Millions of small and medium-sized enterprises (MSMEs) form the lifeblood of the Indian economy, yet these businesses often face hurdles in accessing the financial resources they need to thrive. Radian Finserv, a bootstrapped Non-Banking Financial Company (NBFC), is on a mission to bridge this gap. Achieving the remarkable milestone of exceeding 100 crores in Assets Under Management (AUM) since receiving its RBI license, Radian Finserv is a champion of financial inclusion.
In an exclusive interview with TheCSRUniverse, Mr. Sumit Sharma, Founder, Radian Finserv, delves into the company’s mission and its innovative Gold Loan solutions that empower MSMEs across six Indian states. This interview explores how Radian Finserv carves its niche in the market, the success stories it fosters among MSMEs, and its commitment to financial literacy and ethical lending practices. He also shares insights on the evolving role of NBFCs in the Indian financial ecosystem and his recommendations for policies that can further improve access to finance for MSMEs. This discussion sheds light on Radian Finserv’s impactful contributions to India’s economic growth and its vision for an empowered MSME future.
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Q&A
Q. Mr. Sharma, what inspired the creation of Radian Finserv, and how does the company's mission align with your vision of financial inclusion, particularly for MSMEs?
A. With a background in microfinance, I possess in-depth knowledge of the challenges faced by India's underserved populations. My aim is to extend a comprehensive suite of financial services, with a focus on secured lending solutions. Our initial offerings include gold loans, designed to provide accessible financing options to those in need.
Q. How does Radian Finserv differentiate itself from other NBFCs in the market, particularly in terms of its approach to supporting MSMEs and SMEs?
A. Our commitment at Radian Finserv, is to establish enduring relationships with our customers by providing them with reliable and accessible financial services. Recognizing the importance of long-term engagement, we are investing in a robust physical distribution network of branches. This network enables us to build personal connections and deliver exceptional customer experiences.
In a commoditized industry, we differentiate ourselves by prioritizing transparency and trust. Our approach focuses on clear, upfront communication about pricing and loan terms, ensuring that our customers benefit from consistent and fair interest rates without unexpected increases. This dedication to transparent practices and customer comfort is fundamental to our mission of creating a credible and trustworthy financial partnership.
Q. Can you share some success stories of MSMEs or SMEs that have significantly benefited from Radian Finserv's Gold Loan solutions? What were the key strategies that led to Radian Finserv crossing 100 crores AUM since receiving its RBI license?
A. 1. Underserved customers:
Radian is working to provide a range of financing solutions to the underserved customers in the hinterland of India. Having started gold loan operations in Oct 2022, Radian has started adding other products more recently such as secured MSME loans, unsecured loans to small businesses. Radian aims to expand into other cities over time, and uses top end technology at the back of the distribution network being created.
2. Background, products:
Radian has started work in tier 2 and tier 3 cities, and plans to expand to smaller cities and rural locations, to provide small ticket loans to small businesses and households, primarily for working capital. Having started with gold loans, the offerings from Radian include:
MSME secured loans – provided to small businesses to aid their business, secured against property. Typical market would be all cities/towns with a population of over 30k.
Gold loans – typical customers include farmers and allied agri businesses, MSME and traders, households in cities/towns with population over 10k. While gold loan providers are agnostic to the end use of funds (income generation vs. consumption), there is an increasing trend towards using gold loans for working capital and income generation purposes. Our experience and data suggest that over 60% of the loans are in fact for income generation and planned activities. As we establish and expand, our endeavour would be to launch targeted products for income generation, working capital for small businesses and so on. Radian is setting up a presence particularly in the agri space to provide gold loans, with agri products and push being a key priority. We have tied up with an agri technology firm to provide value added services to farmers, in addition to access to funds.
- MSME unsecured loans – offered to micro businesses and allied agri customers, for income generation and working capital purposes in semi urban locations and cities with a population of >10k.
- Affordable LAP and LAP – loan against property (LAP) is offered to self-employed, small businesses, traders, manufacturers, aimed at providing income generation and income enhancement opportunities, offered typically in cities and semi urban locations.
