When Namaste Credit started in 2014, digital lending wasn’t a buzzword in fintech. In fact, fintech itself was a nascent segment in India, comprising mainly mobile wallets.
Founders Gaurav Anand and Lucas Bianchi — both with risk and credit modelling experience at Moody’s — knew they were early movers in the SME lending space, and set out to solve the fundamental problem of access. They were joined by Krishnan Parameswaran as Co-founder and CTO in 2015.
Gaurav tells YS,
“There are 60 million SMEs in India, and only 35-40 percent get access to any kind of formal credit. We wanted to build a product and tech company that could democratise SME lending in the country.”
[R to L] Namaste Credit co-founders Lucas Bianchi, Gaurav Anand, and Krishnan Parameshwaran
The Bengaluru-based startup wanted to solve essentially two problems — SMEs discovering credit, and lenders underwriting credit.
It built a platform that is a blend of a B2B loan marketplace (for SMEs) and an AI-based credit underwriting engine (for lenders).
Until mid-2019, Namaste Credit disbursed Rs 1,700 crore worth of loans. This nearly doubled in the last two years, and is now touching Rs 3,000 crore.
“We’re doing Rs 150-200 crore worth of monthly disbursals post COVID-19. The demand is back and the supply has also grown. There’s a significant appetite to lend to SMEs,” says the founder.
Solving credit access with AI
Namaste Credit adopted an “ecosystem enabler” approach, targeting 80 percent of SMEs in India that clock less than Rs 2 crore in annual revenues.
On the demand side, it developed Loan Hub, a neobank-led loan marketplace that lists over 80 lenders, including PSUs, private banks, NBFCs, and new-age fintechs.
Gaurav claims, “Loan Hub allows easier onboarding, and provides 6X better credit access to SMEs. From an impact perspective, there is hardly any sector that can create more throughput than SME lending.”
Lenders get access to the startup’s proprietary intelligent credit assessment model (iCAM) that helps them assess the creditworthiness of SME borrowers, identify and minimise fraud, and reduce turnaround time from 1-6 weeks to a few days.
The founder explains, “Traditional banks ask for 600 pages of documents. Of that, the output you get is 1,000 data points, which is sub-optimal. We’ve developed our own OCR engine that uses AI and ML to process unstructured data without any manual intervention. It helps lenders look at 100,000 alternative data points to enhance their underwriting quality and rely less on submitted documents.”
“We have reduced their decision-making-to-disbursement window to less than a week. Because credit that takes long to dispense loses the multiplier effect. The goal is to unlock intent from banks to lend more and faster,” he adds.
iCAM also reduces uncertainty in loan closure, thereby increasing the pool of credit for SMEs. Top lenders, including HDFC Bank, ICICI Bank, Axis Bank, Bank of Baroda, Standard Chartered, Lendingkart, Bajaj Finserv, etc., use it. Namaste Credit earns a cut of the loan value.
Additionally, Namaste Credit charges a SaaS fee for licensing its credit underwriting and loan management product to lenders that may or may not be listed on the Loan Hub marketplace.
Gaurav says, “The SaaS revenue contribution is 25-30 percent at present, but will go up to 50 percent on the back of demand we are seeing right now.”
MSMEs have a credit exposure of $232 billion, as per RBI
Other growth metrics and projections
Namaste Credit claims to have served more than 25,000 SMEs in the last six years. It has facilitated lending to brick and mortar SMEs, from petrol stations to local restaurants to schools to even fledgling startups that need working capital.
The average ticket size is Rs 35-40 lakh for secured loans and Rs 10-12 lakh for unsecured loans. “The loan size has come down because of a conscious effort on the part of lenders to give to customers who are new to credit,” Gaurav shares.
“Many new-age lenders are also giving away small-ticket loans. Even corporates are now getting into kirana BNPL, and we’re partnering with them to give them our proprietary underwriting engine.”
Before the pandemic, the loan conversion rate [application to disbursal] stood at 45-50 percent. Now it is 65 percent. And by March 2022, the startup is looking at monthly disbursals of Rs 500 crore.
Namaste Credit Loan Hub lists 80+ lenders and has served 25,000+ SMEs
Private banks and PSUs constitute 80-90 percent of lending on the platform. Meanwhile, the share of NBFCs has shrunk to less than 10 percent over the years.
“They didn’t have a savvy collection strategy, and couldn’t absorb the shocks of demonetisation,” reveals the founder.
The startup is also building new features like predictive analytics, and is in the POC or contract stage with various lenders. The tool will help them predict how a demand would fare in the next 12-24 months.
Namaste Credit is also building solutions to automate risk monitoring for banks.
Riding on the new product innovations and channel growth, the startup is on course to clock a $2.5 million MRR by FY23, according to the founder.
Funding and future roadmap
In May this year, Namaste Credit raised a Pre-Series B round led by private equity firm Amicus Capital. Even though the size of the deal was undisclosed, Gaurav reveals, “We’ve raised about $10 million in total till date.”
“We use capital judiciously, and our business model is less capex intensive. We also like to maintain our equity stakes in the company,” he says.
Prior to this, the startup had raised a Series A round of $3.8 million led by Nexus Venture Partners in 2018. It used the funds to grow its lending partnerships and scale up the core technology platform.
Anup Gupta, Managing Director, Nexus Venture Partners, said at the time of funding,
“SME credit is seriously constrained due to lack of reach and relevant data to assess credit worthiness of borrowers. Namaste Credit’s technology, combined with its channel partners and lender network, is already making a significant impact on facilitating credit to SMEs in a win-win manner for all.”
Namaste Credit is targeting monthly loan disbursals of Rs 500 crore by March 2022
Namaste Credit also looks to raise a “full-fledged” Series B round upto $20 million over the next few quarters to “expedite its land grab and growth trajectory”.
The capital will be deployed in hiring tech talent (which is increasingly becoming expensive), and building new data science capabilities to ramp up the product.
“Our goal is to become the no. 1 player in the SME lending segment in the next 24 months before we look for expansion in markets similar to India. Banks are asking us to generate even more credit demand.”
Namaste Credit competes with the likes of Lendingkart, Capital Float, Aye Finance, FlexiLoans, OfBusiness (which recently became a unicorn), SmartCoin, and others in a competitive SME lending market. The MSME segment has a credit exposure of $232 billion, according to the RBI.
So, what separates it from the rest?
“Nobody offers a unified platform that automates the end-to-end underwriting and disbursal process. We come from a credit risk background and have immense learning on the SME lending space,” asserts the founder.
He sums up by saying, “Our vision is to give B2B customers a B2C experience and help them reach product nirvana.”
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