An estimated 110 million households in India today are not a part of the formal finance economy. They don’t have access to unsecured loans for medical treatment, weddings, education, home improvement or other needs. This gap exists because of highly risk-averse credit policies and limited geographical coverage of traditional players. They have limited avenues to take loans through pawning their gold or from informal money lenders who charge atrocious interest rates.
MoneyOnClick wants to solve this credit need of a middle Indian wage earner earning 20–30k per month and employed by SMEs. This segment has two types of credit needs — small ticket size, short-term credit needs to meet monthly shortfalls and large ticket size, long-term credit needs. There is an opportunity to solve both, but it requires different business models and DNAs. MoneyOnClick wants to be a business addressing the long-term credit need of this segment.
It wasn’t the segment or the problem that was new to us, but exceptional founders and their refreshing take on solving it.
We decided to invest in MoneyOnClick when Vishal and Himanshu had just come out of leadership roles at one of India’s largest digital lending start-up to pursue their entrepreneurial journey. Founder-Market-Fit is at the core of our investing philosophy, and the investment in MoneyOnClick for us was on the back of team’s deep insights and exceptional execution capabilities to build a digital lending business in India. Vishal had played a pivotal role as business head in building the lending book in his previous role. And as he has always believed it wouldn’t have been possible without work Himanshu had done build a truly automated ML based credit underwriting engine.
We are strong believers in India’s digital lending opportunity.
- There is a huge unmet credit demand in India (~$200–300B). It is a supply constrained market.
- This is not a winners take all market. Many large digital lending companies will emerge over next decade serving needs of various customer segments and needs. There are 11 publicly listed financial services companies with a market cap of >$10B, by far highest for any sector.
- It’s a business that needs “inch wide mile deep” approach — pick your target segment wisely and go deep into it.
- It needs a team that can crack all three pieces of this complex puzzle — distribution, underwriting and collection. Having one of these weak will prove to be value eroding.
- Building the book is not hard, building high-quality and profitable book is hard. And it takes a few years before one realises the quality of book.
While technology is a great enabler, it also needs deep understanding of credit business to build a digital lending business. Vishal and Himanshu brings the right blend of both, and that’s what gives us conviction to partner with them in their journey.
Rajesh & Darshit are the deal team at Kalaari for MoneyOnClick. We believe the digital lending is still at a very nascent stage and are excited to partner with the team to bridge significant credit gap in this country!
Kalaari is committed to investing in great founding teams which are thinking uniquely to create impactful companies in India for India. If you know a company we should meet, we would love to hear from you. Reach us at team@kalaari.com.
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