We serve as an interface between different important parts of the overall MSME lending ecosystem in India” – Karan Desai, Founder at Interface Ventures
CXOToday has engaged in an exclusive interview with Mr. Karan Desai, Founder at Interface Ventures
- Can you explain in brief how you started Interface Ventures and how has been the journey so far?
Interface Ventures was conceptualised as an investment, incubation and high-end advisory platform, largely focused on the financial services sector in India. I started it to be able to leverage the deep network and relationships that I have built across the financial sector in India over the last 1.5 decades. Almost a year into the journey now, I can say that the experience has been very good since Interface is now fairly well recognised as a high-quality advisor to lending and credit-oriented businesses in their debt raising plans, we have acquired an interesting “khata” focused fintech platform for MSME merchants which will be relaunched under our own brand shortly, along with two retail loan origination and savings fintech platforms that we have incubated in-house.
- What are the main services that your startup provides for small businesses and non-banking financial companies?
Interface Ventures offers specialised fund-raising services to its clients who are typically NBFCs or small – mid sized business enterprises. On the wholesale loan arrangement side, we have deep operational insight in the lending business and hence help our NBFC clients raise mid to large size funding lines from banks and other NBFCs in the form of Co-lending, Business Correspondence and Term Loan lines. We follow a collaborative model and work with a number of trusted partners, banks and NBFCs to make optimal funding solutions available to our NBFC clients.
On the MSME front, we work with clients across wholesale structured debt facilitation and also our small-ticket retail loans arrangement verticals. Our soon to launch fintech platform Indirow will increase the volume of our retail loans’ arrangement business exponentially, allowing MSME customers easy and affordable access to leverage whenever they need it.
- How have you seen the MSME and NBFC sectors evolve in recent years, and what trends do you see emerging in the future?
MSME lending has evolved considerably in the last 5 odd years. Given the push by banks to onboard NBFCs, or now Regulated Entities as sourcing and underwriting partners to build their retail MSME loan books and comply with Priority Sector Lending (PSL) guidelines, along with various Central Government schemes like the CGTMSE to open up credit to small businesses, several NBFCs have now realigned their entire model to cater exclusively to this segment. Various products including classic Business Loans (Term Debt), Supply Chain Financing and Instant OD / Credit Line products are now available to MSME borrowers to fund their working capital and growth requirements.
Going forward, we see two major trends emerging. Firstly, banks will increase their market share in the MSME funding space substantially as they leverage the sourcing reach of NBFCs to get to the last mile borrower. Secondly, technology will play an even more important role in the offtake of credit to this segment and lenders that embrace this change sooner rather than later, are likely to emerge as market leaders.
- How do you assess the current state of funding for MSMEs and what advice do you have for entrepreneurs looking to secure financing?
One major trend that we have seen with several MSME clients is their limited understanding of how deeply interconnected all credit related data systems are. We often deal with cases where the company may have appointed a less operationally savvy debt advisor earlier, who goes out and logs in the client’s case in several institutions without considering if the lender would suitable for the case or not. What inevitably happens is that the case gets rejected at several places, the inquiries in the credit bureau pile up and the chances of the client getting funding diminish drastically.
Our advice to MSME clients is to be systematic and strategic with their financing plans:
- Don’t wait till the last minute to raise funds, plan well in advance
- Work with an advisor who understands leverage operationally as opposed to simply playing the role of an arranger or broker
- Run a tight and controlled process to raise funds – don’t let anyone carpet bomb the paper across the funding market
- How does technology play a role in your advisory services, and what innovations do you see on the horizon?
While we have started our advisory business via the offline and traditional route, we have a clear plan to shift and scale this business exponentially using technology in FY 2024. We have already acquired a technology platform that will allow us to offer small MSME customers digital accounting and khata services, and this in turn will be seamlessly integrated into our partner driven loan origination platform Indirow. Both fintech platforms are due for commercial launch in Q1 of FY 2024 and we are confident of profitably disrupting the debt advisory business in the time to come.
- How are you planning to expand your MSME lending outreach?
Interface Ventures is so named since we serve as an interface between different important parts of the overall MSME lending ecosystem in India. On the sourcing side, apart from our own relationships with companies and clients, we work seamlessly with various sourcing partners who provide services (other than lending or loan arrangement) to their MSME clients. Similarly, on the placement side we have a trusted and constantly network of banking, NBFC and other boutique channel partners with whom we work to get our clients the best possible funding solution. Our USP lies in our operational experience and understanding of the lending business, which we leverage to structure win-win deals for both parties and reduce TAT.
- What is the roadmap for growth for Interface Ventures for the next five years?
We aim to build a differentiated institution where we cross leverage the synergies of our advisory and fundraising business with our fintech products business to create value for ourselves and our clients and partners. Both businesses are highly synergistic and we are confident that over the next 3-5 years, we will become the advisor of choice for both retail and wholesale financing advisory services in the MSME sector in India.