Data-Tech Revolution: U GRO Capital charting a New Era in MSME Credit says Amit Mande
CXOToday has engaged in an exclusive interview with Mr. Amit Mande, Chief Revenue Officer, U GRO Capital
- How has the adoption of a Data-Tech platform revolutionized the way the industry addresses credit challenges for small businesses?
U GRO Capital is a dedicated MSME lender servicing all needs of all MSMEs. UGRO has been pioneering extending credit to MSMEs on a Data-Tech platform. Historically, MSMEs have grappled with underdeveloped banking habits and incomplete financial disclosures. This has traditionally led to collateral-based lending, a practice that often falls short of capturing the true financial picture of these enterprises. However, the landscape is changing with the emergence of ecosystems like India Stack, GST, Account aggregators and other alternate data ecosystems which provide a wealth of data. This data, coupled with advanced technology, enables lenders to assess cash flows accurately, marking a shift towards cashflow-based lending.
At U GRO Capital, we’ve gone above and beyond to delve into the intricacies of our customers’ profiles, understanding their income and cash flows that may not be adequately reflected in traditional banking and financial records. This immersive process sets us apart, as only a select few lenders have ventured into this territory. Our ability to integrate assessed cash flows into our proprietary risk model, GRO Score, is a game-changer. This model evaluates customers based on their banking, bureau, and GST behaviors, allowing us to extend credit to the last mile effectively basis cash flows moving away from the traditional methods of collateral backed or financials backed credit assessment. Building on our sectoral focus, we’ve developed risk models tailored to specific sectors and subsectors. This sector-specific approach enables us to extend credit judiciously and accurately price it.
By revolutionizing the MSME lending ecosystem, we are trying to solve the unsolved and participating in servicing the US $600 billion credit gap of MSMEs in India. Our aim is to acquire 1 million customers and capture 1% market share of the larger MSME lending market over the next three years.
- Could you elaborate on the strategic focus behind extending MSME financing to 150 locations?
U GRO Capital has established a robust presence in 25 major cities across the country and is strategically expanding its reach to encompass 150 tier-2 and tier-3 locations in key states, including Rajasthan, Tamil Nadu, Gujarat, Karnataka, Telangana. Our growth trajectory extends further to Uttar Pradesh, Madhya Pradesh, and Andhra Pradesh, as we remain dedicated to reaching the farthest corners and providing crucial financial support to MSMEs.
Our unwavering commitment is to extend credit to the last mile of MSMEs, particularly focusing on the underserved micro enterprises in these regions. Recognizing both the necessity and opportunity to cater to this segment, U GRO Capital has set up over 100 branches, with an additional 75 branches underway in these cities. These branches serve as instrumental hubs for offering both secured and unsecured MSME loans.
In these cities, where customers often have a limited credit history and minimal banking engagement, U GRO Capital employs a unique and personalized approach. By physically visiting customers, we assess their cashflows based on detailed ledger and sales analysis. This meticulous examination allows us to create a comprehensive shadow business profitability profile, forming the basis on which we extend loans that align with the cashflows of each individual customer.
This model has proven immensely successful in addressing the financial needs of businesses in these locations. As we continue to expand our footprint and refine our approach, U GRO Capital remains at the forefront of transforming the MSME lending landscape.
- How has the Co-lending model proven to be a win-win for large banks, NBFCs, and MSMEs?
PSUs and large private sector banks play a crucial role as custodians of liquidity in the financial landscape. Despite regulatory and government initiatives aimed at disseminating credit to the last mile, challenges such as diverse priorities, limited focus on smaller towns, legacy systems, and traditional underwriting models have hindered the satisfactory flow of credit. This has resulted in a significant credit gap that needs to be addressed.
In response to this gap, NBFCs like U GRO Capital have demonstrated remarkable agility. By leveraging their advanced data tech platform and going the extra mile, they have successfully delivered credit to the last mile MSMEs. Recognizing the need for collaborative efforts, co-lending arrangements between institutions have emerged as a strategic solution. Through co-lending partnerships, large institutions can channel credit to the last mile customers. This collaborative approach not only facilitates access to credit for smaller MSMEs but also bolsters the liquidity position of NBFCs.
At U GRO Capital, we take pride in being a pioneer of Lending as a Service in India, with co-lending standing as one of the key pillars of our success. As of September 2023, our AUM stand at INR 7,592 Cr. Notably, 45% of our total AUM comprises off-book AUM, a testament to the efficiency of our co-lending partnerships. These collaborations have proven instrumental in bridging the credit gap, ensuring that financial resources reach the grassroots level of the MSME sector, and contributing to the overall growth of the economy.
- Could you discuss the adoption of predictive GRO Score and advanced analytics in fortifying portfolio monitoring?
U GRO Capital has consistently championed the strategic utilization of data in every facet of our decision-making processes. Whether identifying optimal locations, targeting specific customer demographics, conducting risk assessments, or monitoring portfolios, data plays a pivotal role in shaping our approach.