3. Success Stories:
3.1. Gunasekaran, from Tiruppur, initially ran a small textile sales setup. Whenever he needs to buy clothes from wholesalers, he seeks a loan. In the past, the loans were taken at usurious rates from local money lenders. Radian now provides him with an affordable gold loan, and helps him manage his finances effectively. With ambitions of expanding his business, he availed a loan from the Tiruppur Radian branch. Utilizing the loan, he established his own textile shop in Tiruppur. He is now establishing himself as a wholesale textile shop in the area.
3.2. Rambabu runs a small retail shop in Vijayawada. He has availed gold loans from Radian on a few occasions. This financial support has enabled him to keep his shop well-stocked with necessary items. Rambabu now runs a shop with a full inventory, ensuring he can meet the needs of his customers. The reliability and ease of obtaining loans from Radian have been crucial to the growth and success of his business.
Way forward:
As Radian continues to expand its footprint, our endeavour would be to provide simple, affordable and tailored financing solutions to customers. Our target customers are underserved, and while the MSME loans are given exclusively for income generation purposes (and not consumption), gold loans currently have about 60% of loans for income generation, and our effort would be to move in that direction as we establish our presence in additional smaller cities.
Q. What are some of the biggest challenges Radian Finserv has faced in empowering MSMEs and SMEs, and how have you addressed these challenges, particularly in ensuring that your financial products are accessible and beneficial to these enterprises?
A. Our approach to reaching and serving our customers is highly focused and strategic. We prioritize targeted Below-the-Line (BTL) activities over broad-scale advertising to effectively engage with our specific customer segments. This approach allows us to allocate resources efficiently and directly address the unique needs of our target audience.
Our strategy includes conducting comprehensive market rounds, which involve direct interactions with potential customers in their local environments. This hands-on approach ensures that our financial products and services are readily accessible to those who need them most, and allows us to build trust and rapport at a community level.
In addition, we host educational knowledge sessions for our customers, aimed at empowering them with valuable information about our offerings and financial management practices. These sessions are designed to enhance customer understanding, foster informed decision-making, and build long-lasting relationships. Through these initiatives, we are able to provide a personalized experience that aligns closely with the specific financial needs and aspirations of our customers.
Q. With operations spanning six states in India, how does Radian Finserv manage to maintain consistency and quality in its service delivery? What role does technology play in your operations, and how has it contributed to the company's success?
A. Our operations are streamlined through a centralized processing cell that meticulously oversees all loan disbursals across various geographies. This central unit ensures adherence to standardized procedures, supported by comprehensive process manuals and ongoing training programs for our team members. This approach guarantees consistency and reliability in our service delivery, irrespective of the location.
Our operations are further enhanced by a state-of-the-art in-house application, designed to maintain uniformity in processing and incorporate rigorous checks for quality assurance. This technology stands on par with the best in the industry, offering sophisticated features that facilitate efficient and error-free processing.
However, we recognize that technology alone does not drive success. The true value we deliver stems from our extensive distribution network and an organizational culture deeply committed to customer needs and experience. Our branches and customer touchpoints are strategically positioned to provide personalized and accessible financial solutions, ensuring that our customers receive exceptional service tailored to their individual needs.
By combining advanced technological tools with a robust physical presence and a customer-centric ethos, we effectively bridge the gap between digital efficiency and personalized service, creating a seamless and superior customer experience across all our operations.
Q. Can you elaborate on any significant collaborations or partnerships that Radian Finserv has engaged in to further its mission? How do you engage with local communities and stakeholders to ensure your services effectively meet their needs?
A. We strategically collaborate with banks and financial institutions to leverage their balance sheets, enabling us to extend our reach and enhance our financial capacity. As a bootstrapped organization with prudent financial management, these partnerships are crucial in amplifying our ability to serve our target segments and geographies effectively.
Our approach involves promoting our tailored financial solutions to individuals within these defined segments, ensuring that our offerings are accessible and relevant to their specific needs. To facilitate this, we actively invite customers to our branches for personalized consultations. During these sessions, we provide updates on our latest financial products and services, and offer comprehensive education on financial literacy and product usage.
