India GameChanger was joined by Deepak Aggarwal, a co-founder and the co-CEO at MoneyBoxx. MoneyBoxx is “engaged in the business of providing small-ticket business loans to micro and small enterprises. With financial inclusion at its heart,  MoneyBoxx caters to the unmet credit needs of micro and small enterprises in Tier-III and beyond cities.”

Some of the topics that Deepak discussed:

  • Bringing institutional culture to smaller companies
  • Big company learnings and how much quality matters
  • The importance of analytical rigor
  • The difficulty of getting a small loan in India
  • Helping clients build balance sheets and income statements
  • The role the government plays in determining priority loan sectors

Other titles we considered for this episode:

  1. Shallow Information Is Dangerous
  2. You Need to Have People There
  3. Higher Standards
  4. Hiring Vets in the Branches
  5. We Have a Large Cattle Portfolio

Read the best-effort transcript below (This technology is still not as good as they say it is…):

Michael Waitze 0:00
Okay, we are on. Hi, this is Michael Waitze, and welcome back to India GameChanger. Today we are honored to have Deepak Aggarwal, a co-founder and the co-CEO that’s rare, a co-CEO, at MoneyBoxx. Deepak, it’s great to have you on the show. How are you doing today?

Deepak Aggarwal 0:17
I’m doing very fine, Michael, thanks for having me. It’s, it will be great pleasure talking to you.

Michael Waitze 0:23
The pleasure is all of mine. Before we get into the main part of this conversation, can we get a little bit of your background for some context?

Deepak Aggarwal 0:32
Yeah, sure. So Michael, basically, by qualification, I’m a chartered accountant, I tried in 2003. And then, you know, for a couple of years, I worked for GE Capital, in the structured finance group, you know, track tracking G companies, you know, in terms of debt and covenants. And then I moved to Deutsche Bank for equity analysis, for almost three to four years, you know, I serve hdaci, on both on the equity side and the debt side, okay. And then for Bank of America, as Asia Pacific industry risk head. So I would say that, you know, part of, you know, almost a decade of my career, I have been an analyst, so on the equity side, and that side, and, you know, researching lot of companies across the globe. So because, you know, Deutsche Bank has an international portfolio. So, you know, a lot of tracking a lot of companies in the United States, say, almost top 500 companies, their 200 companies in Europe, and Asia Pacific. So it’s a very diverse kind of experience into multiple sectors, including technology, petrochemicals, refinery consumer, when all of you know, research, a lot of you know, how cycles work, how does credit work? How all those numbers plays? A, you know, so that kind of career?

Michael Waitze 2:01
Did you work at Deutsche in the United States at all? Did you travel to the Deutsche securities office in the US?

Deepak Aggarwal 2:06
No, no, no. Okay. So it’s all largely India based, I have traveled to Singapore, and Hong Kong got it, you know, a few parts of my career. But it’s largely all India.

Michael Waitze 2:18
So that’s really interesting. I worked at Deutsche as well, in the equity department, we were running a portfolio trading business. And we spent a lot of time going back and forth between New York, London, and Tokyo to run was essentially a global business and equity. So very familiar with that platform. So

Deepak Aggarwal 2:32
that’s great. So we made a product for Deutsche Bank, which is which was called capital structure analysis. And that was for, you know, analyzing off balance sheet items from equity perspective, off balance sheet items, right, because those Enron thing, and Worldcom happened during 2002, and three, so basically, you know, analyzing the risk on that front, you know, when companies make a lot of, you know, of balance, you know, subsidiaries and our balance sheet items, you know, contingencies legal cases, and all. Yeah,

