U GRO Capital's Amit Mande Reveals Vision and Innovation in MSME Lending

StartupTalky presents Recap'23, a series of in-depth interviews where we engage with founders and industry leaders to explore their growth in 2023 and their predictions for the future.

The Non-Banking Financial Company (NBFC) industry is a crucial financial sector component, encompassing entities that provide various financial services without holding a banking license. NBFCs play a vital role in meeting the diverse credit needs of individuals and businesses, contributing to financial inclusion. They engage in lending, investment, and asset financing activities, often focusing on niche markets or specialized services.

In 2022, India's NBFC sector reported a robust net profit of 290 billion INR. The credit-to-GDP ratio reached 13.7% in FY 2021, showcasing its growing economic importance. By August 2023, NBFCs exhibited significant YoY growth, expanding by 25.8%. India's MSME sector, growing at 11.5% annually, contributes 30% to the GDP, surpassing the overall economic growth of 8%.

In a recent Recap'23 interview, we at StartupTalky had the privilege of connecting with Amit Mande, CRO of U GRO Capital. We analyzed the operational intricacies of U GRO Capital in the NBFC industry, exploring its strategies and gaining insights into its unique approach and strategic positioning.

StartupTalky: What was the vision with which U GRO Capital was started? How has the company been able to build on its vision?

Amit Mande: U GRO Capital is built on a vision of a dynamic India driven by thriving MSMEs, and we're committed to being their trusted partner on their journey to success. By revolutionizing the MSME lending ecosystem, we are trying to solve the unsolved and participating in servicing the US $600 billion credit gap of MSMEs in India. Our aim is to acquire 1 million customers and capture a 1% market share of the larger MSME lending market over the next three years.

We are revolutionizing MSME lending and are trying to solve historical credit access issues rooted in extensive documentation and cumbersome processes. Our vision is to eliminate hindrances for underserved MSMEs with innovative strategies to eliminate paperwork and streamline applications, offering a seamless experience through proprietary technology, exemplified by platforms like GRO X, providing on-tap financing solutions. This commitment to technology extends beyond convenience; it is about empowering MSMEs with swift credit access based on real business performance. Departing from traditional reliance on collateral and extensive documentation, U GRO Capital utilizes advanced data analytics, notably the proprietary GRO Score model, evaluating customers based on banking, bureau, and GST behaviors.

Our aim is to service every credit need of every MSME. Given our sectoral focus and understanding of eight sectors and 180+ sub-sectors, we are able to understand the business of all MSMEs under these sectors and, therefore, address their individual credit needs. Our presence is in over 100 cities, with a large focus on the states of Rajasthan, Tamil Nadu, Gujarat, Karnataka, and Telangana. In these states, we have micro-enterprise branches where we service the credit needs of small business customers by understanding their business and cashflows and extending credit to them. We plan to expand our reach to 150 cities within the next 6-8 months.

With our suite of products, we are catering to the credit needs of all MSMEs, especially for the underserved small businesses and to the last mile MSME. Our product offerings include secured and unsecured business loans, supply chain, and machinery finance. We offer 7-day to 15-year term loans to bullet structures in the supply chain and offer Rs. 50,000 to Rs. 5 crore loans. Our distribution model is geared towards catering to MSMEs across all geographies and ticket sizes. 

StartupTalky: What new services have been added in the past year? What are the USPs of your service?

Amit Mande: Since its inception, U GRO Capital has been building a suite of products in the MSME lending space to cater to different categories of business with our customized offerings. We recognized that the one-size-fits-all approach would not work for last-mile MSMEs. Our philosophy is to use data from multiple data ecosystems and deliver credit via dynamic technology channels. Through thorough analysis, we crafted loan products with flexible tenures, interest rates, and repayment schedules, catering to diverse needs. While doing this, we embraced data analytics to assess creditworthiness, moving away from traditional collateral requirements and paving the way for inclusive finance.

