Launched in 2014, peer-to-peer (P2P) lender Faircent is processing nearly a thousand applications a day. It is also disbursing loans worth Rs2.5 crore a month, founder and CEO Rajat Gandhi tells Shritama Bose. With yields of around 6.5-7%, the company is looking to achieve break-even in another three to four years, Gandhi says. Edited excerpts:
Tell us about the growth you are seeing.
We are doing Rs2.5 crore worth of disbursements a month now. Now we are getting approximately 1,000 applications a day and as a fintech company with about 50 people, we are processing that many applications a day. Similarly, we have about 10,000 individual lenders listed on our platform. None of the banks or HFCs (housing finance companies) are lending money on our platform. So it’s a genuine peer-to-peer platform. From a business-model point of view, it has scaled out.
What is the revenue model?
We take a cut from both lender and borrower. So depending on the transaction size, we take a flat 1% from the lender and anything between 2-4% from the borrower, depending on the risk profile. We do not allow more than 20% of a borrower’s requirement to be funded by a single lender. The minimum you can lend is Rs750.
What kind of risk assessment do you do for both lenders and borrowers?
As I said, we get 1,000 applications and what that comes down to is about 700 loans a month. We check the borrower’s CIBIL (credit score), we check the borrower’s banking statement and all that. So we have our own algorithm for evaluating a borrower. We score it out of 400 and we give a risk rating to the borrower. For the lender, normal KYC is done. We take his PAN card number, we take his bank details, we take his address proof. So it’s not a free-for-all marketplace; it’s a curated marketplace.
Any other criteria a lender must meet?
We have a few other criteria. You should have an annual income of over Rs10 lakh, though the average lender has a much higher income – around Rs40-50 lakh. We don’t look for statements, it’s self-certified. Secondly, you need to be an Indian citizen. Thirdly, you should be aged 25 years or more.
What is the rate of retention of lenders like?
We did an analysis of people who joined in 2015 and stayed on into 2016. We had retained 66% of our lenders and the portfolio size kept on increasing. Typically, people start with Rs5,000-10,000 and the largest lenders we have have crossed more than Rs1 crore of lending.
How are loans priced?
We have a criteria on the algorithm with which we determine the risk profile and then we put you into a certain risk band of interest rate. We have minimal risk, which starts at 12% and then it goes up to a maximum of 30%. We have some 200 parameters on which we evaluate the borrower and generate a scorecard. All our loans are unsecured personal loans.
You have been working on secured loans as well.
That’s against automobile loans, bike loans that we did with Baxi. It is a motorcycle-taxi aggregator operating out of Haryana. We were funding those people against hypothecation of the motorcycles. We are launching more products on the secured part, things like loan against property, automobiles, cars, etc.
What is the profile of your lenders like?
We have two-three kinds of lenders. One is people who are basically traders, who have surplus money and who used to earlier invest in assets like property and all that for generating rent. They’ve been lending among themselves and within the community. The second is people who are now professionals but whose families have traditionally been into lending. The third is traditional moneylenders, who are finding the platform attractive because now suddenly they have access to so many borrowers. These are the two-three types.
What are your revenues like and when are you expecting to achieve break-even?
While our revenues are minuscule as of now, our yields are around 6.5-7%. Break-even will take three to four years at least.