Here we go.
Hey, Michael. Privileged to be here. I’m doing great. Thank you for having me on the show.
It’s my pleasure.
Can you give our listeners a bit of your background for context before we dig in a little bit? Sure. So I’m based out of, out of India. I live in Mumbai. I am a chartered accountant by training. Right. I started my career at bank. I worked a few years at Citibank did a variety of things at Citibank built credit models and some portion of risk and some corporate banking.
And then I moved on to be one of the founding members HDFC bank, which is today, one of India’s most reputed and largest bank in India. Uh, I worked there for almost 13 years and great experience. I ran the, uh, the corporate bank, which included, you know, SME business mid-size businesses, all kinds of.
All kinds of corporate lending, uh, an 80 in 2006, I moved out to be the CEO or Barclays retail commercial bank in India was the first employee. I set up the entire operations in India. And when I left in 2009, Uh, we had over a hundred branches and we were present. We had abandoned their presence. Uh, in 2009, I left to be the top found actually Equifax in India.
Perfect. The credit Bureau, the US-based credit Bureau has no business establishment in India. And I put together, I stood together the joint venture with some local partners. I got the license from the regulators and I set up the Bureau and I ran the Bureau for three years, was to which I decided to turn it off entrepreneurs.
So when I turned 50, I decided that, you know, I had. Seeing enough of the corporate world. And then most of my jobs that I did, the employment that I did, it was all entrepreneurial. In any case, the first one a month, the first employees of the company enhance setting up something from ganache did not seem that daunting, uh, when I, when I embarked upon it.
So that’s, that’s my journey. It’s been a good five years that, uh, I’ve been at SME owner. And, uh, we have, uh, we have an interesting business. We lend to small retailers in India. You’re based in Thailand. So you know exactly what I’m talking about. Small retail stores and they are ignored, stick to sector.
So we lend to all kinds of stores we lend to, it could be, uh, it could be electric equipment. It could be out some being harvest, or it could be a salon, a small eatery, a grocery store. Well chemist. Uh, so we lend to that segment. It’s an interesting segment because it’s often ignored segment banks. Don’t want to lend small ticket in India because of the unit economics we saw.
Great opportunity. We’ve been around now and lending. We started as a marketplace and evolved into a lender ourselves. So we’ve been a lender now for almost three years and it’s been great going for us. We currently operate out of 25 cities in India from four States. I’ll ask you this, right? Because if someone just looks at your resume, you made a really good point actually earlier, if someone just takes kind of a cursory look at your resume and they see the names of big firms like Citibank and Barclays and HDFC and Equifax, they’ll just think.
Standard corporate guy, but you make a really good point. You were like the first or second or some number like that employee of all these companies, when you were younger, did you have this kind of entrepreneurial spirit or was that something that just started when you were at Citibank and you’re like, I can do this and then you just moved on to do these other things.
Do you know what I mean? So to be honest, I did not know that I could do it. Uh, until I actually embarked upon it. So at Citi bank, so it was the bell established business in India. Right. I look upon something which I thought could be done and had not been done before, which is to rewrite the entire credit rating models and the financial analysis model.
The way we looked at company financial information, the way we ranked and rated them. And I rebuild, I’ve built a new system for India and the system was well appreciated. And I ended up traveling to 17 countries across Africa, Eastern Europe, uh, adapting that model and turning it into a larger regional model for Citibank.
So that in itself, I turned my job into a kind of a small entrepreneurial business. I won nothing other than my price there, but it was, it was just great. Do something and build something. So I guess that was a part of me, which I did not know, but which kind of came out as I started working in my job to see things that.
That don’t exist and see how to better something that exists or to build something afresh. Um, and I’m loving it. Yeah. I mean, the Barclays experienced sounds particularly interesting to me and even Equifax too, but I think it was Barclays where you said you started in, I can’t remember the year 2006. And you were the only employee and three years later there were a hundred and something branches.
Nationwide. When, when you going through that process, are you sometimes surprised is not the right word, but are you sometimes kind of amazed at like the ability to have so much operational excellence? I was having a conversation with somebody about this yesterday. Having an idea is easy, but actually executing it in a way that’s operationally efficient is much harder.
Right. Yes, that is, that is so true. I think one of the things I learned at HDFC bank was the big differentiating, differentiating factor is people and leadership. And I learned early on that if you have the right people in the organization and you set the right culture, it’s. Much easier to execute on something.