The company has undergone a transformative journey over the past year, unveiling a range of business solutions to address the evolving needs of MSMEs and taking our initial strides into sustainable financing. Our commitment to innovation is evident in the launch of various product variants, expanding into new-age businesses with fresh opportunities. This has enabled U GRO Capital to evolve to cashflow-based underwriting and deliver credit at convenience and speed to last-mile customers.

At the forefront of our offerings is our GRO X App, an on-tap financing solution that signifies a momentous leap in empowering MSMEs. This closed-loop retailer financing solution provides instant credit to the last mile, granting small merchants 'Non-Stop Business karne ki Azaadi' they need to operate at peak efficiency. The GRO X App, a digital solution tailored for small merchants, offers a seamless experience with customized solutions, flexible tenure, repayment options, and a pay-as-you-go model.

As a part of our Micro-enterprise lending solutions, we recognize the vital role of micro-enterprises in the economy and have developed micro-loans with minimal documentation and simplified processes, fueling the aspirations of this often-overlooked segment.

In our commitment to Green Finance initiatives, the solutions are designed to aid MSMEs in transitioning toward environment-friendly practices. We extend financing options for initiatives such as rooftop solar installations, green logistics, and energy-efficient solutions. We have collaborated with almost all solar OEMs and platforms that facilitate green logistics to ensure that our green financing solutions reach the last-mile MSMEs, enabling them to harness the benefits of solar energy. Actively engaging with partners involved in various sustainable practices, such as battery recyclables, solar charging stations, and overall energy-efficient solutions, reinforces our commitment to environmentally responsible financing. 

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StartupTalky: How has MSME lending changed in recent years, and how has U GRO Capital adapted to these changes?

Amit Mande: U GRO Capital is a dedicated MSME lender servicing all the needs of all MSMEs. UGRO has been pioneering the extension of credit to MSMEs on a data-tech platform.

Traditionally, access to small businesses has posed a challenge. This has been primarily because of the lack of financial data and discipline that is required to credit assess customers. MSMEs in India also face issues with the number of collaterals that they can borrow against and the quality of those collaterals, and unfortunately, traditional lenders have always demanded either collateral or financials. Because of this, a large number of small businesses have to access unorganized channels for their credit needs. From these unorganized channels, credit has been unaffordable and sometimes even exploitative. 

To address the credit demand, U GRO Capital’s philosophy is to move away from the financial-backed and collateral-backed credit assessment to cash flow-backed credit assessment. At U GRO Capital, we have walked the extra mile to understand the customer and assess his/her income and cashflows that are not reflected in banking and financials to extend credit to this segment. This is a very immersive process, and few lenders have walked this path.

We are able to overlay the assessed cashflows to our proprietary risk model, GRO SCORE, which credit assesses customers on their banking, bureau, and GST behaviors to extend credit to the last mile. Our sectoral focus has helped us build sector and subsector-specific risk models, which help us extend credit and correctly price it.

At U GRO Capital, we have also heavily invested in financial literacy initiatives for MSMEs, helping them manage finances effectively, build credit scores, and make informed business decisions. We have recently partnered with Laghu Udyog Bharati to launch a pan-India Awareness Campaign to Educate Small Businesses on Government Schemes and Promote Digital Credit across 100 locations. By embracing innovation, collaboration, and responsible lending, we are working towards building a brighter future for Indian entrepreneurs and the economy as a whole.

StartupTalky: What is your brand strategy to reach a larger target audience and accelerate the next growth phase?

Amit Mande: Our brand strategy is deeply rooted in our vision to address the significant $600 billion credit gap and foster the growth of MSMEs. This commitment is not just a part of our brand and logo; it is ingrained in every action we take. We have strategically built our brand on the foundation of customized financial solutions, a robust technological infrastructure, and the seamless delivery of credit to the last mile.

The cornerstone of our brand's strength lies in our ability to foster repeat customers. Our UGRO Mitra referral program stands as a testament to the exceptional experiences our existing customers have had with our services. Through this program, satisfied customers become advocates, recommending our financing solutions to their networks, thereby amplifying our reach to the last-mile MSMEs.

