Cluster-based credit reporting approach and phygital model of fintech bridge the gap between MSMEs and organized lending standards
Aye Finance is a new era finance company that provides secured and unsecured small business loans to small and micro businesses across India. It aims to solve the financing problems of micro, small and medium enterprises and bring them into the mainstream of the economy.
“With over 60 million micro-enterprises operating in India, this segment represents a vital engine for job creation and economic growth. Ironically, these micro-entrepreneurs are excluded by strict requirements for material guarantees and formal documentation, usually the main decision factors in the traditional credit risk assessment process,” says Sanjay Sharma, Managing Director of Aye finance.
Sharma says the startup differentiates itself by creating a technically enabled process that generates credit insights through a variety of available business and behavioral data. This efficient credit scoring, coupled with the use of modern workflow automation and a small but engaged workforce, helps bridge the gap between MSMEs and organized lending. The cloud computing architecture enables flexible customer service delivery at an affordable cost. “It’s part of our vision to leverage modern technology to multiply field force productivity, early fraud detection and operational risk reduction,” he said.
In April 2014, Aye Finance, headquartered in Gurugram, provided its first commercial loan to a micro-enterprise located in the shoe manufacturing cluster in West Delhi. “Today, we serve the credit needs of over 100 manufacturing, service and trade clusters in 311 cities and have made affordable credit a reality for over 3,50,000 micro-enterprises,” says Sharma.
He says his company is the only pan-Indian large-scale player providing low-cost unsecured business loans to a large segment of credit-starved micro-enterprises. “Aye has broken into this hard-to-lend segment with its unique cluster-based credit scoring approach and optimally digitized phygital model,” Sharma says.
Aye Finance is financed by three venture capital funds: Accion International, SAIF Partners and LGT Impact ventures. It also has more than a dozen providers extending their debt funds for its MSME finance business. “Since our inception in 2014, we have raised six funding rounds from global leaders CapitalG (Alphabet’s independent growth fund), Elevation Capital (formerly SAIF Partners), Falcon Edge Capital, A91 Partners, Lightrock and MAJ Invest. The majority of our financial partners participated in several funding rounds, demonstrating their commitment to our mission as well as their confidence in our business model,” he said, adding: “We continued to have a strong portfolio diversified on debt deals with leading impact investors. , banks and financial institutions. And we continued our track record of generating profits for four consecutive years, including the pandemic that impacted 2020-21. »
Aye Finance has been a leading player in developing AI and ML models to further facilitate access to credit for the MSME sector and has deployed advanced AI/ML solutions in most of its business processes reviews. According to Sharma, “Our models predict critical customer behavior at a very granular level, which has helped us improve our lending decisions, improve the efficiency of our customer acquisition and onboarding processes, while helping us enabling us to provide personalized solutions as well as upsell offers to our target customer segment.
Before the Covid years, Aye Finance was growing at over 50% CAGR, Sharma says. “I believe we will see a clear track in fiscal year 22-23 without the constraints or the hangover of the effects of the disruption,” he summarizes.