customers to date, and it has partnered with organisations like Northern Arc, Alteria Capital, IDFC First Bank, Vivriti Capital, AU Small Finance Bank and UC Inclusive Credit to provide the loans. 

SarvaGram, which employs about 700 people, currently operates out of eight hubs and 50 branches across Rajasthan, Karnataka, Maharashtra and Gujarat. It also has SarvaMitras, SarvaGram’s franchisees, operating across states. 

The franchisee program is aimed at enhancing the organisation’s deep rural network and acts as a last-mile partner that helps in fulfilling farm rental services. SarvaGram has around 220 SarvaMitra franchisees across the four states it currently operates.

It also recently implemented a SaaS platform to digitise the collection of loans. Most of its loans are repaid through NACH (National Automated Clearing House), a funds clearing platform set up by the NPCI (National Payments Corporation of India)

When asked how they deal with loan defaulters, Sameer says, “Understanding the household and its multiple sources of Income while building a relationship with them is our core. Most of our collections happen through E-NACH. In case it does not work, we visit the customer and our relationship with the customer plays out to cover our collections,” Sameer says.

Understanding the market 

SarvaGram aims to enable rural India’s aspirations by providing access to easy finance and distribution, through a system of data-driven financing and farm mechanisation processes. 

 “SarvaGram’s USP is our distribution platform that leverages technology and data which enables efficient financing and distribution models. The company’s location selection criteria, critical field-based market insights, micro-segmentation of households and proprietary underwriting algorithms are all leveraged by the platform, which factor in frequency, variability, and resilience of incomes at household levels,” says Sameer.

He is emphatic in saying that SarvaGram specialises in serving the financially underserved customer segment, a customer base that he feels is inadequately served by popular financing entities in the market.

“Entities like Bajaj Finance, Fullerton, Adani Capital, Finova and Samunnati etc also cater to our customer segment. However, it is our deep understanding of this customer segment that enables us to build and innovate on credit models that are more relevant and customised to their distinctive need-gaps,” says Sameer. Utpal and he were colleagues at ICICI Bank and working in tier II and III regions when they realised it was simply impossible for commercial banks to fill certain gaps. 

Funding the funds

SarvaGram raised Rs 25 crore in a Seed round from  Elevar Equity in 2020. “The funds provided us with a foundation to build upon, and solve for the various financing and distribution challenges that came our way,” reveals Sameer.

The startup secured Rs 76 crore in a Series B round last year led by Elevation Capital (formerly SAIF Partners) along with pro-rata participation from existing investor  Elevar Equity.

 SarvaGram generates revenue by loan disbursements and providing farm mechanisation processes. “We take pride in the impact SarvaGram has had on the automation of farms, enhancing production and reducing the reliance on manual labour,” Sameer says.

What lies ahead? 

According to a report by Statista, digital lending is one of the fastest-growing fintech segments in India, and grew exponentially from $9 billion in 2012 to nearly $110 billion in 2019. The digital lending market was expected to reach around $350 billion by 2023, according to the same report. 

“The potential for growth in the market is huge. We operate in a market where existing products are unable to provide growth capital, and that is exactly where we strive to change. Our founding team came in with the rich experience of serving this landscape, and this has given us the ability to anticipate and mitigate said challenges from day zero,” states Utpal.

“In the next five years, our plan is to expand to 500 branches from the current number of 50, something that would enable us to reach the goal of serving 15,00,000 households from the 20,000 households we currently work with,” Utpal comments.

The startup plans to expand in the states it is currently operating in, and also thrust its focus on Karnataka. It also has plans to enter Telangana and Andhra Pradesh.

 SarvaGram recorded an AUM (assets under management) of Rs 172 crore in March 2022. “We are seeing incredible growth each day. Currently the AUM is at Rs 185+ crore with end of April numbers projected to be somewhere around Rs 195+ crore. In the next five years, the number is expected to touch the Rs 10,000 crore mark,” Sameer signs off.
Edited by Anju Narayanan

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