 Delighted to be here today with Mr. Sanjay Sharma. Sanjay is the co-founder of iFinance and today as we speak to him we would really understand his journey of building the startup iFinance along with how they have managed to make so much headway in such a short time. So welcome Sanjay. Thank you Ritu. I'm happy to be in this conversation. Love to start with how the name came to happen. iFinance is such an unusual name for an NBFC, for a financing lending company. So how did the name came to be born? I is a very unusual name and there is a very interesting story behind that. When we started we thought that we wanted a short syllable name because our customer is the typical micro enterprise owner who is not very educated and therefore a simpler name would have been better. And we looked for single and double syllable names and I appealed to most of us because I has a positive connotation in English it obviously means yes but also in Hindi it means income which is exactly the place where we wanted to play. I also in many regional languages means mother so it was a great name to start with. But anecdotal information that when we started going to our customers initially in those clusters with the lanyard saying iFinance people started downing the shutters because they thought it was a rear from the income tax department. So I can also mean Icar department and gradually I think the eyes broke and people realized that we were there to provide them funds which they desperately needed. So it's all worked out well for us. That's something that I would say started almost 10-15 years back and I always wanted to end my career by doing something which was socially relevant. I came back from my last job which was in UAE Dubai setting up a very large housing finance company and I then said that I would now like to work on the social side. I work for a year in Ujjivan which is a micro finance company and then I decided that just like the poor individual at the bottom of the pyramid needed to be supported similarly there were micro enterprises that needed support as well. I was joined by Vikram in this journey who's my co-founder and we went and met 350 micro enterprises in five different towns around Delhi and we spoke to them. Every interview took almost an hour so there was a lot of effort that was put in because lending to micro enterprise so far has been an area where most companies have not made too much of inroads into. So we went and we looked around and then we finally realized that a lot of challenges like no documentation, no typical income tax return or balance sheet or P&L, lack of credit bureau information because there's no prior credit lending. All these problems can be solved if one looks at understanding the type of business they are in or the cluster based lending which we do. We realized that there are patterns in every type of business and if you understand those patterns in a cluster you can actually do better cash underwriting and that was the starting point and that got us thinking about getting into this space and clearly the thought was that we wanted to work in a social space create social impact and that's why you could probably say that it started so late because most of the new startups are more into solving a key problem in the commercial world. Whereas this is a problem in the social side that is being solved. A lot of financial modeling is what sets us apart. We have propensity models for understanding that when is the customer likely to default. If the customer defaults what's the probability that it will lead to a loss and these are not simple statistical models alone. There are artificial intelligence models, machine learning systems which pick up variety of data. Data could be the state that you are from. It could be the industry that you come from. It could be the seasonality of that business. So a lot of points are picked up and the machine learning model can tell you that this is the predicted default. Default is one of the most obvious ways lender can benefit. Origination it plays a big role. Repeat loans we have when customer comes up for a repeat loan we don't put him through the same hassle of collecting information on him. We can use a machine model which can categorize customers into very low risk, medium risk and high risk and then we can decide on how much to lend to that customer. So the repeat process is where the beauty of this whole underwriting engine comes to fore. Customers are often given a pre-approved loan. Some of the customers ask some very basic questions before loans are given because they are a repeat customer. The customer does not have too much of investment in capital equipment. So loans tend to be small in size. Average ticket of the loan is 1.25 lakhs. So most of the loans would be in the 1 lakh, 2 lakhs sort of range. What do they typically need it for? The need is as I mentioned for working capital and it could be a person who let's say is manufacturing garments. And he needs that money for buying raw materials, paying the wages of their employees till they sell the products and get the cash back. We find that for these customers a shorter tenor loan is better because it brings them better credit discipline. So tenors typically range between 1 year to 2 years. Some of the larger loans could have longer tenors but on a weighted basis our tenors are around 1920 months. This also ensures that when the season comes the customer has more or less repaid his loan and can take a new loan at the start of his business season. We also find that the delinquency on these loans because the amounts are small tend to be very low. And we had a very good experience over the last six years in terms of seeing the NPAs stay very stable. For these customers I think repayment is important because that's how they get their repeat loans. And I think repeat loan brings in a win-win for everyone because they can take a larger loan and we have a great history now to work on. There are days in the life of an entrepreneur which are very lonely days. You know it's like days or weeks that you really just you and your co-founders have to get together and say no this is all, we'll turn it around. And I think it's your shared confidence and commitment that sees you through on those days. We've seen some early challenges while on the commercial side let me use the example of demonetization. We were hardly into a third year when demonetization happened. Demonetization impacts our customers in a much much larger way than anyone else because all our customers transact primarily in cash. Now if the cash was to be sucked out of the economy a lot of businesses stayed close for quite some time. In fact they were the government manufacturing cluster in Gandhi Nagar here in Delhi which remained almost close for two months. And for these customers they don't have very large amount of savings to tide them over. We had a quick discussion and we realized that rather than tell customers not to pay for some time we reduce their installment to one third. And we said that let them pay the one third installment for the next three months and two installments that will remain arrears will pick it up right in the end of the loan. So these are sort of things that one has to look at in a typical banking or a finance environment changing the installment would have been something that people would not have liked to do. Here we understood the customer and we did that and because of that while most of the MFI industry and a lot of NBFC went into double digit default in the NPA levels our NPA levels never crossed 2.7%. And I think this shows that there can be difficulties but there are solutions also available. So I think life goes on being an entrepreneur is not an easy job I think being in a job is the easy thing. But I think the rewards are phenomenal when things do work it gives you a lot of satisfaction that you can see your idea taking shape. In six years we have now 120,000 customers. A lot of people when I even go to the government forums realize that it's a very large number considering what other programs have achieved. And that's a big satisfaction for me. I am a complete believer that you've got to keep bettering yourself. You can't just say that this is enough and we are doing well. iFinance is done very well in the market and we've today seen in terms of many parameters as one of the leaders in our place. And yet we are not happy with where we are we want to do better. And I think that is essential to be a little paranoid about what you're doing. When we started we always used to say that you know that the next competitor is going to be just six months away from us today. Fortunately some of the competitors are more than two or three years away from us but you got to keep improving. And I think the way to look at it is that whenever you look at a problem you find immediate solution for the problem but look at what the long term better solution is. We are very fortunate that we are in an environment where there is so much of digital infrastructure available. The India PAC, the JAM network etc is a huge opportunity I feel. I wish I had seen this opportunity when I was in my 30s but still it is available and I think that is a huge opportunity which India should leverage. We are beginning to leverage that a lot of our KYC related checking off credit bureau is all online. So I think one has to keep thinking of newer ways to help your customer and that is how the business flourishes.