Bali Devi, who is around 50 years old, used to run a small makeshift shop in the front of her home in Jaipur. The small kutcha house was home to her two sons, daughter-in-law and two grandchildren. Devi dreamt of better living standards, but getting a loan from any formal lending institution was unthinkable given the temporary and informal employment of her household. However, today she lives in a pucca house, with a newly constructed floor, rented out a room to another family and made her makeshift shop a little bigger and better.
According to UN-Habitat estimates, there are 40 million homes in India that are in need of safe, sanitary and permanent housing. Bali Devi’s house would have continued to be one of them had she not come across the pamphlet of SEWA Grih Rin (SGR), the Delhi-based housing finance company (HFC) which provides loans to women from low-income groups to construct or refurbish houses. Like Bali Devi, who received a Rs.2 lakh loan, there are 1,750 such customers for whom SGR has been the lender to help build their first pucca house.
A helping hand
Self Employed Women’s Association or SEWA is a trade union established in 1972 in Ahmedabad by Ela Bhatt to promote the rights of working women from low-income groups. SGR under SEWA was established in 2011. The group, which had its own SEWA bank based out of Ahmedabad, started seeing an increase in demand for housing loans following the heavy downpour in Ahmedabad in 2000, earthquake in 2001 and the Gujarat riots in 2002. This germinated a thought within the group to form a separate entity that provided home loans in the range of Rs.50,000 to Rs.10 lakh to those denied access owing to lack of clear title deeds or income proof. “There was no other player offering loans of this kind. We are not even an affordable housing finance company. We are a low-income HFC,” points out Shruti Gonsalves, CEO at SGR. However, setting up a for-profit HFC that had its roots within a non-profit organisation was not easy. Though SEWA had members across 14 states, raising funds was hard. It was a task cut out for the organisation to raise Rs.10 crore needed to set up a separate HFC. An RBI restriction preventing an urban co-operative bank from setting up an HFC subsidiary also proved to be a hurdle. Between 2011 and 2014, the team structured the SEWA Mutual Benefit Trust (SMBT) as the promoter entity. They had to rely on SEWA’s women members who contributed a small sum of around Rs.300 each, which finally added up to Rs.2.94 crore.
That wasn’t enough though, so the team reached out to other institutions. That’s when NHBC, HDFC and Hudco, and private equity funds such as Acumen Funds, AHI Capital Gateway and Lok Capital came on board. Simultaneously, the team also went about identifying the areas it would operate in, putting policies in place, identifying client profiles and customer segments, understanding them and conducting market research. SGR eventually got its licence in 2015.
The company then set up branches in Delhi, Jaipur, Indore, Ujjain and Kota in its first year. While places such as Delhi had SEWA’s presence, those like Kota didn’t. This was a strategic approach so as to extend its help to not only SEWA members but also to the other deserving candidates who met the eligibility criteria. “We were very clear on our target segment. We accepted Know Your Customer (KYC) proofs that have some formal sanctity approved by RBI,” says Vimal Kant Arora, who heads MIS, IT and operations at SGR. Other documents they accept include utility bills and phone bills.
Unauthorised constructions are a clear no and all possible checks such as credit history and property checks are also done. While loan officers from the respective branches go to the homes and check the original KYC documents, branch managers visit the homes for personal discussions after applications are filled. Although the loans are sanctioned in the woman’s name, it is the income of the entire household which is considered. “When we do the assessment we tell them that the rest of the members will be co-borrowers. This leads to a couple of empowerment points — one, the household recognises her; two, we insist on creating the asset in her name, if not, as a joint property. This provides her with a tangible asset,” points out Gonsalves.
The company also helps customers with getting formal identification and bringing them into the banking system. “In case a woman doesn’t have the usual identification requirements we rely on her SSC or school leaving certificate. We also help her get an Aadhaar card,” says Arora. Like in Bali Devi’s case, the KYC was incomplete, so the SGR Jaipur branch took her to the Lok Mitr service kiosks where she applied for her Aadhaar card. Her bank account was opened in Bank of Baroda, 2 km away from her home. The Jaipur team offered a helping hand whenever she needed one — be it for a ride to the bank, learning to create her signature, filling up forms or understanding basic banking.