I will take no credit for doing whatever happened. Like solely by myself. I’ve always been blessed with a fantastic team, whether it be at HDFC bank or at the Barclays, it, they put facts. I’ve always had very good people working with me. Yeah. And I feel that, you know, if an organization in West, in. Finding the right people attracting them and identifying them upfront early in life.
And that’s what we’ve done at SME owner. I mean, every single person in my leadership team today are people who’ve come from the embedded institutions where they are known to have built strong, wrong businesses or processes, um, and have run good set setups. So as you hire such people, it makes it that much easier to.
To execute on something. And if you have good institutional backing, it makes it that much easier. Big box always helps. Right? I think you make, I don’t, I want to talk about that a little bit as well, but I think you make a really good point having the right people in place and that this idea that no one succeeds alone is really important.
I think you can tell a lot about not just the CEO, but about the management team when they realize, and they don’t take credit themselves when they kind of. Push that credit down to the people that are actually in the trenches and executing on a day-to-day basis. Because like I said, the management team can have a ton of great ideas, but if there’s no one there to execute it, it’s hard to get stuff.
Totally. Right. And I think that can you, can you try to, and this is hard, right. But can you try to explain to me what type of culture you’ve tried to build at SME Corner so that I can try to understand the type of person that would fit inside. So I think the first and foremost is ethics and. And, um, integrity, key, absolutely key to, to a good business.
Um, and one win, uh, very clear. And that starts from the leadership, right? So I have to walk the talk and every single person that I hired come to with it either I’ve known them personally, or I have. Very strong references about their ethics and about their integrity. I think it starts from there because when you’re running an organization, when you’re working with a team and coworkers, it’s extremely important to be honest, honest about your thoughts, your feelings about.
Mistakes you make and about decisions that you take. Uh, and so I think it stops, it stops from there. The second is, uh, transparency and openness, and being able to express what you feel right or wrong. And that I feel is also critical because if you’re going to fail your company or your team with, with yes men or yes, women, it’s not going to be helpful at all.
Because if your team is not, does not have the Liberty to speak up and say, Hey, I feel we are going the wrong path here, and we need to do something different or you’re making a mistake for me. I feel you should look at it differently. If I did not have people like that, I would not enjoy my work and we would not be where we are today.
So I feel that’s the second thing. And the third, which I actively encourage my team to do is this self care, which also means that they need to have a strong work-life balance. I insist that my team take time off and spend time with their family or on themselves. And I try and inspire as many people as I can.
To stay fit and healthy because it’s extremely important. And it also helps in productivity and in mental, mental health, if you are able to balance your life well, and if you’re able to devote time to keeping yourself safe. Yeah. I mean, there are a bunch of myths in the startup world around, you know, working 90 hour weeks.
Giving up everything at the, um, at the request of the management team and just making sure that growth, growth, growth at all costs. And I think you’re right. You run into, in some instances where the culture is built incorrectly, that people do have mental health problems. They also have regular health problems and it kills productivity because they’re just not fit anymore, either physically or emotionally to come in and get work done.
Yeah. So you may take off like a rocket and you might be able to put in the first, maybe six months, one year, and you might be able to burn yourself out. But yeah, I think beyond a point, people will stop youth. This was just not have the motivation. You shouldn’t have go on anymore because you know, they can push themselves beyond a point.
So I understand some businesses will need 90 hours and I’m not judging anybody. I think everybody has the right to have that have to have the right to have their own culture and what works for them best. Okay. But I feel what works what’s worked well for us is ensuring that people, you know, have a good balance and people work incredibly hard in the hours that they work.
Uh, they are extremely productive because, you know, they, they are mentally healthy and alert and have had enough time to recover from there, from the day’s work. So we’d like to believe that, and I’d like to make the workplace even better. And I’m not saying we are perfect. I know that our teams, which do spend long hours in the office and I, I really appreciate that because there are times of the month when businesses business just requires them to be, to be there.
So we try and balance as much as we can and ensure people try and have as much time off as they can, as it is overall though. Yeah. I mean, I remember when I was working at Morgan Stanley and Goldman Sachs and we used to get four weeks vacation every year and I never took a full year’s vacation, but I’m laughing now.
Th the only reason why I point that out is because the, the follow on sentence to that is at the time, you know, as when I was in my twenties and thirties and forties, I thought I was being a hero. And the reality was I was just being an idiot. Right. Like I should, I should have just taken that time off.
