Home Credit India, a non-banking financial company, focuses on small-ticket loans for purchase of mobile phones, home appliances, etc., primarily to people with little or no credit history.
Home Credit India, a non-banking financial company, focuses on small-ticket loans for purchase of mobile phones, home appliances, etc., primarily to people with little or no credit history. Jean-Pascal Duvieusart, a shareholder of PPF Group and member of the board of directors, Home Credit BV outlines the company’s India strategy in an interview with Saikat Neogi. Excerpts:
How do you see your consumer finance lending business growing in India given that competition is growing so fast?
The Indian consumer finance market is quite competitive with strong local players. With a robust economy and a significant percentage of the population financially underserved, the potential of India as a growth market for us is tremendous. Even the Point of Sale (PoS) lending is not widely spread across the country which again is an opportunity and focus area for us. In the long term, we aim to become the first and most trusted choice of consumer credit in the country.
How will technology help lending to the unbanked?
Technology is a key enabler for financial inclusion. It helps overcome the issue of missing credit histories, bringing a larger unbanked population into mainstream consumer lending market. The wide reach of mobile phones and use of Aadhaar database helps us streamline the KYC processes efficiently. All of these are supporting financial inclusion and will enable us to reach a wider customer base.
Are you looking to expand in areas like home finance, education lending, etc?
For the time being we are not looking at these because it is not our core competence and something that we will be doing in other countries. Perhaps we could at some point of time do it, so never say never.
What are the gaps in the Indian market where you can use your expertise?
Home Credit is one of the fastest growing NBFCs in India and we aim to drive credit penetration. Our focus is on being a responsible lender. We offer simple, transparent and easy loans to previously underserved customers besides guiding them on the path of financial literacy. Our entry strategy has been to focus on smaller ticket loans which were not covered by others. We offer very competitive processes, and since we focus on small items, we can offer a higher acceptance ratio which is important for retailers because the more credit is available, the more they can sell.
As you lend with CIBIL Minus one, how do you assess the credit worthiness of the person?
We have pretty good mapping and data around customer behaviour and a specific target group. Our India office has a team of over 60 people just focusing on developing techniques and approaches on how to do underwriting for that type of customer. So, it’s a very specific expertise we have. And then when we go to a particular country, we develop models, start trials with a small portfolio and see how it works.
How do you balance growth and profitability?
We are definitely focusing on growth because the market is big and we are just at the surface. One need is to build presence, be relevant for partners and be able to amortise branding efforts—none of which is possible if you don’t have scale. And if you want to scale in this business, you need capital because otherwise you cannot get funding. Under strict regulatory constraints, we need to have a certain amount of capital that we will invest to be able to grow. The investment is not giving credit to high risk customers. We are a responsible lender and understand that giving credit to somebody who cannot repay will create misery for everybody. We will continue our efforts to be a responsible lender and will also focus more on technology, create new apps and develop a strong sales force to grow the business.
Since you are present in insurance business in many countries, are you planning something in India?
We have insurance activities in India which are related to our consumer lending activity. So we are not looking at any other insurance business. There is lot of competition and local players are highly advanced with adequate skill sets.
Regarding your financing, you have tapped non-commercial debentures and securitisation. What are the other sources you are planning?
We have securitisation and direct assignments. Where we are selling a portfolio of loans to third party, we have bank loans. We are going to issue commercial papers. It will be a first step into commercial paper as part of diversifying. We expect bank loans to increase over time as we get better ratings. We are having dialogues with rating agencies such as Fitch India, CARE, CRISIL, etc., and they understand that Home Credit India is part of Home Credit BV with close to two billion euros of capital. And that is part of PPF group which has seven billion euros of capital.