Creating such goodwill and a feet-on-the-street approach helped SGR garner more customers. However customer acquisition has not been an easy task given the clientele were mostly financially excluded and less literate. “It has been very difficult in the sense to persuade people to mortgage their properties and submit their papers to SGR. They had an impression of microfinance where they were given money without being asked for documents,” Arora says. “Once we got our first customer, we worked through references. Meeting one-to-one is the key. We don’t say that we work for a home loan organisation, instead we ask their requirements — whether it is a pucca roof, a staircase or a toilet,” he adds.
Branch managers and other staff are involved for at least two hours a day to distribute pamphlets in Hindi in localities identified by branches. Kiosks are set up at local carnivals, while the managers who have personal networks make use of them. With 1,750 customers, as of September 30, SGR is looking at catering to nearly 8,000 customers by the end of the next financial year.
“We have been able to maintain a balance between policies laid down by the NHB and, simultaneously, catering to a segment which is difficult to service under their purview and stringent policies of NHB. This is our USP,” says Somesh Tewari, COO at SGR, which competes with players such as MHFC, Aptus, Shubham and India Shelter in the affordable housing loans space.
The company looks at three parameters while identifying their potential customers — income, profiles and the market value of properties. The entire income of the household is assessed and loans are given only if the monthly income is above Rs.5,000. Since, a majority of the customers belonged to the informal sector, it also meant that the company wouldn’t get their proof of income. “We have a trained team which can assess the income of self-employed people by understanding their business profiles,” says Tewari. In case of salaried people they reach out to the customer’s employer and get the proof of income. In terms of market value of property — ranging from Rs.3 lakh to Rs.30 lakh — SGR identifies the areas where such market value of property exists. It has designed a program where it is possible to know how much a Rs.3 lakh property will cost to build, what will be its resale value and the built-up area. “We have automated the whole thing for better understanding of our team. We are much more structured than others since we are lending to the informal sector,” he says. And his claims seem to be true given the fact that SGR has seen no NPAs to date.
SGR takes around 10-15 days from lead generation to disbursing the loan in tranches to make sure the funds are not being utilised for other purposes. The staff makes regular customer checks and visits. The company has a complete software platform on the backend ensuring quality assessment of the applicant and integrations for online verifications, thereby reducing the time frame of the whole process.
A niche of its own
SGR which charges 18% interest on all of its loans, has disbursed loans worth Rs.33.1 crore (as of September 2017) with FY17 seeing disbursals of Rs.12.6 crore. The average loan size is Rs.2 lakh with an average tenure of seven years. The company, which clocked a revenue of Rs.2.6 crore in FY17, has 20 branches with 175 team members across Madhya Pradesh, Delhi-NCR, Rajasthan, Uttar Pradesh, Maharashtra and Bihar. In 2015, SGR raised Rs.13.5 crore from a consortium of investors including Acumen, AHI Capital Gateway, HDFC, Hudco, Lok Capital and National Housing Bank. After two subsequent right issues, in 2016, it had received some debt funding from HDFC and Janalakshmi Financial Services. “We are looking at increasing our debt and equity levels. By March we should have a fresh equity infusion of Rs.40 crore and debt of another Rs.25 crore,” says Gonsalves. While it is yet to break even at company level, its branches set up in 2015 have turned profitable. SGR is looking at turning profitable in FY19.
Rini Singhal, associate at Lok Capital, feels SGR is in a niche space, offering a genuine product for the underserved in an informal segment. “Typically for other financing companies in the affordable housing space, the average ticket size varies between Rs.8 lakh to Rs.10 lakh. They typically don’t cater to this segment. Since they were associated with the SEWA group, the company had a better understanding of this segment,” says Singhal. She feels the gap is huge and more players should come in, but unit economics could be a challenge. “For a newcomer it will be tough. SEWA can leverage its existing network that is already ingrained in these communities. So it will be easier for SGR to provide loans,” she adds. Looking at tie-ups with government bodies, SGR has partnered with the Delhi Urban Shelter Improvement Board to fund resettlement cases for low-income groups, and is trying to reach out to other state bodies too.
Most of SGR’s customers tend to work from their homes. Some run a shop, while some do embellishment work. For the working woman of a low-income family, a well-ventilated, secure and clean pucca house becomes a door to a better future. And the team at SGR is helping them get there.