You can’t do that. Right? Even either that Citibank, I asked in Friday night, I post to my kids saying that, you know, we worked a hundred days in a row without taking a single day off the first year, April in the year, 2000, whatever. Okay. And in 1990 something, and I’m thinking like we never went home and I then did a hundred days of office.
No public holidays, no Sundays, nothing. And I took extreme pride at having stayed overnight in the office with my toothbrush. So that was, that was the culture of that organization. I think I learned differently at HDFC bank where my boss, Mr. Pauley went home at 5:00 PM every day. And I saw that he was one of the most efficient people I’ve ever known.
He got all his work done. He was just. That’s amazing. You knew everything about every ant that crawled in the organization. I realized that you don’t necessarily need to be sitting there and waiting and burning the midnight oil. If there is a smarter way, which is why there’s so many on, or we try and use a lot of AI to do stuff, a lot of machine learning, to read documents, to be able to analyze documents, papers, so that.
We can leverage technology. Things are very different now than what they used to be before. We did not have the tools back in the days, but now, uh, enterprises can deploy so much of, of automation and AI to be able to do bulk of the work that used to be done manually. So people need to spend the time more intelligently on strategy and on.
Parts of execution that requires a human, a human touch. Can I ask you this? You, cause you mentioned your age. You said when I was 50 years old, I decided it just hit me. Like I just had to leave and I’d had enough of corporate life. Do you think it wasn’t an age related thing? A time-related thing or was there just again, was there this itch to just say now that I’ve built a whole bunch of things from scratch, I want to build it from scratch in the, in the exact way that I want to do it.
Does that make sense? So the age, so the age was a good trigger in the sense of. And a milestone time in your life. Sure. I think, uh, the other project was also that I felt I had enough of corporate life and I felt I should do something on my own. And I wanted to do something which was, which was for-profit, but also something that would benefit the larger community.
So I thought really hard and I decided then what can I do? Which is for profit, but at the same time, and I’m saying for profits so that I can attract investments because the kinds of. Work I want to do that is being able to lend money to a large section of the under finance in know underbanked communities requires pockets, which means investors need to come in with large amounts of money.
It needs to be for-profit because investors have an obligation to return, you know, Particular, you know, profit to their investors as well. So I said for profit and let me do something for the community. And throughout my banking is one of the things that hit me hard was whenever a small business person.
Wanted a loan, he or she had to run around in circles, wait endlessly for weeks to get a loan approved, right. Pay somebody in the middle of the middleman to, to get the loan approved, uh, have somebody to present them at the bank. I speak, you know, not necessarily the truth to get the loans approved. So it was just.
So abandoned that there was a massive need in the community. And this is what I decided to do really balances or which means that, you know, what we do will create value for our investors and employees. And at the same time, Gives tremendous sense of satisfaction of having self the community in some way.
Do you, do you feel differently? I don’t want to say when you wake up every morning or when you go to bed every night, but you understand the concept, right. Do you feel differently knowing that you’ve learned over time? Like I said, to have this operational excellence, how to make a profit, you understand the SME market and I have a few questions about that, but also this idea that you can make a profit, but still have a purpose.
And. Then you can help these smaller business owners not have to do that. Run around. To grow their business because in the time between, when they normally apply to larger institution and maybe they finally get their money or don’t, you know, their business could be at risk because of cashflow reasons of dying.
No, absolutely. It could be weeks before. In some cases, though, things are improving in India. A lot of institutions have gotten much more efficient now and things are changing, but yes, it’s a tremendous sense of satisfaction. And one of the tastes. I am particularly time for, um, and I have great gratitude is that I’ve been blessed, you know, in my life.
And I would think that it’s a great way for me to give back something to the community. And it really gives me a great deal of satisfaction, seeing what we’ve built and what we have been doing and where it’s going, because we know that we’ll reach a very large number of they’re already in 25 cities.
And we see this. Growing exponentially over the next three to five years. So we feel that we’ll be able to, to, to complete our, or to achieve our mission of really getting there to the under-financed under-banked community and giving them money with dignity. Yeah. I think I want to touch up on that because just because somebody yeah.
Is, is, is somebody whose hand has been all yours and you’re the one getting the money does not make you any superior to them. You need them more than. They need you. And I think that’s an important thing. I tell my team to remember that your customer does not need you. You need them to succeed. So give money with dignity.
