Financial technology firm BharatPe plans to build a $ 5 billion loan portfolio over five years to serve the credit needed by millions of small businesses in India, a senior executive said.
The Delhi-based company is on track to cross $ 14 billion in total annualized payment value and is aiming to grow to around $ 30 billion in POS by March 2023.
“Our plan is to build a loan portfolio of around Rs 40,000 crore ($ 5 billion) over five years,” said Suhail Sameer, CEO of BharatPe, in an interview. “Hopefully a lot of this would be funded by our network of merchants and consumers. We have heavy use and investments from our traders and consumers. “
The company said it had grown during the Covid-19 pandemic during digital payments in the country and also helped increase its lending business.
BharatPe focuses on three segments: merchant loans, consumer activities and Unity Small Finance Bank, a joint venture with Centrum Group that would soon start operations.
The company’s target segment includes around 65 million MSMEs (micro, small and medium-sized enterprises) in India which employ some 80 million people. The company is seizing the opportunity to close the US $ 1 trillion unmet credit gap in MSMEs in India.
The company has facilitated loans to over 3 lakh merchants to date. It has facilitated over 2,800 crore rupees in loan disbursements. There has been a 10X growth in the last fiscal year. It makes monthly disbursements of Rs 300 crore. By next year, the company aims to provide $ 1 billion in loans to traders.
“It’s a big jump on merchant loans that we expect,” Sameer said. “We have shelled out around Rs 3,000 crore so far in the past 18 months.”
BharatPe competes with players like Pine Labs, Paytm, Mswipe, and Razorpay.
BharatPeLoans are available in over 11,000 PIN codes in 24 states. Merchants can opt for assisted application processes over the phone. They don’t have to leave their stores and lose business to go to branches in order to qualify for a loan. It has a sales force of over 4,000 agents to educate traders on various financial products. Adequate loan sizes are available for traders from Rs 10,000 to Rs 7 lakh (average Rs 75,000). About 45 percent of its traders are taking over loans.
BharatPe loan sizes are available for various use cases like buying inventory, growing during festivals, and opening new stores. There is no cost of application. Small installments (on average Rs 430 per day) ease the burden on traders to save money until the end of the month to repay via EMI (equivalent monthly installment).
BharatPe said there is little or no reimbursement cost because automated payments are collected from receipts on the QR (quick response) and POS (point of sale) machines. Automatic refunds also reduce the risk of incurring penalties due to missed due dates and loss of business when calling the bank to make the refund.
The other area that is expected to drive the growth of the company is the Centrum Group-BharatPe consortium. The Reserve Bank of India (RBI) recently issued a Small Corporate Bank (SFB) license to the Centrum Group-BharatPe consortium. Incorporated as Unity SFB, the lender will begin operations in a few weeks with a loan portfolio of Rs 1,500 crore.
The consortium will take over the assets and liabilities of the besieged Punjab and Maharashtra Co-operative Bank (PMC). The timing of PMC’s integration will depend on when the RBI and the government release the proposed merger.
“We are aiming for the bank to go live in a month and plan to expand it,” Sameer said.
He said Centrum is much more capable of managing branch operations and handling regulatory compliance because it has a reputable team of bankers led by Jaspal Bindra, executive chairman of the Centrum group. He said BharatPe is much better at creating digital products. “We would use our time and energy in terms of building technology and products for the bank. “
Unlike traditional organizations, Unity SFB will be a digitally-led bank, with branches for specific use cases. Sameer said much of the technology is ready. The company is in the final stages of building basic banking systems that have been built from the ground up compared to conventional systems that are not suited to heavy digital business.
“From a technological standpoint, we are ready for the first set of products related to payments and investments and for existing products from BharatPe and Centrum related to lending and financing of SMEs,” Sameer said.
The other goal that should play a key role in the growth of BharatPe is its mainstream business. BharatPe has stepped up its game with consumers, entering the peer-to-peer (P2P) lending space with the launch of its product – 12% Club in August this year.