CO-LENDING – Uttrayan Financial Services Private Limited

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Case Study

CO-LENDING

Introduction:

Uttrayan is actively involved in an initiative aimed at expanding financial inclusion and bolstering economic opportunities for poor women beneficiaries in cost-effective way. In collaboration with State Bank of India, the largest PSU bank of India, Uttrayan facilitates co-lending model since May, 2022, to provide micro-loans at competitive rates of 19.45%, significantly lower than the typical 25-29% rates offered by NBFCs, targeting underserved poor women beneficiaries and boosting credit access sustainably.

Problems:

Uttrayan addresses the challenges of high-cost micro-loan for borrowers. This initiative aims to boost customer satisfaction which involves fully digital, end-to-end customer on boarding process till ultimate disbursement. Uttrayan aims for digital transformation and transparency by integrating through API with SBI’s IT. This initiative aims to enhance livelihood opportunities for borrowers by providing low-cost Credit. These initiatives present opportunities to enhance Managed Portfolio Segment, expanding to Rs 300cr.

Solution:

Checking the credit history of the potential clients from Credit bureau and securing 650 score, client is oriented in mandatory CRT and GRT about rules to be followed in Group. After successful completion of CGT & GRT, that potential client’s application is made in system. Then all the relevant particulars of the clients are furnished in system. Finally, the Loan application is made in the system with full information of his /her Income & expenditure details.

Challenges:

Integrating new digital system with existing IT infrastructure is complex and requires R&D. Differences in technology platforms, and operational procedures cause hurdles at initial stage. Encouraging users in transition to digital platforms and ensuring they are comfortable with the new technology is being a significant hurdle and lack of financial literacy among underserved communities made it difficult to open SBI accounts of the beneficiaries which were needed for loan disbursement.

Innovation:

Uttrayan through these initiatives get access for market expansion in underserved market and increase its customer base. Uttrayan also targets in financial stability through low borrowing costs which lead to more stable and successful micro-enterprises, reducing default rates and sustainable growth in microfinance sector.

Outcomes:

This initiative helps company in serving the “missing middle segment client” whose loan demand is high and require loan. Digital integration reduces the need of manual intervention, which improves accuracy and enhancing overall operational reliability. The model reduces Uttrayan’s financial exposure, allowing it to participate in larger lending operation. By providing affordable financial services, Uttrayan builds trust and loyalty, lead to repeat business and positive word-of-mouth driving further growth.

Opportunities:

Future plans may include developing more integrated digital systems for seamless loan origination, processing, disbursement, and monitoring. Future Co-lending program could focus of specific sectors or customer segments such as SME and affordable housing to bring more customers under the purview and scale up the operations.

Summary:

This model operates under 80:20 funding arrangement between SBI and Uttrayan, initially started by allocating a limit of 100Crs by SBI. Its successful utilization prompted SBI to increase the limit to ₹300Crores, by Dec, 2023 thus markedly enhanced its Asset Under Management (AUM). As on 30^th June, 2024 Co-Lending disbursement was made to 71455 borrowers amounting Rs. 500.87 Crores, and portfolio stands as ₹ 294.67 Crores segregated among 62067 clients in 10 states across India.

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For more information, please contact:
Kartick Biswas at kartick.biswas@uttrayan-mfi.com

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