Traditionally MSMEs were too small and diverse to be viably catered by traditional financial institutions, said Rohan Juneja, MD & CEO, TruCap Finance Ltd, in an exclusive interview with SME Times.

He added that right from sourcing, servicing and collecting, MSMEs require grassroots level processes, skills and infrastructure to do a meaningfully profitable business while ensuring that affordable credit is accessible

Excerpts of the interview…

Please tell our readers about TruCap Finance and its entrepreneurial journey.

Rohan Juneja: Tru started lending operations in Mumbai in FY18 by offering loan against property and diversified into becoming a specialist MSME Business and Gold loans lender. This was achieved by building deep sectoral expertise in underwriting to finance daily cash and carry businesses such as kirana stores, small manufacturing units, medical shops etc. With an integrated digital platform and more than 60 branches or experiential centers across Maharashtra, Madhya Pradesh, Delhi NCR and Goa, Tru will now focus to build a stronger distribution network to help MSME business and consumers access credit at affordable rates with ease.

The evolution of Dhanvarsha Finvest Limited to TruCap Finance Limited (Tru) unifies its product offerings on one platform driven by synchronizing digital assets and offline branch network to cater to a rapidly expanding MSME customer base. Our team has been working relentlessly to navigate multiple challenges in local and global markets to strike a balance, between building a brand that connects with all its stakeholders while achieving profitable growth. We felt a need to evolve into a brand name which is aligned with this transformation. In this manner TRU was conceived and coined – to reflect our aspirations and journey undertaken to serve the purpose of nation building through lending.

What products do you offer and what are they for SMEs?

Rohan Juneja: Tru will be offering gold finance to MSMEs under the aegis of its offline branch network branded as Dhanvarsha; and MSME business loans would be rebranded under the Tru umbrella to cater capital requirement of small and micro enterprise businesses. Tru is an articulation of the mission to promote financial inclusion. It has expanded its distribution network within and around the vicinity of MSME hubs to simplify solution delivery. Tru stands for trust, reliability, and user friendliness in building credit solutions for unserved and underserved needs of small businesses.

Tru offers speedy gold finance solutions to MSME customers who are in urgent need of Finance at an affordable price. The gold loans are priced competitively and delivered within 30 minutes to the customers through a strong branch network of more than 60 Dhanvarsha experiential centers. Tru caters to cash and carry business to expand their footprint or finance working capital needs through business loans up to INR 20 Lakhs based upon the vintage of business and other factors. These loans are designed to address the need for affordable credit solutions to fulfill the needs of small entrepreneurs.

Our channel partner app DhanSetu facilitates the customer journey into a seamless process through a fully digitized journey. The loan products are effective in solving the credit gap and promoting financial inclusion by enabling us to underwrite new-to-credit business borrowers across Tier2 and 3 cities.

What is your market reach and what are your plans for further expansion?

Rohan Juneja: Our branch network is concentrated in and around Northern and Western India's MSME clusters, providing us with a ready market for our lending services. As the business grows and we discover opportunities to expand into other clusters, our branch network will follow.

TruCap has co-lending arrangement with Central Bank of India, the partnership was announced on Aug’21. The Co-lending model is now live across all branches in Maharashtra, Delhi NCR, and Madhya Pradesh. Company is also in talks with three other large institutions for similar arrangements.

TruCap has multiple Co-Lending partnerships with FLDG (first loss default guarantee) specifically in MSME business loans. Multiple partnerships under this model have enhanced penetration into newer geographies. We have been successful in building as well as scaling the collaboration strategy, going forward we would continue this strategy while thoughtfully refining it as per business needs.

Why do the majority of Indian MSMEs continue to witness lack of credit? What are your personal thoughts?

Rohan Juneja: Traditionally MSMEs were too small and diverse to be viably catered by traditional financial institutions. With extensive growth, there is a visible gap in access to formal credit at competitive terms. They have challenges in showing vintage & income and expenses since they were largely a cash-based business and underwriting is largely managed through assessed income model. Moreover, the ticket size is large, sourcing is difficult, separate collection force and special skill set is needed. From a balance sheet point of view, this does not move the needle for banks and traditionally large NBFCs. Hence, right from sourcing, servicing and collecting, MSMEs require grassroots level processes, skills and infrastructure to do a meaningfully profitable business while ensuring that affordable credit is accessible.

What measures are needed to resolve these issues?

Rohan Juneja: Given these challenges, we are seeing a pick-up in lending against gold even by business borrowers. Moreover, the traditional unsecured loan disbursement model takes upto 7 days to get disbursed unlike the gold loans which are fulfilled in under 30 mins at Dhanvarsha branch network. Hence, gold lending is likely to grow especially via value add in terms of time-efficiency.

Given that for large lenders it is still hard to service the MSMEs hence the Lending-as-a-Service or L-a-a-S models are beneficial since the partner is able to source, service and collect from these segments and manage the entire loan portfolio leveraging technology and skills developed over a period of time.

The biggest challenge, however, is that more than 90% of the registered MSMEs which fall in the micro-segment, are either new to credit or do not have the wherewithal, resources or time required to manage extensive documentation process that makes them eligible to qualify the credit processes. To solve this investment crunch, we need to build a viable and a cost-efficient ecosystem to solve access to credit, have a step-up program where diligent credit servicing habits are formed and then build products suitable to empower these growth generators to build capacity and expand businesses. We will have to take the credit solutions to them and educate them about the benefits and create a process that is robust but not documentation heavy for these small business-people. Recent developments and government initiatives such as Jan-Dhan Accounts, innovations in payments ecosystem such as UPI, Account Aggregator Framework, Open Credit Enablement Network (OCEN) accompanied with efforts to promote priority sector lending will yield positive results and contribute significantly to solve this access to credit in coming times.