Our employees, driven by a shared vision of empowering underserved businesses with the right credit solutions, serve as invaluable brand ambassadors. Their commitment goes beyond the ordinary; they willingly go the extra mile to contribute to our mission.

Recognizing the immense contribution of MSMEs to the country's GDP, we understand the significance of reaching a large and diverse target audience. While traditional media channels such as TV and radio campaigns have been integral to our brand positioning, they represent just one facet of our comprehensive branding strategy.

The true ambassadors of our brand extend beyond the confines of media campaigns. Our customers, employees, and partners, including FinTechs, OEMs, and supply chain partners, play a pivotal role in shaping and validating our narrative. They believe in our story and trust in our ability to deliver on our promises. Our brand strategy revolves around building a holistic ecosystem where every stakeholder, internal and external, contributes to and validates our mission. This collaborative approach is what propels us forward, enabling us to not only reach a larger target audience but also to accelerate into the next phase of our growth journey.

StartupTalky: With the changing financial landscape and evolving customer demands, how is U GRO Capital adapting its business model to stay competitive and meet customer expectations?

Amit Mande: Historically, MSMEs have faced challenges with underdeveloped banking habits and incomplete financial disclosures, leading to collateral-based lending. However, the emergence of ecosystems like India Stack, GST, Account Aggregators, and other alternate data sources is transforming this scenario by providing a wealth of data. In response to this evolving financial landscape and changing customer demands, U GRO Capital is strategically adapting its business model to stay competitive and align with customer expectations.

At U GRO Capital, our investment in data analytics and technology positions our products to leverage the digitized MSME landscape effectively. We have embraced a cashflow-based lending approach, utilizing advanced technology to assess cash flows accurately. Our commitment goes beyond traditional methods, delving into the intricacies of customers' profiles to understand income and cashflows not adequately reflected in conventional records.

Setting us apart from others, our immersive process integrates assessed cashflows into our proprietary risk model, GRO SCORE, which ensures swift customer assessments and approvals within an hour, setting a new standard for efficiency. Moreover, our sectoral focus has led to the development of tailored risk models for specific sectors and subsectors, allowing us to extend credit judiciously and accurately price it.

In line with our data and technology prowess, we have introduced the GRO X Solution, Retailer Finance Solution, and online loan solutions. These innovations reflect our commitment to providing access to credit with ease of documentation and leveraging data ecosystems and robust technology.

Our digital stack plays a crucial role in making credit access and servicing convenient for customers. The entire onboarding process, whether direct or assisted, is fully digital, relying on our data tripod of banking, bureau, and GST records. 

We prioritize transparency in customer interactions, digitally dispatching all documentation to foster trust and ensure fair pricing. Our WhatsApp bot, Unnati, further enhances the customer experience by delivering information, answering queries, providing status updates on existing loans, facilitating applications for new loans, and more—all at the click of a button. At U GRO Capital, our differentiated and forward-thinking approach positions us as leaders in today's dynamic financial landscape.

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StartupTalky: What opportunities do you see for future growth of MSME lending in India?

Amit Mande: The future of MSME lending in India holds immense potential for growth. We are currently at a nascent stage of an explosive trend, similar to the trajectory that consumer lending experienced after the evolution of lending bureaus in the mid-2000s. The advent of a robust data ecosystem, coupled with initiatives like Account Aggregator, ONDC, and others, is set to transform last-mile MSME lending.

As one of the early adopters, U GRO Capital is strategically positioned to benefit from this evolving landscape. The integration of advanced data ecosystems allows us to tap into new opportunities and cater to the unique needs of MSMEs. We foresee a significant growth trajectory in last-mile MSME lending, and we are excited to play a pivotal role in shaping and benefiting from this trend.

StartupTalky extends its gratitude to Mr. Amit Mande for dedicating his valuable time and generously sharing his insights with all of us.

Explore more Recap'23 Interviews here.