By combining our deep understanding of the target market with the robust financial backing of our banking partners, we deliver innovative and customer-centric solutions. This collaborative framework not only enhances our operational efficiency but also reinforces our commitment to empowering our customers with the knowledge and tools they need to achieve financial well-being.
Our dedicated efforts in customer education and engagement are central to building trust and fostering long-term relationships, ensuring that our customers are well-informed and confident in their financial decisions. This blend of strategic partnerships, targeted outreach, and educational initiatives positions us uniquely in the market, enabling us to provide exceptional value and support to our customers.
Q. In addition to providing financial products, does Radian Finserv engage in any initiatives to enhance financial literacy among its clients? What steps do you take to ensure the benefits of financial inclusion are sustainable for the communities you serve?
A. At Radian, fostering meaningful customer engagement and open dialogue is central to our mission. We are committed to providing our clients with competitive and transparent pricing on all our loan products, ensuring clarity and fairness in every financial transaction.
Our engagement strategy involves proactive discussions and interactions with our customers to understand their unique financial needs and aspirations. Through these personalized consultations, we offer tailored financial solutions that align with their specific requirements. This approach not only enhances customer satisfaction but also builds long-lasting relationships based on trust and transparency.
Transparency in pricing is a cornerstone of our product offerings. We ensure that all loan terms, including interest rates and fees, are clearly communicated and devoid of hidden charges. This commitment to competitive and honest pricing enables our customers to make well-informed financial decisions with confidence.
By integrating customer engagement with our transparent pricing model, we create a supportive and empowering environment for our clients. Our goal is to provide financial products that are not only accessible but also equitable, contributing to the financial well-being of our customers and fostering trust in our services.
Q. Does Radian Finserv integrate any social impact initiatives or sustainability practices into its business model to benefit the communities it serves?
A. Our customer engagement initiatives are designed to deepen relationships and enhance the overall customer experience. These activities not only foster meaningful interactions but also provide comprehensive insights into our diverse range of services and offerings.
By actively engaging with our customers through various channels, we are able to effectively communicate the value and benefits of our financial products. This includes personalized consultations, educational seminars, and interactive sessions that address the unique financial needs and preferences of our clients.
Q. As a bootstrapped NBFC, how is Radian Finserv planning to secure future funding to fuel its expansion plans and reach a larger MSME segment?
A. Currently, we are actively engaging with fund houses and individual investors to support our next phase of growth. To date, our initial capital has been sourced from our promoters and close associates, including friends and family. Now that our platform is well-established and poised for expansion, Radian is seeking additional funding to accelerate growth and extend our reach to a broader customer base.
Q. What are the future goals for Radian Finserv in terms of geographic expansion and service offerings? How do you envision Radian Finserv contributing to the broader goal of economic empowerment and growth in India over the next five years?
A. At present, our operations will primarily remain focused within our existing geographical footprint, with potential expansion into one or two additional states in the near term. Over the next few years, we plan to gradually broaden our reach, initially by enhancing the productivity of our current branches before establishing new ones. This strategic approach aims to extend our services to a larger customer base.
Drawing from the microfinance background of our founders, we are committed to advancing financial inclusion by delivering accessible and effective financial solutions. Our goal is to leverage our established expertise to build a more inclusive financial environment, reaching underserved communities and promoting economic empowerment.
Q. Based on your extensive experience in the financial sector, what policy recommendations would you suggest to improve access to finance for MSMEs and SMEs in India? How do you foresee the role of NBFCs evolving in the Indian financial ecosystem over the next decade?
A. NBFCs are poised to play an increasingly significant role in extending the reach of financial services. While NBFCs often function similarly to shadow banks by providing critical financial solutions outside the traditional banking system, we anticipate a consolidation trend within the sector. Over time, larger NBFCs will likely assume responsibilities akin to those of traditional banks, encompassing enhanced governance, stringent compliance, and ethical lending practices. This evolution will ensure that NBFCs uphold high standards of operational integrity and offer competitive interest rates, thereby fostering a more equitable and transparent financial environment.
