Arogya Finance, a non-banking financial corporation (NBFC) providing medical loans to the bottom-of-the-pyramid segment, is in talks with two-three large venture capital investors in India to raise Rs 2.5 crore ($390,000) by early next year. The company will use the money to expand its operations, co-founder Dheeraj Batra told VCCircle.
“Regular bank loans are only accessible to those who are inside the formal system—that is, for those who can provide salary slips or have assets to collateralise. However, for majority of Indians, such an approach is a non-starter,” said Batra. “In contrast, we provide loans to the bottom-of-the-pyramid segment and don’t ask to pledge collaterals to avail loans.”
The firm lends between Rs 20,000 to Rs 2 lakh at 15-21 per cent interest rates. Borrowers also need to pay a one-time 2 per cent processing fee. The tenure depends on the borrower's need, but cannot exceed three years.
Once approved, the amount is disbursed directly to the healthcare service provider’s account of the patient’s choice to ensure the loan is not used for other purposes. Borrowers need to repay the loan to Arogya Finance on multiple EMIs which is calculated based on the borrower's eligibility to repay, amount and duration of the loan taken.
“We have so far processed 320 loans. We expect to reach 100,000 loans by 2018,” Batra noted.
The NBFC has so far partnered 50 hospitals and healthcare service providers across India for the service. It has employed finance counsellors who work with these hospitals to select patients. These counsellors check the patients’ background and income sources before giving recommendation for lending.
Arogya Finance, founded in 2010 by Batra along with Jose Peter, is run by Mumbai-based Ramtirth Leasing & Finance Company Pvt Ltd. An MBA from Wharton Business School, Batra earlier worked with design consultancy IDEO as a business designer. Previously, he also worked with Razor Rave and Innosight Ventures.
His partner Peter Jose has more than 30 years of experience in finance. He has also co-founded consulting firm Index Advisory. Prior to setting up Index, Jose was CFO of Tata Motor Finance.Arogya Finance is one of the 15 startups selected for Artha Venture Challenge’s potential funding programme.
With 11 employees on board (including the counsellors), the company is also looking to come up with an online platform, similar to UK-based Lending Stream and Zebit, to enable individual borrowers borrow money directly.
(Edited by Joby Puthuparampil Johnson)