If you do want more, give him money, be upfront until we run out checks. At the point of contact, we have the apps and we have the score cards to be able to tell with reasonable confidence to our customer, that. He, or she does not qualify or does qualify and save them the bother of going through the humiliation of filling out forms or giving information and then calling and listening, getting an idea, audit the other end, no human, right.
We’ve set up branches. And a lot of people ask us, why do you have branches? I said, okay, because our business is one of relationship. At the end of the day, we want our customers to feel that they know somebody and there is someone. Personally looking after their interests, it’s served us very well because our customers pay us back or, you know, uh, likelihood of our customers paying us back is far higher than them paying somebody else because they know us personally.
And it’s been true all the time when we’ve been able to collect almost everything that customers will want. Uh, despite the hard time they, I think, prefer to pay us. And priority, right? I wanna, I wanna make this point explicitly and you tell me if I’m interpreting this incorrectly, you mentioned earlier using artificial intelligence and machine learning to make things more efficient.
And yet you’ve put branches, you said in 25 cities. And the reason I think for that is like you said, humans want to interact with other humans at the end of the day. And building that relationship means, again, you’re much more likely to. Payback another human than you are to pay back a machine because of the relationship.
Not, not because you feel fear or, or anything like that. It’s just like, I have a relationship with that lady and I’m going to pay her back. Exactly. I think it’s really helped us. We also want to sell more products to the customer and we want to be the, the one institution that think off whether they want any consideration to only a couple of types of loans.
But in the future, we think we will be able to distribute and work with large institutions to distribute different kinds of loan products here. When to launch a credit card. So we will do a lot more and they want the customer to think of us as a one stop shop on, uh, an advisor who can get them what they want.
And with again, with full honesty, complete honesty and transparency. So we want to be that relationship person. Uh, we do have a digital business, which is scaling up, but even when we have a digital let’s, we do we’ll have a human reaching out to every of our customers and speaking with them. And it’s not a machine of who we are alone and you know, somebody out of.
You know, just automatically doing it. Yeah. I do want to make this, this point as well. I’m not in any way saying that as a technology enthusiast myself, that there are not a lot of problems that technology can’t solve. But the idea for me has always been, even when I was back sitting on a sales trading desk, is that technology should make your best employees.
Much better at their job as opposed to completely disintermediating them because disintermediating them, because at the end of the day, like I said, humans want to talk to humans. Even if the, even if the human is just giving the advice or giving the information that the machine has told them, it’s super powers, people that are good and it actually takes middle level people and makes them much better.
There’s nothing wrong with that. Absolutely. So to just give you an example, I mean, when we, when a customer sends us financial documents or bank statements, we have a Bureau bureaus report. We have AI reading everything. We have Emin reading by statements, pulling out information, building cashflow models, doing all the Drudge work, the work that would have otherwise taken a few hours for the human to populate data and analyze bill XO sheets.
So, I am undoing everything in the mid-office and also preparing a set of questions that I think I’ll the documents on patterns of cashflow, uh, patterns of business, uh, you know, a trend on businesses. And then we have a human calling, the customer and saying that, Hey, you know, we’ve just gone through your documents and we have noticed these few things and we’d like to chat with you about it.
And we find that that builds a great comfort for both of us. I mean, it’s good to speak with the customer. We understand the psychology of the customer. And at the same time, the customer understands that, Hey, there is a human at the other end. Okay. Uh, and I can talk to him or her. And I can also ask a few questions that may be on my mind, which I always wanted.
Wow. So, so it’s helpful. So we use a good combination and a good balance of, of technology and touch. To see how we can, you know, sell our customers better. Okay. I want to ask a little bit about building from scratch. One of the things you said earlier was it takes a lot of money to build. And when you and I first spoke, we were kind of joking a little bit.
About how, when you’re at a big bank, like when I was at Goldman Sachs, you wanted to build some new technology. You just had like a budgeting process. You just had to convince somebody to give you this kind of mythical three to $5 million, which happened to be lying around somewhere. You know what I mean, though?
Right? What is, I totally know that. So how do you. Particularly for startups at the earliest stage, but even in the mid stage, like that infrastructure doesn’t exist. So how do you feel that infrastructure gap? In other words, not just the tech gap, but like the idea that we have to build stuff and we know we have to build it, but how do we fund it?
And then how do you convince everybody else along the way that look we’re successful, but we don’t have an unending amount of resources, right? It’s not infinite. So at first, I, it kind of, it probably took me about three months to adapt to the fact that things were different. Right. Okay. Both for me personally, but for me, it, it sitting in a corner office having, you know, a bunch of staff doing your work for you, having it, do most of your stuff.
