BharatPe plans $5 bn loan book to help small businesses with credit: CEO

Company expects growth from Unity Small Finance Bank, its joint venture with Centrum Group, says Suhail Sameer

Financial technology company BharatPe plans to build a loan book of $5 billion in five years to serve credit needed by millions of small businesses in India, a senior executive has said.

The Delhi-based firm is about to cross $14 billion in annualised total payment value and it is working to ramp up to about $30 billion TPV by March 2023.

“Our plan is to build a lending book of about Rs 40,000 crore ($5 billion) in five years,” said Suhail Sameer, chief executive officer of BharatPe, in an interview. “Hopefully, a large part of this would be funded by our merchant and consumer network. We have heavy usage and investments by our merchants and consumers.”

The company said it grew during the Covid-19 pandemic when digital payments in the country and helped increase its lending business as well.

BharatPe is focused on three segments: merchant lending, consumer business and the Unity Small Finance Bank, a joint venture with Centrum Group that would start operations soon.

The firm’s target segment includes about 65 million MSMEs (micro, small and medium enterprises) in India that employ some 80 million people. The firm is tapping on the opportunity to address the unmet credit gap of $1 trillion in MSMEs in India.

The company has facilitated loans to over 3 lakh merchants to date. It has facilitated over Rs 2,800 crore of loan disbursals. There has been a growth of 10X in the last fiscal. It does monthly disbursals of Rs 300 crore. By next year, the firm aims to disburse loans of $1 billion among merchants.

“That is a big jump on merchant lending that we are expecting,” said Sameer. “We have disbursed around Rs 3,000 crore so far in the last 18 months.”

BharatPe competes with players such as Pine Labs, Paytm, Mswipe, and Razorpay.

BharatPeLoans are available in more than 11,000 pin codes in 24 states. Merchants can opt for assisted application processes over the phone. They don’t need to leave their shops and lose business to visit branches to avail loan. It has a sales force of over 4,000 agents to educate merchants on various financial products. Adequate loan sizes are available to merchants from Rs 10,000 to Rs 7 lakh (average Rs 75,000). About 45 per cent of its merchants take repeat loans.

The loan sizes from BharatPe are available for various use cases such as buying inventory, growth during festivals and opening new shops. There is a zero cost of application. Small instalments (average Rs  430 per day) alleviate the burden on merchants to save money till month end to repay via EMI (equated monthly installment).

BharatPe said there is a low or zero cost of repayment as automated payments are collected from receipts on QR (quick response) and POS (point of sale) machines. Auto repayments also reduce risk of incurring penalties due to missed due dates and loss of business while going to the bank for making repayment.

The other area that is expected to drive growth for the firm is the Centrum Group-BharatPe consortium. The Reserve Bank of India (RBI) recently issued a small finance bank (SFB) licence to the Centrum Group-BharatPe consortium. Incorporated as Unity SFB, the lender will start operations in some weeks with a Rs 1,500-crore loan book.

The consortium will take over the assets and liabilities of beleaguered Punjab and Maharashtra Co-operative (PMC) Bank. The timing for integrating PMC will depend upon when the RBI and the government release the scheme for amalgamation.

“We are targeting the bank to go live in one month and planning to scale it up,” said Sameer.

He said Centrum is much more capable in terms of running the branch operations and managing regulatory compliances as it has a reputed team of bankers led by Jaspal Bindra, executive chairman of the Centrum Group. He said BharatPe is much better at building digital products. “We would use our time and energy in terms of building technology and products for the bank.”

Unlike traditional organisations, Unity SFB is going to be a digital-led bank, having branches for specific use cases. Sameer said a large part of technology is ready. The company is in the final stages of building core banking systems that have been built from scratch compared to conventional systems that are not attuned to doing digital heavy businesses.

“From a tech point of view, we are ready for the first set of products related to payments and investments and for existing products of BharatPe and Centrum related to lending and SME financing,” said Sameer.

The other focus that is expected to play a key role in BharatPe’s growth is its consumer business. BharatPe bolstered its consumer play, by foraying into the peer-to-peer (P2P) lending space with the launch of its product -- 12% Club in August this year.