Moneyboxx Finance: Helping Small Scale Businesses Achieve their Entrepreneurial Dreams

Deepak Aggarwal, Co-Founder,    Mayur Modi, Co-Founder

Deepak Aggarwal, Co-Founder

Mayur Modi, Co-Founder

India has had a strong GDP growth with nominal GDP per capita growing at about 10% during FY12-FY20 period, however, it has a long way to go in terms of financial inclusion. Access to banking has improved in the recent years through policy initiatives such as Jan-Dhan accounts, but availability of credit is a challenge: only 8% of India's population borrowed money from a formal source as per 2017 World Bank database. Rural India, which accounts for 66% of population and contributes 47% to GDP, had only 9% share in banking credit as of March 2021.

In terms of borrower segments, access to credit for the borrowers at the bottom of the pyramid has improved with more than 200 lenders active in the microfinance loans (average loan of less than INR 50k) with outstanding credit at INR 2.49 trillion as of Mar'21, however, there is a huge credit gap for the missing middle segment (loans of INR 50k­10 Lakhs) which had outstanding credit of merely INR 1.02 trillion. Micro enterprises faced a huge credit gap of 8 trillion as per 2018 IFC report and the credit gap has further grown since then.

Viewing this huge credit gap and enormous potential for financial impact, Mr. Mayur Modi and Mr. Deepak Aggarwal, co-founded Moneyboxx Finance for addressing unmet credit needs of the `missing middle' borrowers.

The Brains behind the Operations
Moneyboxx Finance Limited (Moneyboxx) is a BSE-listed, Non-Banking Financial Company that caters to the unmet credit needs of micro enterprises in Tier-III and below places in India. Established in 2019, It started the lending operations in Rajasthan and by March 2022, it spread 30 branches across the five states of Rajasthan, Madhya Pradesh, Haryana, Punjab, and Uttar Pradesh. Moneyboxx serves the credit needs of micro entrepreneurs in important and essential segments (livestock, kirana, other retailers, micro-manufacturers) through unsecured business loans of INR 1-3 Lakhs and secured business loans of INR 3-7 Lakhs.

The firm conducts credit assessment of borrowers by evaluating their ability to repay(cash flow stability/business), intent (credit history/references) and traceability (business and residence stability). Given that their target segment does not have regular documents to prove their income, Moneyboxx has developed a robust credit underwriting model backed by non-traditional & financial and non-financial alternative data sources and sector specific inputs. Customer's enterprise is analyzed in-depth, and the trades are continuously monitored incorporating the changes in the credit evaluation tool accordingly.

Moneyboxx Finance also has a unique methodology for a diverse set of micro enterprises focusing on ones in livestock, trading (retailers), manufacturing, & services segment. Moneyboxx has robust underwriting standards resulting in very low loan write offs and GNPA of only 0.62% as of Mar'22. The company is currently supported by 20 lenders including banks such as DCB Bank, IDFC First Bank and global impact fund, Caspian, which is a validation of its robust business model. Riding on the opportunities offered by the under served market segment, the company plans to achieve assets under management (AUM) of over INR 1,000 crores in the next two years from current AUM of over INR 120 crores with the aim to impact 1 million lives over the next five years.

Most microfinance institutions serve average loans of less than INR 50,000 and the secured loans of more than INR 10 Lakhs are aggressively pursued by the Banking and the
Non-Banking Financial Institutions. However, the `Missing Middle' segment of unsecured and secured business loans of INR 1 to 10 Lakhs is a severely under served segment which presents a huge market opportunity. "Underwriting is the most difficult part in our customer segment in the absence of any GST Returns, ITR returns, inadequate banking data and absence of books of accounts. Moneyboxx has internally developed various modules to carry out proper underwriting in this segment which is helping lending to this segment", says Mayur Modi, Co-founder, Co-CEO and COO, Moneyboxx Finance Limited.

Moneyboxx Finance also has a unique methodology for a diverse set of micro enterprises focusing on ones in livestock, trading (retailers), manufacturing, & services segment

Over 15,000 borrowers, out of which 33% are women entrepreneurs and 33% new-to-credit customers have benefitted through the financial schemes with cumulative disbursements of over INR 200 crores up to Mar'22. Moneyboxx has had a rapid growth in business and AUM over the last two years despite the pandemic, leading to a more than five-fold increase in its Total Income from INR 4.12 crores in FY20 to INR 23.31 crores in FY22.

Moneyboxx Finance acknowledges the fact that availability of adequate amount of credit in cost-effective and transparent manner is pivotal in helping micro enterprises achieve self-sufficiency and plays a crucial role in alleviating poverty by encouraging people to start or expand their small businesses. According to Deepak Aggarwal, Co-Founder, Moneyboxx Finance Limited, "There are over 200 microfinance lenders in India where the average loan is under INR 50,000, however, such a small amount of finance is inadequate for the borrower to acquire a single livestock or any income generating asset.

The borrower is also unable to avail funding from traditional banks and NBFCs due to lack of credit history, collateral, and business documentations such as ITR, GST, adequate banking, etc. With Moneyboxx, we are bringing in a transformation change in the lives of such underserved borrowers by providing them 'unsecured' business loans of INR 1-3 Lakhs and secured loans of INR 3-7 Lakhs for income-generating assets and working capital purposes which has the potential to double their income profile over three years." Moneyboxx Finance has also been nominated by Michael & Susan Dell Foundation for a 2-year impact study based on its significant initiatives in impact financing.

Reshaping the Microenterprise Lending Sector
The Company follows a `Phygital' business model with on-ground physical presence through its branch network for better understanding of customers while leveraging technology right from credit assessment to approval, disbursement, collection, reporting and analytics. While Moneyboxx relies on its relationship officer assisted model for sourcing, it has entirely digital approach right from onboarding to loan documentation to disbursement and collections.

From customer onboarding to loan documentation to disbursements and collections, Moneyboxx has adopted entirely digital approach ensuring availability of credit in easy, and transparent manner. Significant investments in IT infrastructure for cloud-based integrated loan management software for scalability has allowed them to reap the benefits of a cost-effective digitized processes, analytics and decision making. Moneyboxx is also being identified as a new-age, tech-driven financial institution which is driving economic growth through transparent financing to underserved micro enterprises. Moneyboxx Finance has also been awarded Special Mention -"Best Digital Lender of the Year" by esteemed jury of BW Business World recently for its digital initiatives.

Moneyboxx strives to bring in improvement in the lives of the underserved sections of the society and to ensure the purpose of microfinancing is preserved, the company stays rooted by having a direct-to-customer approach which helps them to have a better understanding of the customer needs and high repeat business. Medical support for cattle health, feedstock advice, and reproduction advice to the borrowers is provided by the company without any additional cost as a part of social responsibility. Apart from that, most of the employees are hired locally creating employment opportunities.