And then. Having, you know, four, two executive assistants running, you know, making decks for you that you need to present to the, to your boss doing all of that. And from there setting by yourself, you know, building a business model, uh, I struggled a bit with Excel to begin with because this was a long time that I actually done formula.
Armenian exhale. Right. I mentioned, I used to, I used to see, but I never used to sit in build models. Right. So it took me a little bit of time what the human and, and, you know, when you’re just so adaptable, I think we adapt to every situation and that Dan lies the secret of, you know, a person being successful or not either you learn to adapt very quickly and change yourself or you perish and I’m.
Happy. I was able to adapt very quickly too. We actually have a no resources. I don’t have the money I’d put as a startup seed capital in myself. Right. And I realized that, well, it was tough, but it wasn’t impossible. And I did not have, I did not have money to buy a ready-made system, but I have some money to sit with, you know, A software developer or team my team, then my technology team and say my engineers and design something and say, let’s build and we will upgrade as we go further.
And they’ve done that. They built the entire technology suite, ourselves, every single piece in our stack, even today is something we’ve built ourselves. It’s proprietary, it’s scalable and we’ve saved a bunch of money. I think what. If you have gone and bought everything that we use today have just spent millions of dollars.
I don’t even think we spent a billion dollars in total buying and building whatever we have today. Right? So we’ve adapted. I think you, me and my team, we learned that the people I hired also came from backgrounds where they worked in large institutions. But they all were aligned to the fact that, Hey, this was the amount of money we have, and this is what we need to make with this and build with this money.
And, uh, if it’s possible to do it. So it’s not, it’s not impossible. I was lucky to have a good. Well, these days, uh, investor seed stage investor in the form of Axion venture labs. Okay. What about the money? It was a lot of learning that I got for them from them and, uh, it was nice. And I think I lucky enough to get good investors along the way.
People who supported me taught me and believed in me. Do you also think great listeners are good? I mean, great leaders are good listeners. In other words, they’re not so set on the fact that they know everything, but they’re willing to listen to sort of alternative ideas that is so critical, especially in a startup, you might get away.
If you are, you know, CEO of a formal institution where you can boss people around and you can probably get around for some time, but in a startup where the world is changing so much. There’s just so much to learn every single day. I, I honestly came from a business background and I knew little about technology and I had to learn it not.
And it was only because I was very open to admitting that I known him not saying I would tell my team, guys, I know nothing about this, teach me and tell me what this is about. And it could be a 20 early, 20, 22, 24 year old person who could be teaching me. And I was more than happy to learn what was going on because it actually helped me a lot.
Uh, and I say that to a lot of my peers. I’m 57 now. And I say that a lot of my peers who are now, this is retirement age in India, right? 58, 57, 58 is officially retirement age. And a lot of ideal, a lot of my. My experience and people who are, who I worked with and say that, you know, we have self-made versions of whichever version 1.2 or two point.
Oh, do you not want to be a 2.0, and do you want to stay on 1.2? If you stay in a proper job all your life, you’re going to be a 1.0 forever. Never done anything new. So, unless you’ve done entrepreneur and you decide to do something, you’re never going to know anything different or new, and you’re never going to be a different version of yourself.
And I think my two point or just end it, we are becoming 3.0 now because there’s just so much, so much more to learn and so much more that we can change in the company. And I can change for myself as well. Uh, that I feel I’m constantly learning. So if you have that attitude, that, and you’ll have the exceptions that you really don’t know much in life, and that you’re willing to listen to people who definitely know more than you, or have experienced or have academic, uh, knowledge, which is also useful because.
You know, that’s what, that’s, what is applied into, into your business. Then you will be a much better leader for sure. And those who think they know everything. Um, sorry. And it’s going to be a very hard life for them, especially with the changing world these days. I think the, the younger generation, the ones that their twenties, not far more than you, you see people like me have the experience.
They have the ability to manage teams. They have the ability to. To lead teams to visualize strategize and, uh, you know, and lead people. But the real, you know, if you, if you go down to the grassroots, the ability to, to learn, to do something, you know, in the field, especially in technology, digital marketing, it’s more, the younger folks who know it all.
And so there’s a lot to learn from them. Do you feel like, and I’m surprised actually you said you’re 57. I feel old. Sometimes I’d just turned 55, but. Again, maybe similar to you, the beauty of what I do in a way, similar to what you do is that because I get to talk to so many different people, running different verticals and building different businesses.