Central to our risk assessment framework is our proprietary GRO Score model that operates on a tripod of Banking, Bureau, and GST data. This comprehensive approach allows us to evaluate diverse risk profiles, strengthening our overall portfolio. The synergy between our proprietary risk model and technological capabilities empowers us to make informed credit decisions swiftly and efficiently.
Our commitment to leveraging data extends beyond mere risk assessment. By harnessing the power of data analytics, we can construct multiple propensity models, predicting potential defaults among our customers. This foresight enables us to craft effective repayment and collections strategies, ensuring a proactive and well-informed approach to risk management. The early warning signals generated through these models further enhance our ability to navigate potential challenges and maintain the health of our portfolios. In essence, our emphasis on data-driven decision-making not only fortifies our risk assessment processes but also equips us with the tools to proactively address challenges, fostering a robust and resilient financial ecosystem for our stakeholders.
- In what ways have collaborative efforts in technology adoption, especially API stacks, enriched digital underwriting processes?
Our endeavour to revolutionize MSME lending through technology is exemplified by our strategic deployment of digital stacks. At the core of this initiative is our in-house team of over 200 dedicated professionals, tirelessly working to ensure the seamless integration of Application Programming Interfaces (APIs) across critical processes such as KYC validations, identity authentication, Bureau, Banking, GST, Repayments, and servicing.This meticulous integration serves multiple purposes. Firstly, it streamlines and automates key functions, enhancing the efficiency of processes such as validation and risk mitigation, thereby significantly lowering the likelihood of fraud. Secondly, it ensures a robust and reliable source of data for analysis and risk assessment.
API stacks have not only facilitated better risk assessment and underwriting but have also enabled us to embed ourselves in multiple ecosystems, allowing us to deliver credit to the last mile through various credit products — from term loans to instant credit lines to closed-loop retailer financing solutions.
The real impact of delivering sachet-sized small credit to the last mile has been possible because of all these API stacks, digital journeys, embedded solutions, and checkout financing. By embracing advanced digital technologies, we have positioned ourselves at the forefront of innovation in MSME lending, creating a seamless and secure ecosystem that ultimately benefits our customers through enhanced speed, accuracy, and risk management.
- What is your focus for sustainable and renewable sectors in terms of MSME lending, and your views towards green financing?
Embarking on the journey towards sustainability, our initial strides are rooted in a profound belief in green energy and sustainable solutions. At the heart of this commitment lies our dedication to providing tailored financial solutions that empower MSMEs to embrace eco-friendly technologies and practices.
Our Green Finance solutions are designed to support MSMEs in their transition towards sustainable operations. We offer financing options for a range of initiatives, including rooftop solar installations, green logistics, and energy-efficient solutions.
In the realm of rooftop solar, we’ve forged partnerships with a comprehensive network of solar panel manufacturers and numerous Engineering, Procurement, and Construction (EPC) companies. This strategic collaboration ensures that our green financing solutions reach the last mile, empowering MSMEs to harness the benefits of solar energy.
Expanding our commitment to sustainability, we are also establishing partnerships with manufacturers of L3 and L5 logistics Electric Vehicles. This initiative aligns with our goal of fostering green ecosystems by encouraging the adoption of electric vehicles in logistics operations. We actively engage with a multitude of partners involved in various aspects of sustainable practices, including battery recyclables, the development of solar charging stations, and overall energy-efficient solutions.
We’re still in the early days, so adoption is at the ground level. It is critical to understand the assets, given that these assets are continuously evolving and hence, a structured reuse market has still not been established. With our understanding of credit risk and partnerships with platforms that understand the asset risk or give us comfort on reuse, refurbishments or buybacks, we have taken the pioneering steps in the green financing space, expecting to soon be a quantum player.
- With the rapid expansion and technological innovations, how has U GRO Capital addressed challenges in HR and talent management to ensure a skilled workforce capable of driving these advancements?
The UGRO methodology has always stood in stark contrast to traditional processes, whether it be onboarding, assessment, customer management or be it data and technology. With this, it becomes imperative to not only have strong tech and analytics teams, but also align resources across functions to be able to maneuver through the next generation of lending philosophy.
At U GRO Capital, we boast a resilient management team dedicated to building India’s premier small business financing platform. Recognizing the pivotal role of technology, we’ve curated an in-house tech team, proficient business and underwriting experts, and a robust operations and customer services team. To maintain a skilled workforce, we’ve instituted comprehensive training programs, keeping employees abreast of technological advancements. Our culture of learning and innovation fosters adaptability and proactivity, evident in initiatives like continuous learning modules, mentorship programs, and skill development workshops.
We attract top-tier talent with a profound understanding of the digital landscape or talent who appreciates and likes to upgrade to new-age business models. Our HR and talent management efforts are pivotal in sustaining leadership in the fintech space. By investing in our people, we aim to reach close to our goal of empowering the MSME ecosystem.
Beyond the work competencies, what we have been able to do is drive down to the last person our commitment to ‘Solving the Unsolved’, and therefore need to take an extra step to take credit to the underserved last mile MSME. By investing in our people – upgrading, training, etc., we aim to keep the entire workforce at the forefront of new-age lending.
