Digital lending application mPokket has chalked out a growth plan by connecting with its customers when they are young. The company plans to expand into areas that will allow it to provide end-to-end services to its young customers as their credit and other financial needs evolve. Gaurav Jalan, CEO & Founder, mPokket in an interview with FPJ’s Jescilia K and R N Bhaskar highlight the company’s growth plan.
Tell us about your journey.
Our journey started five years back. The objective behind starting this business was to serve the weakest part of the Indian population. The reason is that in India personal credit penetration is very low. This is because banks and non-banking financial companies (NBFCs) in India have focused on the cream of the population. The advent of smartphones, which is available to a large Indian population, has allowed companies like mPokket to reach out to a lot of people. This became an enabler for a company like ours.
We have users in 19,000 pin codes in the country. We built an analytics engine that helps us serve these borrowers. The borrowers are not the ones with high bureau ratings.
We started our business with the college student segment.
Why college student segment?
The need was to serve the underserved groups of people. Even today, no student in the country is eligible for a credit card, and bank loans too, even if they have bank accounts for a long time. This is not the case in other countries. I do not understand why a college student is not allowed to take a loan or credit from a financial institution. We started off with that concept in mind.
The students are at the bottom of the lending hierarchy. We have built a business around groups of students and have figured out how to lend to this group. And most importantly, making it a viable business model.
What is your market share in this segment?
In the college student segment, there is practically no other lender on a similar scale that is serving this segment. We have a 90 per cent market share in this segment.
More than a million students have borrowed from us.
Over the last three years, we have been focussing on scaling, growing the business and reaching more people. Over the last year, we have been focussing more on business expansion. This means expansion in newer segments.
Last year, we also launched a product for young working professionals. These are salaried employees typically under the age of 25 and their salaries range between Rs 10,000 to Rs 20,000 a month. These are low-income individuals that will not have access to the credit facility. In the salaried segment, there are a lot of other companies. However, in this low-income segment among the salaried class, we are one of the few companies offering credit.
We are looking at diversifying and grow our business presence. We will look at the newer segments we can serve. There are other segments like self-employed individuals and small businesses. So, we are looking at serving low-income groups. This is our plan for the next couple of years.
What is your other focus?
We are looking at serving a suite of products. This is because every individual has different requirements. At different points, the same individual may have different requirements as well.
Over the next six months, we will introduce many new types of products that will meet more of our users’ needs. At present, we are in the loan business. There are many other ways to facilitate credit business like buy-now-pay-later; checkout financing, credit cards etc. This will allow our users to come to us for all their credit needs and stay with us for all their credit needs.
In years to come, we will evolve to become financial service providers. We want to be the service provider to these low-income and new-to-credit groups that are technologically savvy.
What is your minimum ticket size? What is the interest rate for the loans? What is the time duration for your loans?
The average outstanding per borrower is between the Rs 3,000 to Rs 4,000 range. We really focus on microlending. The maximum we go up to is Rs 30,000.
In the future, we may come up with loans with higher ticket sizes.
Our interest rates are around 2 per cent a month and they vary. It depends on our models and based on the assessment of the borrower, the rates vary.
As we offer credit to high-risk customers, our interest rates are on the higher side.
For the new products that we are conceptualising, the loan duration for these new products would be longer. Our duration goes up to four months as of now.
Are you looking at new investments?
We are a profitable company. So, our internal accruals part funds our growth. Because our growth rate is fairly high over the past four-five years. It is because we are still small compared to the opportunity that is out there. In the case of penetration, we are still at a very low number. We need to periodically raise capital given the pace at which we are growing.
For any lending business, the main source of capital is debt. We have multiple lenders who provide us with debt capital. Periodically, we do need to raise equity as well to maintain a certain leverage ratio. So that the risk is not high.
At present, we are not in the equity fundraising process. But possibly in the next six months, we will look at another equity round.
Do you have any growth targets?
In the fiscal year 2021, we ended at Rs 1,200 crore in terms of disbursal. In fiscal 2020, we are looking Rs 2,000 crore of disbursal that is the growth we are expecting this year.
Growth has been impacted by COVID this year and last year. However, the growth rate could have been higher if it was not for the pandemic.
What is the most stated reason for loans taken by students?
There are categories and the most opted category is education-related expenses. Given the ticket size, students are not using that to pay their tuition fee as it is not large enough. The second category is for travel and the third reason is to buy something online. Lastly, it is discretionary.
Where are your customers largely from?
Our largest market is south India, and then it is equally split between west and north. Even though we are based in the east, it is our smallest market. It is based on customer demand.
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