Ant Financials is a great role model: co-founder M Lunia

Manish Lunia, co-founder of Flexiloans, a digital lending platform, offers credit to micro, small and medium enterprises (MSMEs) which find it tough to tap into legacy institutional players. It uses digital tools to make good the lack of transparency and poor credit histories of borrowers. MANISH LUNIA, co-founder of Flexiloans, spoke to Edited excerpts:


How is your invoice-based funding solution different from working capital loans provided by banks for MSMEs?


Invoice-based financing and bill-discounting has traditionally been restricted to a few large enterprises and their suppliers or customers. Our endeavour has been to serve deserving MSMEs that have hitherto been either unserved or underserved. We partner with tier-I to tier-III entities that want to support their vendors and suppliers for their working capital needs. We acquired Creditperiod — a supply chain technical interface startup — three years ago and have disbursed 10,000-plus loans. To summarise, working with a wide range of corporations (rather than only large-cap entities), financing small vendors using digital processes, and unlocking the working capital stuck with debtors are the biggest differentiators of our invoice-backed financing product.


The books and equity structures of many MSMEs may be not be transparent, and their credit histories could be less-than-adequate. Where do you draw comfort from?


Over the past five years, has built expertise in both flow- and transaction-based assessment of MSMEs' ability to pay via data science models. An asset-thin or credit history-thin file becomes meaty with the use of transaction data, cash-flow trends, depth of the business relationship, vintage of the business and multiple digital footprints. We have 50-plus partners that have connections with over two million businesses which could access lending products at the point of transaction or basis the transactions. The continuity of data flow, post-lending, also adds additional early warning signals in cases of stress, as well as opportunities to reach out to borrowers in need of additional funding support, depending on their growth requirements.


What are the lessons from the success of Ant Financials, and how can they be adapted to our context?


Ant Financials inspires every fintech startup, given the sheer potential market size that we can cater to. It has over 700 million customers and has processed transactions amounting to nearly 65-70 per cent of the Chinese GDP in a single year. Its cross-selling into insurance, credit scoring, and wealth management beyond just loans to its captive customer base is something most financial institutions aspire to. Many fintechs like us are leveraging the platform approach of Ant to cater to the massive digital customer base. IndiaStack is creating the path to a digital economy.


With Aadhaar-enabled payments, Unified Payments Interface, e-Know Your Customer, eSIGN and Digilocker being available, it’s possible to power an entire paperless lending experience. This enables the seamless and sustainable distribution of micro credit, which will directly impact the growth possibilities of MSMEs. We have been an early adopter of the digital experiences enabled by IndiaStack’s Application Programming Interface, and today, a small business can get a loan by downloading our mobile app, which is power-packed with all these features.


Again, with Open Credit Enablement Network, and account aggregators coming in and set to scale up over the next few months, we will see a complete transformation of customer journeys — just like what Ant has enabled. And newer credit frameworks are emerging which will use verified data coming from these pipes to take faster and better credit decisions. And eventually, customers will win.


Has the reluctance of banks to lend to MSMEs opened up space for players like you to step in? And what does it mean for the nature of disintermediation of credit to this sector?


It amazes me how this reluctance on the part of banks to lend to MSMEs has led to entities like us starting years ago, and which continues in many forms even today. Now, fintechs account for a 55 per cent share of the market in personal loans by volume. More credit lines have been issued by fintechs compared to what existed in the country even five years ago. Lenders like us cater to MSMEs in over 1,000 cities. Fintechs are now collaborating with banks and large non-banking financial companies to use their proprietary credit assessment models, customer reach and technologically seamless process to expand financial inclusion like never before.


Your first round of seed funding of Rs 100 crore in 2016 was the biggest ever by a startup, which saw Sanjay Nayar, Vikram Sud and Anil Jaggia come on board. Since your business is at an inflexion point, are talks on to fill up the fuel tank again?


Yes. We raised Rs 150 crore in a combination of equity and debt in October last year, led by the Family Office of Sanjay and Falguni Nayar. It’s a great time to get capital backing to fund MSMEs. You see, the continued confidence by marquee investors who have seen multiple credit cycles is an unparalleled advantage.

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