The key role that the Micro, Small and Medium Enterprises (MSMEs) play in India’s economy cannot be undermined. According to the Confederation of Indian Industry (CII), there are over 63.4 million MSME units operating in the country. MSMEs contribute around 6.11 percent of the manufacturing GDP and 24.63 percent of the GDP from service activities and 33.4 percent of the manufacturing output.
However, when it comes to funding, MSMEs continue to have limited access, especially in smaller towns and villages, where they are primarily based, and have to resort to informal sources to address their financial requirements. They end up paying higher rates on loans borrowed, which clogs their business growth, owing to the high collateral for these loans. Many are also dealing with an increase in working capital requirements. The majority of these businesses are from the unorganised sector, barely possessing any recorded financial history, which affects their capability to borrow credit from organised lending sources.
Against this backdrop, Harshvardhan Lunia, Co-Founder & Managing Director, Lendingkart, decided to change the paradigm and address the $400 billion credit gap in this segment. Harshvardhan, who had worked in the private sector and lending divisions of multinational banks, realised that small business owners were being denied financing despite being creditworthy. He decided to return to India from London and build a platform that makes Indian MSMEs bankable.
Building for the unbanked:
In 2014, he started an advisory business and identified various inefficiencies that impacted the MSME lending space in India. Among these were the amount of time it took for banks to make credit decisions, the need for business owners to visit banks multiple times, and the complete absence of data, which further hampered decision making. MSMEs had limited resources to execute financing transactions, and the ones that did needed hand-holding through the entire process. Despite the advisory doing well, he had a strong urge to scale the lending in this segment by taking the entire process online. For this, it was essential to have a credit underwriting process in place to accurately evaluate these businesses using alternate data points.
Starting with a small team, Harshvardhan says they interacted with small business owners to understand their business requirements, operations and business cycle better. This also involved a pilot lending programme for these businesses. They discovered that despite contributing significantly to the country’s GDP, these small businesses were hindered by the dearth of access to finance and a scarcity of funds. Many did not have properly documented tax returns, which was an additional stumbling block, and most had a low recorded financial history as they were primarily high cash-based businesses.
Harshvardhan and his team designed an initial credit product through which MSME borrowers could avail short-term loans (upto 36 months) with a small ticket size (Rs. 50,000 – Rs. 10 lakh).
Today, Lendingkart has offices in Ahmedabad, Bangalore, Mumbai, Delhi NCR and has service reach across India. It provides short term collateral free working capital loans to MSMEs with minimal paperwork within 72 hours. The loan ticket sizes ranging from as low as Rs 50,000 up to 1 crore for a period of 1 to 36 months. The company analyses 5000+ data points from various sources and leverages robust in-house technology tools based on big data analytics and machine learning algorithms to evaluate creditworthiness. Lendingkart also offers several customised financial products to address today’s diverse business needs in competitive environments.Since its inception, Lendingkart Finance has evaluated nearly half a million applications, disbursing 1,00,000+ loans to more than 90,000+ MSMEs in 1300+ cities across all 29 states and union territories of India, making it the non-banking financial institution (NBFC) with the largest geographical footprint in the country.
A trusted platform
To build its platform, Lendingkart was looking for a reliable technology partner, and Harshvardhan says they decided to go with the team recommendation for Amazon Web Services (AWS).
“Lendingkart has been hosting our cloud applications on AWS, starting with self-hosted services in the early days to more sophisticated container-based solutions. The solutions provided by AWS have gone a long way for us to establish a stable and serverless architecture,” he says.
As the first service provider in the space of cloud solutioning, AWS has served as a big contributor to the ever-evolving and growing ecosystem of web services. “It has had a first mover advantage to establish leadership in the segment. Since Lendingkart is in the financial industry, security and compliance is topmost priority for us, which AWS has catered to since Day 1.,” he adds.
Lendingkart’s service architecture is based on microservices and Amazon Elastic Kubernetes Service (AWS EKS) is used to run and manage containers. They use Gitlab as a docker registry and CI/CD pipelines are also triggered via the same. “Presently, there are 50+ microservices. We identified Gitlab to host our code repository on account of a seamless CI/CD and 1-Click deployment capability,” says Manish Bhatia, President-Technology, Analytics & New Capabilities, Lendingkart.
“AWS has been extending support in the ever-developing ecosystem to provide visibility on the scope of optimum resource utilisation and operating at maximum efficiency. The AWS Well-Architected tool has helped us in running and reviewing our existing workloads and bringing in the latest architectural best practices.It has served as a trusted partner in suggesting the resource optimisation and in minimising existing gaps.”
Scaling seamlessly with AWS
Lendingkart has grown more than 100 percent each year and the scaling has become critical to serve more traffic and workload. “AWS EKS serves this purpose as it manages horizontal scaling of pods as and when required. From the database perspective, Amazon Relational Database Services is utilised with read replicas that helps us scale database read requests and achieve fast performance, security and compatibility across the environments. High availability and durability of the production database is achieved by Amazon RDS Multi-AZ . Its automated backup feature to a different Availability Zone (AZ) enables point in time recovery and customisable retention period,” says Manish.
The AWS team also helps Lendingkart review the architecture, resources, monitoring security, reliability and have served as advisors for the efficient utilisation of resources for low administrative burden, cost effectiveness, and manageability along with vetting to scalability.
“The flexible options available to optimise costs like spot and reserved instances has enabled us to take many cost initiatives as a result of our association with AWS. And all these features are available without compromising on the reliability or the support to be extended which has kept our business running 24*7 in the past six years,” Manish adds.
Lendingkart’s recently developed financial SaaS product offering for its ecosystem users, that uses the AWS SaaS Factory Program to leverage access to technical content, solution architects, and best practices to accelerate delivery of SaaS solutions on AWS.
