Over >US $200 Bn of debt in rural India sits with moneylenders and landlords. Unlike the urban salaried individual with a payslip, assessing income for a rural borrower is tricky - given multiple income streams, variability in agricultural earnings, and limited paper trails. While collateral may be available, the documentation is non-standardized. Consequently, the 150M household-strong rural market is underserved by banks and large NBFCs.

Microfinance institutions have done fantastic work in delivering credit to parts of this segment, however, these loans tend to be smaller sized, typically under ₹50,000. There is a large missing middle in the ₹ 1-10L ticket segment.

Utpal and Sameer know this segment intimately. Until 2018, Utpal led ICICI Bank’s Rural and Inclusive Banking team, managing an asset book of ₹40,000Cr. For over 20 years, he has designed, launched and scaled financial products for this market. Sameer comes with 22 years of experience in rural financial services, and most recently set up the rural lending business for Adani Capital. Prior to that, he spent 10 years at Fullerton India, part of the team that set up the rural business for the NBFC, and eventually went to lead this unit as National Rural Business Head.

Utpal and Sameer came together to launch SarvaGram – a household-first rural NBFC and distribution platform. The team started lending operations in June 2019 and today services customers across Gujarat and Maharashtra through six locations.

SarvaGram’s intervention starts with focused location selection. The team has developed an inhouse pin-code level index, to account for affluence, credit penetration and repayment discipline to select branches that are high-quality yet underserved.

Unlike lenders that take an individual-level view of incomes and liabilities, SarvaGram focuses on the household. This helps them better assess cashflows and obligations, as well as household-level cross-sell opportunities. The appraisal is based on a mix of documented and assessed income, with the team’s relationship officers supported by proprietary scorecards for standardization.

SarvaGram then matches borrowers with a relevant product on the basis of this appraisal. The team currently offers business loans, personal loans, farm loans, housing loans and gold loans ranging in ticket sizes from ₹10,000 to ₹15L. These products rely on similar income assessment methods, but cater to the unique end-uses and cashflows of the family. This is productive credit, that helps the household enhance their income generation capacity.

Given their on-ground presence, personal relationship with their customers and deep understanding of their needs, over time, the team aims to cross-sell multiple lending and non-lending products to help the household create assets or increase income.

The team’s approach has shown promising early results. Borrowers speak highly of the SarvaGram process and actively refer potential customers. Repayments have been exemplary despite the challenging environment posed by COVID-19 - <15% of the borrower base took up the loan moratorium offered by the RBI, and only <2% took the moratorium for 4 months or more. Post moratorium, collections efficiency has bounced to over 98% across the base.

Vertical-focused lenders have created immense value in India, be it gold-focused NBFCs like Manappuram Finance, commercial vehicle lenders like Chola, or SMB-focused players like Aye Finance. We’ve known Utpal and Sameer since they were still in their notice periods at their previous roles,and have been tracking them actively over the last two years. With their household-first approach, innate understanding of the segment and high touch & tech model, and we believe SarvaGram’s approach is uniquely tailored to service this deeply underserved market. We’re excited to join the team’s mission to build a household-focused lender catering to the aspirations of rural India.