Hyderabad-based fintech startup CredRight has raised $1.3 million (Rs 9 crore) in a pre-Series A round of funding from seed-stage impact investment firm Accion Venture Lab, early-stage investor YourNest Venture Capital and other angels.
Owned and operated by CredRight Private Limited, the startup offers collateral-free business loans to micro, small, and medium enterprises (MSMEs) on the back of expected chit fund receivables.
The company will use the funds to strengthen its technology platform, grow its team, and expand its reach to acquire more customers, it said in a press statement.
CredRight partners with chit funds across India to acquire customers and use previously untapped chit data, along with other data points, to underwrite loans. It was founded in 2016 by Neeraj Bansal, a former executive at software services firm Tech Mahindra, with specialisation in corporate strategy and M&A, information on his LinkedIn profile shows.
“Chit funds are the most underappreciated financial inclusion story in India. Registered chit funds, well regulated by the states and the RBI, cater to more than $10 billion credit demand in India. With digital channels and complimentary lending, the industry has the potential to grow many folds and expand the financial inclusion story even further,” Neeraj Bansal, co-founder and chief executive, CredRight, said.
The company ties up with chit fund companies that allow access to the past credit history of MSMEs related to chit fund payments and defaults data. Using its machine learning-based credit algorithm and digital processing capabilities, the company claims that its platform can analyse an applicant’s cash flows, ability and willingness to repay, and it can approve loans within 24 hours and disburse funds within three business days.
The company aims to disburse Rs 100 crore in the next 12-15 months.
“For decades, chits have been a trusted source of savings and credit in India. CredRight team has intelligently built an algorithm to use reliable data on the members available with the chit funds. This strong digital platform allows CredRight to have a lower operational cost, conduct multivariate analysis and to continuously evolve its credit model,” said Sunil Goyal, managing director and fund manager at YourNest.
SME lending is one of the fastest growing sectors in the larger fintech space. CredRight joins a growing number of startups in the online lending segment, many of whom are targeting SMEs, that have raised funds.
On Thursday, emerging markets private equity firm Actis Advisors said it will invest up to $220 million (Rs 1,484 crore) over five years in a non-banking financial company founded last year by KV Srinivasan, the former CEO of Reliance Commercial Finance. The lender, Actis said, would focus on loans against collateral to small and medium enterprises (SMEs) operating in a dozen sub-sectors.
E-commerce major Amazon India invested $22 million (Rs 144 crore) in Bengaluru-based digital SME lender Capital Float last month. The company operates as a hybrid marketplace where banks and NBFCs co-lend along with the firm to borrowers.
Namaste Credit, Lendingkart, FlexiLoans, Shubh Loans, KNAB Finance and Stashfin are among the other digital lenders that have raised funding over the past year.