Fintech lenders find comfort in the steady cash flow of humble corner shops

BENGALURU: Fintech lenders focused on small businesses are finding comfort in the steady cash flows of corner shops selling groceries, milk and medicines, even as Indian economy slowly reboots itself from the Covid-19 pandemic-led lockdown phase.

Most fintech lenders are focusing on servicing existing clients and in the process turning off the funding tap for new borrowers. The only exception is for essential services, including grocery shops, dairy outlets, pharmacies, opticians and restaurants offering food delivery.

“In the last three months, other lending has been slow but there is demand from essential services like kiranas (corner stores) and pharmacies. The focus of lenders has moved to them,” said Manish Lunia, co-founder of Flexiloans. “Logically, for one year at least, there is cash flow visibility and stability in the segment. Others have zero cash flows.”

About 60-65% of Flexiloans’ total loan disbursements over the last few months have gone to essential services.

“Because of the Covid-19 crisis, 2-3 pockets are holding up, which are essential services, e-commerce vendors and food delivery. Those are the ones we are focusing on right now. We are looking at a strong transaction footprint that is available at these categories. All new loans are going to one of these three categories,” said Alok Mittal, co-founder and CEO of Indifi Technologies.

BharatPe, which equips merchants with digital payments solutions and gives them loans through non-banking companies, said it is doubling down on lending to essential services.

It will underwrite the loans on the back of transaction volumes clocked on its QR code in shops.

“We are keen to expand our lending business. We want to focus on lending to food and beverages, grocery, pharmacy and dairy outlets,” said Ashneer Grover, co-founder and CEO of BharatPe.

It is targeting to lend Rs 700 crore to shopkeepers over the next 12 months on the back of their transaction volumes. “We lent Rs 140 crore in 6 months,” Grover said.

Lenders said once economic activity hits pre-pandemic levels, loans to other businesses will pick up pace.

“Companies are lending to essential services because their cash flows have not been affected,” said Harshvardhan Lunia, co-founder and CEO of LendingKart. “It is not a wave. The industry is just being prudent right now. Lending can’t be an industry focussed. Diversification is the key.”

About 35% of LendingKart’s total loans in the last few months have been to essential services, and the rest in servicing existing clients.

“It is an obvious place to give money right now. Kirana stores want to digitise right now. As their collections become digital, the money trail can be used to get loans. For two months, e-commerce was not able to deliver, so kiranas and small shops struck out. But once they come back, then what?” said Vikram Chachra, founding partner of early-stage venture capital firm 8i Ventures.

[Source – Economic Times]


Please enter your comment!
Please enter your name here