Fullerton to up lending to low-income group

Fullerton India Credit Company, a subsidiary of Temasek, is planning a big push in lending to the low-income group, a sub-prime segment not serviced by mainstream banks.

It is eyeing a four-fold increase in its presence to 400 cities, and planning to double its staff count to 15,000 by March 2008, hiring 1,500 people a month.

To fund its ambitious growth plans, Fullerton India, which began operations on a low key in January 2006, will treble its equity capital to $300 million in 2008 from the current $100 million.

The equity (around Rs 1,400 crore) will match the net worth of Citifinancial, which has been in the business of mass market lending in India for many years now.

Fullerton is a subsidiary of Fullerton Financial Holdings, which in turn is wholly owned by Temasek Holdings. Temasek manages direct investments of over $100 billion by the Singapore government. Fullerton is among the international players that are getting more active in lending to the low-income mass market.

The others include GE Money, HSBC¿s Pragati Finance and Standard Chartered Bank¿s Prime Financial. The lending rates in the mass market segment range as high as 45-50 per cent.

Fullerton currently has loan assets of about Rs 900 crore and expects to scale it up to Rs 6,000 crore by December 2008. Its loan disbursements since January 2006 totalled about Rs 2,500 crore. Fullerton charges interest on a monthly basis as most of the loans have repayment tenures of less than 12 months.

"Our target audience is the mass market, which does not get easy finance from banks and other financial institutions. We service our customers only through our own employees. We follow a neighbourhood financial model, where our branches are as close as 3-4 km from the customer's workplace or home," said G S Sundararajan, chief executive officer and managing director of Fullerton India.

"We are hiring local people for the purpose," said Sundararajan. Fullerton's immediate expansion will be in the urban and the semi-urban areas and thereafter, a strategy will be drawn for reaching out to the rural populace.

The total retail credit market in the country, excluding home loans, is about $70 billion, most of it by mainstream lenders in urban areas. Borrowing by the low-income group from formal sources remains negligible.