When reports of Flipkart superstar Sachin Bansal’s thumbs-up for micro-finance hit the headlines some days back, there was anticipation and trepidation in equal measure. Can Bansal turn CRIDS (Chaitanya Rural Intermediation Development Services) into another Flipkart? Or will the micro-lending company launched in 2009 be forced to change horses midstream?
Since his famed billion-dollar exit from Flipkart, speculation was rife amongst the investing community on how the man (along with Binny Bansal) turned an online bookstore into an e-commerce giant would begin his second entrepreneurial journey. That he would pump in a whopping Rs.739 crore into CRIDS was far-fetched. Does micro-finance even make business sense?
Obviously, it does. As Bansal revealed in a chat with the Times of India, CRIDS would focus on financing the middle-income groups in its new avatar and purposefully move away from the low-income segment that it had targeted with loans for bikes, small houses, small business and education in Uttar Pradesh, Jharkhand, Bihar, Maharashtra and Karnataka.
The Bansal Edge
Bansal wants to turn CRIDS into an automated, paperless micro-finance enterprise that relies on smartphones to do business. Of course, there are others already crowding this space. The likes of Jana Bank morphed themselves from micro-finance companies into banking entities post RBI’s approval of their licenses in September of 2015.
There is no denying that the move to use technology backend to deliver quality banking services is right up Bansal’s alley, given that he built India’s first e-commerce giant Flipkart on the back of a similar premise. The fact that smartphone-based apps work better with middle-income groups as against the rural folk is just collateral damage.
The Original Dream
With Sachin Bansal obviously buying his way into the corner office, the question is whether the move would end up relegating the founders into an inconsequential corner. Though the company statement claims that the duo of Anand Rao and Samit Shetty would continue to be responsible for their existing business segments.
In the same statement, Bansal made the right noises by suggesting that the duo had built a great company that provides “much needed financial access to people who don’t have access to other formal finance.” However, barely a week later, he was singing another tune that suggested a shift from the rural economy to a tier-2 level, probably with the smartphone penetration in mind.
After quitting Flipkart in 2018, Bansal has invested in a few startups including Rs.200 crore in Piramal Enterprises, NBFCs Altico Capital and IndoStar Capital Finance. These debt investments were made through his venture BAC Acquisitions Pvt. Ltd. that he co-founded along with investment banker Ankit Agarwal. In addition, he did debt deals with Ola and electric vehicle maker Ather Energy.
My Way or…
The grapevine suggests that Bansal now wants to invest in companies that he can control. The hands-on approach is probably what nudged him towards CRIDS, though it remains to be seen if the IIT Delhi alumnus would stick with the original mission and vision statements and build technology that can find favor in rural India or simply take the freeway to middle income groups.
The latest development in this story is the investment by Bansal into the tech-enabled small business lending platform U Gro Capital, the company founded by former Religare Finance head honcho Shachindra Nath, who proposes to use the funds to expand business at a time when capital has been scarce for the sector, a report published in the Economic Times says.
In an earlier interview with the Times of India, Bansal had stated that while CRIDS focused on low-income groups and in rural areas where under-penetration is much more. “If you go to Mumbai, the credit to GDP ratio would be over 100% but in Bihar it would be 16%,” he says adding that his focus would be to add some digital lending business on top of the micro-financing.
Denying rumors of seeking a small banking license, Bansal says that the idea is to expand offerings to the existing markets and expand into newer ones. The question is how much of what CRIDS does today will continue and at what point, if at all, would the massive investments by Bansal start talking down on the co-founders’ vision and mission?
Growing penetration of the smartphones and over 20% growth in the microfinance industry (as predicted by ICRA) does suggest that Bansal could well be third time lucky with his entrepreneurial dreams of making a difference where it matters.