I feel invigorated. I don’t know if that makes sense, but I feel so much more alive today than I did even 10 years ago, because I feel like I’m learning so much more and kind of like you, I don’t turn down the ability to get information that changes the way I think about almost anything. Does that make sense?
Totally makes sense. I feel I’m in my twenties right now, to be honest. I am just learning so much. And when I started off in it to be gone, I invested some of my money in attending a large number of workshops and conferences, seminars, especially the ones that spoke about AIML and the future of tomorrow and the use of technology and digital in building businesses.
I felt that was a huge gap in my. Skill-based knowledge base. And I invested time and energy in, in doing that. I also, uh, built networks and I want to talk about the power of networks because it’s very important to build. It’s very important to build, uh, a set of people who you admire and respect, try and reach out to them, set up some kind of connect.
You may not succeed all the right, but you will succeed with a few people. And if you do that, you will learn a lot from them. And I did that. I reached out to a bunch of people I even wrote to Jeff pesos and he wrote back to me, I’m really proud of that analysis. Yeah. That, that, you know, that man had the time to actually, it was like a short email with wish, wish, wishing me luck and saying that we love to collaborate and write to so-and-so because I told them I’m starting a business in India and I want to work with Amazon.
So I reached out to a large number of people and some of them responded extremely well. And. I’ve built a good set of mentors across the globe who I speak with for 15 minutes, maybe every three months. And I tell them what I’m doing and I ask them what the feed about what I’m doing. And. What have they learned in their journey?
And, uh, many of them are younger to me, but they’ve built great businesses. They’ve built successful businesses. And so it’s important to keep learning. You can learn in many ways you can learn by, by, by doing courses online, you can attend workshops, you can read. But you can also meet with people and you can also talk to people and learn from them.
Their experiences can teach you a lot. How, how big is the SME market from your perspective? Or the micro-lending market. Let’s just say that in India. And I know India is a very large country. I know it’s very spread out that much. I completely understand when you look at it, how much future growth do you think you have there?
Because at some point some of those SMEs are going to become bigger companies and will no longer need micro-lending. Right. So I’m just curious about what that path looks like. So via today, we have 10,000 borrowers, the universe for us, the universe and India, small businesses.
And not everybody, of course will be bankable. I think probably a little more than half and not the bank of Berlin. Probably another half may not need the money, but there’s surely at least 10 million businesses that need money. And they are only at 10,000 today. So you can imagine how large the opportunity is.
There’s just so much place for everyone to operate. And grow a large 95% of these businesses have never taken the money or don’t, don’t take money from formal lending channels because it was just a big theme in the backside to be, to reach out to anyone and the trade would normally give them money.
Well, when I taught in stern, they all there to do is pick up the phone, sign an IOU, or even not find that are you in many cases and somebody would send them the money and, uh, they would, heavy interest rates, right? So working capital cycle, working capital cycle. Well it’s 15 days. And so any money that they get gets done that on 24 times.
So if they’re bottle $5,000, they can generate over a hundred thousand dollars of sales out of it. Uh, because money just move that fast. So they’re willing to pay extra interest because for them, the margins are still good and the velocity of cash is just too high. Right. And, uh, they bought it, they were borrowing.
So they’re still borrowing from us from the local money lenders and their own, their own communities, communities in India, they up by themselves and having community in India. There are a bunch of people while the. They’re more when they are of them and whose business is to lend to people in their own community.
So community lending is big because there is a addition at stake and people tend to pay back within the community because they want to be relevant and part of the community. So there is a social pressure to be back within the community. So the very interesting models in India, and we feel that they will not scratch the iceberg.
Even after five years speaks to so much business. Yeah. I mean, for normal business, I would ask if you want it to expand outside the country, but if there are 30 to 40 million people and you have 10,000 borrowers, it doesn’t even make any sense to think about it at some level. Is there some kind of skepticism, right?
Because you said a lot of these borrowers originally considered unbankable, right. That they could not get lending from other institutions when you finally approach them through the 25 branches that you have are some of them skeptical. That the interest rates are going to be too high for them. And, and I guess further to that, Like, what does it take to convert somebody from that skepticism into the acceptance of wait a second, this actually makes a lot of sense for me.
