I was convinced that for India to rise with a social balance, it had to enable the growth of micro businesses at the bottom of the pyramid, even though it was fraught with challenges. Vikram (Jetley, co-founder) and I got together to delve deeper into the opportunities and obstacles in micro, small and medium enterprises (MSME) lending.
While conducting field research, we interacted with over 300 micro-enterprises spanning five cities and six manufacturing industry clusters—lac bangles in Jaipur, brass casting in Aligarh, sports goods in Meerut, shoe-making in Agra, and shoes and garments in New Delhi. We were impressed by the resilience of this segment and how it had managed to stay afloat and contribute to the Indian economy, despite battling inaccessible funding and repayment challenges.
It is impossible to witness so closely the human perseverance and not let it change you. However, we could certainly not solve these challenges without innovating. One inspired evening, while contemplating ways of disrupting this status quo over tea, we got the idea of utilizing cluster metrics to assess credit worthiness of these businesses.
Our research had shown that each industry cluster had a unique footprint of financials, cash cycles, operating ratios, seasonality, and supply chain dynamics. We explored ways of leveraging this granular data and other semi-formal records for estimating cash-flows of businesses in specific clusters. That evening we sat down and drafted a detailed underwriting methodology built on Cluster Insights in a single sitting that ended in the early morning hours. The ‘Cluster-Based Credit Assessment’ methodology that we use even now got distilled from that click moment.
Since that spirited evening, we have continued to hone the methodology and strengthen our grip on the segment.
There was one moment when fate turned their way, a moment that they can look back upon and say, that was when it started. Capturing click moments.