Aye Finance adopts 'phygital strategy' to revolutionise credit underwriting – Business Standard

Aye Finance’s phygital strategy leverages technology to underwrite credit and disburse loans, using business markers to predict sales and categorise underwriting methods

Sanjay Sharma, Aye Finance

Sanjay Sharma, Managing Director, Aye Finance

Ajinkya Kawale Mumbai

Over the past decade, the rising demand for credit among micro, small and medium enterprises (MSMEs) has necessitated the use of technology for underwriting customers at the offices of fintechs and non-banking financial companies (NBFCs). 

These financial sector participants, who aim to bridge the gap between underserved segments of the MSME sector, have aligned their focus on improving the tech stack at their companies to improve credit decisions, make processes efficient, and ultimately limit delinquencies. 

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Meanwhile, MSME lending firm Aye Finance, has its eyes set on a ‘phygital strategy’ to underwrite its customers, and improve efficiency in credit decisions. 

Even before co-founders Sanjay Sharma and Vikram Jetley founded the Gurugram-based company Aye Finance, the duo surveyed 350 micro enterprises across five towns in the country to understand the challenges that industrial units face when it comes to accessing credit. 

“Lack of finance was the biggest challenge to the growth of MSMEs. We also learned the lack of documents among industries, and the typical challenges to underwrite them, based on which we came across a cluster-based underwriting methodology for customers,” said Sanjay Sharma, co-founder, MD and CEO, Aye Finance in an interaction with Business Standard.

Aye provides small-ticket loans and working capital loans to micro-enterprises. 

Sharma explains the firm’s ‘phygital strategy’ to underwrite credit using technology and disburse loans. 

Predictive markers for sales

Every business has a few markers that can predict the level of sales it can do. He explains that as a company understands the clusters a business falls under, underwriting methods can be categorised into five or six types of computation. 

“One computation is based on the inventory of a unit which can give you a sense of the turnover of the business. Another is about the modes of production. For instance, one can get a sense of what production can be if a garments firm has a certain number of sewing machines,” he said. 

Aye Finance’s technology playbook includes the latest trends in tech such as artificial intelligence (AI) and machine learning (ML) models. 

“For a grocery store, our models may look at the photograph of a shop to understand its inventory. The photograph has details such as density of the shop, GPS coordinates, if it is located on the main street or not, among others,” he explained. 

Tech-driven credit underwriting

Along similar lines, Sharma explains that the entire intelligence for underwriting resides within the technology that the company has built over the years. 

The physical approach as part of the phygital strategy at the company includes setting up offices across 22 states in the country. At present, the company has about 478 physical offices spread across India. 

“The technology makes the job of the loan officer in our offices easier. We hope to add another 50 branch offices this year,” he added. 

As Sharma explains his strategies, he points out that the cost of technology for the lender has dropped over the years. 

“IT costs were more expensive previously than today. I estimate that our technology cost is about eight to ten per cent of our total expenses. We have moved our data into high-quality cloud infrastructure and there are many of these segments where we have put in top dollars because we want to deliver to our customers a secure service,” he said. 


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