Suryoday Small Finance Bank (SSFB) sees its microfinance clients as potential cross-selling targets for micro-loans for housing, micro-loans against property (LAP) and two-wheeler loans.
The Navi Mumbai-based bank, which has a customer base of around 18.5 lakh and gross advances of ₹4,872 crore (as of end Dec 2021), plans to launch micro-LAPs and two-wheeler loans over the next next three months.
It also plans to expand housing micro-loan offerings — introduced about seven months ago in 12 branches — to at least 200 branches next year (fiscal 2023), said Baskar Babu R, MD and CEO.
He observed that, on the asset side, the bank owns 70% of the activity in inclusive finance (group unsecured loans granted to women micro-entrepreneurs for income-generating activities built on the model of the group with joint liability) and 30% in non-inclusive finance (commercial vehicle loans; affordable housing loans; secured commercial loans; micro-enterprise loans; etc.).
Babu pointed out that SSFB is looking at a 50-50 business mix by mid-fiscal 2025.
Inclusive financial mix
The bank seeks to offer micro home loans (₹3-10 lakh) under the inclusive finance category. It is difficult to meet the demand for this product without a large existing customer base, he said.
“A micro-LAP (₹3-5 lakh) is also in preparation for business enhancement with a tenor of five to seven years. Usually loans in the microfinance segment are limited to two years.
“So instead of taking out 3-4 loans of ₹40,000-50,000 each, a client can take out just one loan and have a much lower EMI (equivalent monthly installment) burden. It gives them space to invest in long-term assets,” Babu said.
SSFB will initially offer loans for two-wheelers to its existing customers.
“The majority of microfinance client households will purchase a two-wheeler once every three years.
“For example, a client’s son who starts a food delivery service business will probably start out buying a used bicycle. And once he is in service for a year or two and has his own savings, he will buy a new vehicle,” Babu said.
So instead of a customer going to a dealership to find out if they qualify for a two-wheeler loan, they can go to the bank, which will pre-approve the loan since they know the household.
“So what we envision is that a customer can just walk into a dealership and take delivery of the vehicle. And the prices will be as competitive as possible – in fact, much better,” Babu said.
Although there is huge potential in the gold lending business, the head of SSFB said his bank will enter at an opportune time when it can expand in terms of distribution.
March 23, 2022