‘In India We Have Information About The Customer, Unlike China’

The largest mobile phone financer has ventured into India with an aim to consolidate on the under-served section of the society which is deprived of small ticket size loan by the bigger players.

Pavel Maco, the CEO of Home Credit spoke to BWBusinessworld’s Haider Ali Khan about the concept of NBFC in India and abroad.

Excerpts:

How do you see your prospects in India in terms of NBFC among other players?
The players will always be around. But what we see is there is slight difference apart from our risk from the market than the local player because it’s probably driven by strict requirements from banks financing these enterprises, everybody requires variable risk but we actually came up with the right balance between risk and profitability.

This is not always about minimizing risk, of course you can minimize the risk but you have to find out from the 1.2 million billion population in India may be only 100 million is eligible. This is exactly where we are going to actually offer our services to customers. So 70 per cent of our customers are first time borrowers, people who have very limited chance to get credit. Of course, there are small players who are financing these people but there is no big player other than us to provide this facility to the customers.

How do you access the markets in India, China and Kazakhstan?
I am always surprised how different markets are similar. When you are entering to different market you expect difference. But I would say that in India we probably came in at perfect time as India is overtaking China and becoming the fastest growing economy.

China was perfect 10 years ago. Now we are seeing the similar thing with India. The customer behaviour is approximately the same way it used to be with China. I thought it would be difficult to even find the customer in India because of density and size of population. But the market behaves the same way.

In China, we are number one in customer durables but two-wheeler market is weaker and in Vietnam and Philippines, both consumer durables market and two-wheeler is strong.

The competition with small companies is tougher for the segment where we are. This has taught us to do the business without CIBIL score but most of companies have no credibility here, in India we have the information about the customer. But in other countries like China and Kazakhstan, we have no access of returns; we learnt how to assist the customer without taking loans. This is what exactly allowing us now to serve customers without CIBIL score here in India. But in China and Kazakhstan there is very tough competition over this first time borrowers.

What are the eligibility criteria for the loan?
There are eligibility criteria. Everybody can apply for the loan. Within 5 minutes a person gets to know whether its loan gets approved or not. Once it gets approved, he can actually go home with the product. Like in other cases, there is lots of paperwork required, but with us it’s just 2 step documentation process. Ordinary people who have some income, we identify them properly with some documents whether they are eligible for the loan or not. We have the system, which tries to assign loans to the people who are having some probability to repaying back.

How can you judge a person in 5 minutes and approves a loan?
We ask them for the proof of identification (ID), proof of residence and a pan card which helps to check their credit history. The entire algorithm works based on CIBIL scores and person credibility. And the expertise leads from the table. We finance people starting from Rs 3000. We can assume that almost everyone can repay. We check few things like contact info and collect information regarding their background so that we can deal with the customer in future.

What is the amount a person can take as a loan?
In the two-wheeler category, it is about a lakh and half. In consumer durable goods like mobile phone which starts from Rs 9000 but we also finance iPhone for Rs 60,000. But the customers are not interested in Rs 60,000 phones; they are more inclined towards consumer durable goods of Rs 10,000.

What will be the period of a loan?
It starts from 6 months to average 12 months for consumer durables. We go up to 18 months for bigger loans. With us, we offer the consumer complete flexibility to pay the EMI. We give them freedom to choose their instalment and duration. We are working with the 70 per cent first roller consumer who might not understand the whole new phenomenon of loan process.

How do you see the regulation policies in India?
Regulation is much more predictable in China and Kazakhstan. In India, RBI is doing very smart things. In the countries like China, Kazakhstan including US the regulations is fast and sometimes illogical. Here in India, norms taken by RBI are much more safe, stable and slow.