So let me touch upon the first question that you asked about expanding out of India. So we have been approached by, um, by the big four consulting firms and we’ve been approached individually by entrepreneurs in Southeast Asia, but they can on the Island. Uh, Malaysia, Indonesia, even Pakistan to say that, Hey, we have similar businesses here.
Can we just, and you have a technology stack. Can we just take the entire stack and, and set up a business here? We do license it to us. So we don’t do that today, but maybe there’s a possibility that in the future we could just license it to somebody who wants to set up. We won’t run it, but somebody can run it there and pay as a fee because the models are just so replicable and it’s easy to tweak something to local, uh, local requirements and customize it.
So that’s the part of the first plus point that you made? The second part is on interest rates and. People are willing to pay the interest rates for them. Money quickly in the hand is very important. So there is not so much skepticism. We rarely, we do face. Obviously every good business person wants to haggle about it, interest rates and they have this as possible.
Right. So customers do argue and they do try to bargain and it is a big target market for that matter. So unless you bargain you don’t. Clearly you’ve done. You’ve made a good business. You have to buy again, if you want to feel good about it. So people do try and bargain. But eventually they’re willing to pay, uh, pay a reasonable interest rate for two reasons.
One is as long as they are getting money in their hand, and second it builds their credit history. They know that if they start borrowing from a good lending institution, their reputation in the bow, in the lending community starts going up and their payment tracks record starts getting reflected in the Bureau.
And everybody understands the Bureau. And they know that if they, they do a couple of cycles with a good borrower, a good lender, they can actually get much more money in the future for the growth and expansion. So the, the, uh, the recognition that a Bureau is important. And my, if I bought a formerly from the community, from the lending community, uh, it will be beneficial to me is well known and hand.
Uh, the skepticism is lower now. Got it. When you, when we first started this conversation, you said, when I think when SME coroner first started, it was more of a marketplace and now you’ve turned into a lender on your own. Is there a regulatory difference between what those two things are? And does that mean you get regulated more like a bank or like, what does that environment look like to you?
Oh, yeah. So we need, we need a non-banking finance company license to be a lender. So we are regulated by the central bank. I would say this business was not a regulated business. So now there is more compliance and, uh, there’s more reporting. And they are subject to more regulations than we were before, but it’s not on it.
It says it’s specific. I was just curious. Yeah, no, that’s a good place to work. It’s a good India is a good market to operate. The regulators are, are reasonable. Oh, there always be demand from the community to do more and they are getting more, uh, they’re recognizing the, the FinTech space and they are willing to, to adapt and, you know, continually monitor and issue guidelines.
So it’s a, it’s a good, it’s a good environment, regulatory environment to work in. So I never felt it to be a huge burden just because we are regulated. I think it all stems from the fact that if you are, if your governance. Standards are good for some governance standards. That’s good. And you do not want to do not want it to
Not one thing should be out of place. If this is the law, this is a law. Doesn’t matter what it takes to, to obey it. Then it’s not, it’s not onerous. Then it’s just the, our normal, it becomes a, your, your day-to-day process on life. And it’s not really that hard. I, I completely agree with you. Like, I, I, I agree with you, like, particularly from a regulatory perspective, right?
Just go out and do it. It’s not really in the way, just like, get it done. I wanted to ask you a little bit more about technology, right? Because you and I, again, are pretty close to the same age, but I also noticed that there’s on your website. It has this thing like apply via WhatsApp. And I, I’m always curious about how those types of decisions get, get made.
In other words, some young lady comes to you and says, we should have this thing on WhatsApp. And the senior management says what’s WhatsApp kind of thing. No, no, no. This actually was born out of COVID. We designed and developed this in COVID because, uh, uh, earlier there was a lot more physical interaction possible.
And in COVID times we said, uh, let’s try the best way to communicate with customers. Nothing beats WhatsApp, right? Because people use that so much. It’s so deeply integrated and personalized. Now that people feel most comfortable replying to exchange, uh, sending photographs. Uploading documents doing anything because they do that in their personal life.
And so we punched his button last month, in fact, in September. And it’s a huge hit it’s, uh, you’re getting inundated with loan applications on WhatsApp when they had it as a website, uh, journey. And you still have it. And despite spending time, money, hold on, UYUX trying to make it, you know, most. Convenient, you know, trying to reduce the friction.
You still did not have as much success, or it does not have as much success as the WhatsApp app. So if I send you to click on the WhatsApp button, It opens a whole conversation on chatbot conversation on WhatsApp, and you can complete your loan application. You can take a photograph of your document, you can upload it and they’re almost done.
