Yesterday (September 25) Flipkart cofounder Sachin Bansal announced that he has acquired Chaitanya Rural Intermediation Development Services Private Limited (CRIDS), a non-banking finance company (NBFC) and will be heading the organisation as its CEO.
Talking about the acquisition, Bansal told TOI that what he has seen in Chaitanya so far is that they are a great team, great founders building the microfinance business starting from scratch in 2009. “Today, it’s a very strong business, leads in its geographies. Mostly focused on low-income, micro-credit customers. Over time, they’re expanding their portfolio. We’re going to add some digital lending businesses on top of that (micro-financing),” he added.
Bansal emphasised that digital lending would be focused on low-income and middle-income customers.
Founded in 2009 by Anand Rao and Samit Shetty, CRIDS provides access to credit for the underbanked population; the majority of its business is in microfinance. It also provides loans for two-wheelers, housing, small business and education. CRIDS operates in Karnataka, Bihar, Jharkhand, Maharashtra, and Uttar Pradesh.
With the acquisition, Samit Shetty and Anand Rao will continue in their respective roles of growing the existing business segments. The various business units will continue to operate as they have; there will be no significant change in management.
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For CRIDS, Bansal said that they are looking for people who can add value as shareholders. “I think we may get some investors because we need their expertise and their network, their advice,” he said.
Focus On Digital Lending
As per DataLabs by Inc42 estimates, the credit demand in India is projected to be worth $1.41 Tn by 2022. The estimated growth rate in credit demand is 3.73% between FY17 and FY22.
Between 2015 and Q1 2019, the total investment in Indian fintech startups was $7.62 Bn with a total deal count of 478. Out of the total funding, 25.49% ($1.94 Bn) was in lending tech startups.
The prevalence of digital lending startups in India has opened new opportunities for synergies between fintech startups and established financial institutions and banks.
With a positive outlook for digital lending, Bansal said, “If you are serious about digital lending or lending in general, it’s a complete area of focus in itself. You can’t build it on the side, that you have another business running, and strap on lending. I think it doesn’t work that way. BFSI should be the core focus area of the company for it to succeed. It can’t just be an add-on.”
Burgeoning Credit Market Beyond Tier 1
The Global Fintech Adoption Index 2019 report by EY says that the adoption of fintech rose to 87% in India, the second largest in the world. This means that at least 87% of consumers are aware of money transfer and mobile payment platforms and standards. This explains why fintech companies are optimistic about penetration in Tier 2, 3 cities.
The EY report further said that the expectations of customers have evolved and banks, insurance companies and wealth managers are starting to see the benefits of offering digital financial services to a tech-averse audience.
DataLabs by Inc42 noted that in addition to the penetration of the internet, the diversification of the fintech landscape in India from being payment centric to other verticals such as lending tech and insurance tech has acted as a catalyst in the context of fintech awareness among the informal sectors of the Indian economy.