Lessons as a lender: How FlexiLoans was conceived and grew in scale  

Enthusiastic about a strong wave of India’s march in the areas of Jan-Dhan (bank accounts), Aadhar (KYC solutions) and Mobile (connectivity/alternative data), Ritesh, Deepak and I (classmates of the Indian School of Business 2009) started FlexiLoans.com in 2016 To serve deserving but underserved MSMEs across India using data-backed credit underwriting and technology infrastructure for excellent customer journeys.

When we met our first group of e-commerce platforms and merchants to digitally distribute business loans using alternative data within 48 hours, we were greeted with a red carpet. With that said, potential investors/lenders wanted to see the debit and credit behavior give us the first lesson that lending risk is more rewarded than book growth and potential.

FlexiLoans has quickly become one of the leading lenders for e-commerce sellers selling on platforms like Shopclues, Snapdeal, Flipkart, Amazon, Paytm and many more. During 2016-17, Indian MSMEs experienced two major changes: a) de-trading; and (b) the introduction of the Goods and Services Tax (GST) – pivotal changes for small Indian businesses.

We developed alternative underwriting models based on point-of-sale payments and e-commerce sales that ensure seamless delivery of credit and data-backed eligibility calculation for loans, which was until then unheard of. The Covid period of 2020-22 has increased digital adoption of Indian companies and today we are receiving more than 3.5 monthly applications and more than 10 monthly visits to our digital platforms. The lesson here is that India is a very large, underserved and high potential market waiting to disrupt lending with category-defining lenders like FlexiLoans.com leveraging data and technology to serve viable loans.

During 2019, Indian NFBCs suffered a major setback after the PNB and ILFS crisis as funding literally dried up and penalties that would take a few weeks to get paid started months. We learned a hard lesson then that managing liability and liquidity is one of the most basic and challenging tasks in lending and, if not set as a disciplined process, can stunt growth. We have developed syndicated lending solutions for our clients along with a few notable banks and non-bank financial companies and this was very useful in 2021-22 when the funding scenario for lending was again tight due to overlap but 70% of our AUM growth was easily provided by accepted by our lending partners via our syndicated lending platform. Our liability franchise is diversified today with over 25 banks and financial institutions lending directly to us and many syndicated lending partners.

Finally, the COVID period has been a real test for any lender and we have learned the virtues of empathy, communication and technology in our group efforts. We have kept in constant contact with our customers, expanded access to customers, restructured their loans at an understanding customer level, obtained <5% credit costs even during the Covid years and minimal customer escalation. We used technological tools to remind customers, obtain payments, and update their records.

In short, the past 6+ years have seen one of the toughest macroeconomic environments for Indian MSMEs, but at the same time, it has seen Indian Digital Stack gain tremendous strength with the help of regulatory support. We are now among the leading FinTech lenders in the country with over Rs 1,000 crore assets under management, over Rs 4,000 crore annual payments run rate and among the few profitable FinTech companies backed by the trust and support of our clients. Dear stakeholders. In lending, one is judged by the ability to increase the risk sensitivity of the loan book.

Manish Lonya is the co-founder of FlexiLoans.com