And that the, a finding is, is an exponential growth of your channel for us. And, uh, customers are not, it’s not, we don’t have to teach them anything. Right. I mean, it’s just so easy to reply and it’s on it’s all Monday quick questions and it’s all a nice journey that is built into the white cap is still refining it and making a chop or take up another three months to get this like a hundred percent right.
But it’s been a great experience for us and also for our customers. I love it. Do you have more time because I’ve got a couple of more things you just brought up, something that I wanted to ask you earlier, and you just reminded me again. If you’re out there. You know, the further away you get from bigger cities, the less experience you have not you, but the, your clients have in the lending experience at some level, do you have to educate them on sort of what the implications are now?
I understand money velocity, right? So I get that completely. In other words, if you lend them a hundred dollars, but it turns over 24 times and they have a, what’d you say, 15 day window. For their accounts receivable. I can’t remember the exact words you use. So I understand that, but are there some people out there that actually are running a business that’s potentially bankable, but they don’t know how the whole thing works.
Is there an educational process that has to take place as well? Not the set of customers. We reach out to establish doors and I think they’re, they’re, they’re funny. Base mock also what’s happened is the younger generation has started getting into businesses and they are the audio not used to be largely uneducated.
And I’m not saying they were not
academic education is nothing. I agree completely, but now the newer generation is coming into business and they are all educated. So they understand. Financial calculations also. And they, we don’t have to teach people. Don’t have to teach people anything, but what the language, they, they, they know better.
It that if I say the a hundred thousand rupee loan, how much is the amount I like to pay every month? Interest rate is not relevant. I have to tell them you will pay me 3000 rupees every month or 5,000 rupees every month for the next three years. Okay. So then he will pink and say, okay, 5,000 a month, then he does his own math.
And he says, yes, I can afford to pay you 5,000 a month for a hundred thousand dollars for no one, I would say Stallone. Right? And so the effective interest rate in their minds, of taking the loan and not as much as. You know exactly interested. There are some, of course who want that number to be a nice, small number.
So it’s good. Uh, but it’s finally one customers to understand why they are thinking and what they’re thinking and whether they are otherwise, they won’t be able to lead. If we stop for throwing money down, people who don’t understand, uh, what the loan and how a loan operates. We one get our money back as well.
And so for us, you know, to date, we’ve been. We’ve been in lending largely to those who’ve taken a loan before, uh, from unending introduced does not have to be a large loan. It could be any loan. It could be to buy a scooter. It could be to buy a television set. It could be a really small, tiny loan, but the fact that they’ve taken a loan before gives us comfort.
And there is again, within this population of 40 million, there is a sizeable number who’ve taken one small loan before, or be like 10 to do it. Well, I’ve never taken a loan before. What? The ones we don’t lend to. Other ones who’ve taken a loan, but not rebate. So our only excluded community today is the one tool they cannot alone, but have delayed or defaulted or everybody else quantifies.
Got it. And look, I want to be clear about the Genesis of the question. My grandfather left school when he was seven years old and ran multiple successful businesses. So to me, the equivalency between how educated you are and your level of business acumen is not necessarily correlated. In fact, I see sometimes that the ones who have not done a formal education, higher, a higher ability to take a risk in life because.
They don’t want all this equate everything to a financial model that is running in their head and understand the business far better without complicating their lives. By trying to run the data to Excel models done better this way work and their ability to take a risk is far higher. So. I’ve seen that the businesses which are successful and they’ve been built by the older generation are based by those who haven’t formally gone to a school, and yet they run phenomenal businesses and they can rattle them calculate any, any, any number of formulation combinations without using a calculator or without using anything.
The brain just works. Brilliantly without any kind of computer or any kinds of calculators. So, yeah, my, my guess is that if you had asked my grandfather, if he could do mathematics, he would have said no, because he never had a formal mathematical education. And yet if you asked him, like you said, if I give you this loan and you have to pay this amount of money, he could see him calculate it in his head.
So you could definitely do it, but it just didn’t know that he was doing it. So I’m sure. That’s pretty standard. Right? Right. Exactly. Exactly. Yeah. Oh gosh. Okay. Look, this was really, really great. I want to let you go, cause I’ve taken up way too much of your time. I really want to thank you. Send me about, yeah, for coming in and doing this, the founder and CEO at SME Corner.
This was awesome. Thank you. Great conversation. Uh, look forward to hearing it.