CredRight is a lending platform designed to serve the needs of small business owners in India.
CredRight Private Limited
Neeraj Bansal, Co-Founder and CEO
CredRight has developed an innovative underwriting model that expands access to financial services for nano entrepreneurs, who are often unable to provide collateral or credit history. Using information gathered through various physical and digital touchpoints, including chit fund data, the company can assess a borrower’s ability to repay a loan – expanding access to the credit they need to grow their business.
disbursed in FY23
Unlocking Formal Credit for Chit Fund Subscribers
If someone needs to borrow money but doesn’t have access to formal financial services, their only recourse may be to work with unscrupulous lenders charging exorbitant interest rates. But in India, ‘chit funds’ have long offered an alternative. These funds bring together a group of people, known as subscribers, who contribute a fixed amount in monthly installments. Each month, one subscriber can access the fund’s balance, which may be a larger sum of money than they contributed at that stage.
It’s a tool for both saving and borrowing, and one that has historically been available to those underserved by formal banking systems, including nano entrepreneurs who often run small retail or kirana shops, are small-scale manufacturers or work as street vendors. However, chit funds are largely unregulated. Now, thanks to an innovative underwriting model introduced by the lending platform CredRight, participating in a chit fund can help borrowers unlock access to formal credit from regulated entities – making it easier for nano entrepreneurs to invest in their businesses.
Since chit funds are composed of recurring payments made by each subscriber, CredRight can use statements to gain insight into cash flow, repayment behavior, and savings history. Additionally, CredRight gathers and analyzes nano entrepreneurs’ business flow data, inventory levels, and ordering frequency. The lender supplements this information with demographic data, business analysis, and reference checks for a more holistic understanding of the borrower. The deep penetration of chit funds, especially in rural areas of India, offers a robust data set for underwriting loans.
Physical and Digital Touchpoints
With growing digital adoption in India, lenders can leverage vast amounts of data to assess a borrower’s creditworthiness. However, because nano entrepreneurs often have incomplete digital trails, lenders still need to rely on physical methods to determine creditworthiness — like visiting the neighborhood to see how a person’s business is performing. While physical banking models may have lower risks, digital models can have significant operational efficiencies.
CredRight leverages the best of both worlds by using what’s known as a “phygital” model, which blends the two and leverages both physical and tech-enabled touchpoints when lending to nano entrepreneurs. After CredRight onboards new customers and loan officers complete physical assessments at business premises, customers can make payments digitally. The lender has also enhanced its customer experience through innovative data management and underwriting tools. Using this approach, CredRight can extend collateral-free, unsecured loans to these communities while harnessing the power of rapidly advancing technology.
Revamped Underwriting at Scale
With this credit model, CredRight has built a robust portfolio of $21.7 million as of H1 FY24, growing 2.5X year-over-year. Moreover, CredRight loans have high on-time repayment rates. Currently, 97.1% of loans are repaid on time, with only 2.9% at 90+ days past due, demonstrating the potential of investing in the MSME segment.
This credit model can foster the growth of millions of small businesses in India. By rethinking how to define creditworthiness, CredRight is unlocking opportunities for chit fund subscribers, nano entrepreneurs, and other small businesses across the country.
Growing up, Mohammed helped at his uncle’s shoe shop in Andhra Pradesh. He set his sights on opening his own shop one day. Today, he is a successful small business owner with a dedicated customer base vouching for the quality and affordability of his footwear products. Despite lockdowns and supply chain disruptions during the pandemic, he has built a thriving business.
CredRight supports nano entrepreneurs like Mohammed to unlock capital and grow their small businesses.