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When it comes to higher education, what does a student need apart from access to good resources? The answer would be – money to manage learning expenses. And in the absence of ready cash, many disadvantaged but hardworking students stand to hugely benefit from small loans.

Unfortunately, access to micro loans can be expensive in several banks, and most banks will not fund small amounts for buying notebooks and guides. But that’s where several students and their families require support.

Kolkata-based mPokket, founded by Gaurav Jalan in 2015, wants to make it easy for students and young working professionals to access instant loans during times of need. The company provides an easy way for students, the self-employed and young working professionals to take micro loans via its mobile app in order to meet urgent cash requirements.

Gaurav completed his college education from Amherst College in the US, and then completed his MBA from the Columbia School of Business in 2006. He then went on to work for Bain, and Fidelity International before setting up his own wealth management business, Avant Garde, in 2011. However, one idea always piqued his interest from his university days.

Gaurav says, as an international student in the US, he was able to get a credit card, which helped him significantly in managing his finances. However, college students in India are not eligible for credit cards or personal loans, and are thus unable to obtain credit from traditional financial institutions. He says –

“Given this need, we saw an opportunity to leverage the increasing penetration of smartphones to create an app. Through this app, tech savvy college students could easily and instantly borrow small amounts of money to meet urgent cash needs.”

He adds that most individuals need access to credit at some point in time. The youth, more so, as being in the early stages of their careers, they are unlikely to have built up meaningful savings. The majority of youth in India find themselves ineligible to borrow from traditional financial institutions due to the latter’s strict underwriting criteria, and also due to reluctance in providing small size loans that young individuals really require.

mPokket is an app-based lender, and competes with the likes of Gyan Dhan, Slice and Udhaar.

It is one of the earliest micro loan companies in India, having been set up in 2015. It has recently introduced tailored products for its customer segment, and expects to increase its user base rapidly over time by offering a superior user experience.

The market is big for startups in the sector. The HRD Ministry and the Ministry of Education pegs the higher education industry to have 12 million graduates entering education each year.

The product

mPokket’s USP lies in its simplicity of use. A user needs to download the app from the Google Play Store, and register using their Google or FB account. They then need to upload their KYC information and documents via the app. Once verified, customers are able to borrow money instantly, and get it credited into their bank account or digital wallet. Assuming the required information is provided promptly, the entire journey from downloading the app to getting the money into bank account can happen in less than an hour.

“Once our app went live in December 2016, we got our first customer the very same day. This customer found our app when searching for ways to take loans online,” says Gaurav.

The startup has close to seven million registered users, and nearly 1.3 million KYC approved users. By the end of 2021, it expects to grow that figure to 1.5 million.

mPokket has raised three undisclosed rounds of funding from external investors till date, with a Series A round in Feb 2020, led by a US-based private equity firm. It has raised $8.22 million to date.

It expects to close financial year 2020-2021 with a disbursement of more than Rs.1200 crores, which implies greater than 70 percent YoY growth. It’s annual disbursal run rate is over Rs.1000 crores per year. It expects this to grow 2x-3x in the next 12 months. The founder claims that the company has been profitable since 2018.

The company’s revenue was Rs 72.4 crore as of FY 2020. The founder does not want to disclose its revenues for FY 2021 yet.

“The biggest challenge has been to ensure that the company has capable and sufficient talent as we scaled. Hiring people who can lead and drive the organisation forward has been a non-trivial exercise, and has always been top priority,” says Gaurav.

mPokket works with NBFC lending partners that charge borrowers interest and/or fees on the loans that they take. mPokket charges the lending partners a fee for its services.

The app logs in users from over 18,000 pincodes in India.

In the next 18 months, the startup plans to consolidate and grow its leadership position as a provider of credit to college students. It will also focus on fine tuning its product offering for young working professionals, and grow this business significantly from its current nascent stage. It also plans to increase its lending to the self-employed segment.

Currently, borrowers can avail loans ranging from Rs. 500 to Rs. 20,000, and the amount is sent via instant credit to their bank account or Paytm wallet. Borrowing limit is increased over time, based on multiple factors, including timely loan repayments. One can choose to repay in up to three months, along with a nominal interest charge.

The company did not disclose its NPAs, but sources says it is about 3 percent. However, it also believes that its portfolio does not have many defaulters as students often are willing to repay. And that itself shows that students are ready to pay up their debts while they are studying.