Michael Waitze 3:03
it must have been such a killer experience, though, right? I mean, look, we built some incredible technology, when I was in Georgia was a market leader when I was there. I mean, I’m happy that I survived that whole experience, but a lot of stuff was learned there. What What’s the impetus for somebody who’s working at big institutions? I mean, Bank of America, Merrill Lynch, GE, capital, Deutsche Bank, these are big global companies, what’s the impetus for someone like you to say, you know, what, I think I got this, and there’s an issue in India that I want to solve, and then go going out on your own because, look, even I, when I was at Goldman, and Morgan, like, I didn’t understand how lucky we were to have all of these internal resources, you know, if I needed something done, I just told somebody, I need that thing. And they gave it to me. But when you go out on your own, it’s like, a completely different world. No,

Deepak Aggarwal 3:46
yeah, it’s a completely different world. But but, you know, see, we I enjoy both. So, you know, Deutsche Bank, especially, I learned so much. Yeah. You know, in terms of analysis, you know, understanding you know, what cyclic ality is, you know, how things change, you know, how you have to see the industry, you know, they got us so many training, like, you know, we learned we had a three month training from Michael gravely unfeignedly, which is, you know, very reputed Institute in the United States, and then, you know, learning from, you know, mid level people there, and the early part of the career, and we learned about, you know, quality, really, you know, on each single thing, you know, how much quality matters. So, that was an amazing experience, you know, whether it was in Deutsche Bank or Bank of America, that you have to be very, very deep into what you do, you know, it does not have to be a shallow approach. And, you know, you know, while, you know, when I was in Bank of America, the screens started with saying higher standards. So, you know, that’s the code and then you know, you you develop inside yourself that you know, every time you do anything, you have to be you know, very high on integrity, you know, those are the things you’ll On with larger organizations absolutely know that, you know, you have to respect people, and you know, those culture, then you bring to your own company as well that, you know, the respect to the people is very important, the culture is very important. And that, you know, you need to have a long term view, and not you have a very short term view on things. So,

Michael Waitze 5:22
I want to make a point in a way that’s backwards, actually, and you don’t have to elucidate that much. But how many people are in money box right now?

Deepak Aggarwal 5:29
Today, we have 700 people, strong 700 people, it’s

Michael Waitze 5:31
already kind of large, it’s not the same size of BFA, and that same size Deutsche Bank, but it’s not small either. But if you back up to the founding, right, and you think this analytical rigor is so important, the depth of our analysis, as opposed to the shallowness of these are really important things. How do you inculcate that into the culture of the company from day one? Because you can’t do that later? Do you know what I mean?

Deepak Aggarwal 5:55
True, true. And I think that that has helped a lot, you know, you know, while working in these organizations, you know, when when we have learned that, you know, you lent billions of dollar, yeah, say, you know, when I was, you know, I was part of a deal RPL, where we lend almost 4000 corrode almost now, half a billion dollar today, but much larger amount during that time, and Alcon so, you know, you realize that how important is to have the very, very deep dive into the industry and segment. So then you realize that shallow information is dangerous. Yeah, you know, when you analyze something, you need to got very deep into it. And that’s what we do at money box as well. I mean, the sounds very, you know, may not be, you know, that great, but then, you know, when we have large cattle portfolio, and, you know, this is one portfolio, which not everyone likes, what kind of portfolio setting, so, like, you know, you found a lot of cattle, I mean, buying livestock back when cattle for milk production, so, which is not, although it’s, I mean, as a small and medium marginal farmers garment has a very high focus on that, but it’s not kind of loved portfolio within the NBFC segment. Because, you know, you need to get very deeper into it, you need to understand the lactation period, you need to understand about the breed about, you know, how much money you will make, how this whole system works, you know, having a cattle breeding it. So, so that is what I think we have really understood, you know, from those deeper, you know, analysis, which we learned those larger organizations.

Michael Waitze 7:44
So, talk to me about the founding of money box, and then talk to me about the progression of getting to 700 people, it’s a big, it’s a big organization, go ahead.

Deepak Aggarwal 7:52
Right, so, so, in 2010, you know, after my corporate career, you know, I, you know, thought of founding my own company, you know, when I started a boutique investment bank, so raising debt and equity, you know, that I did almost for eight, nine years, so raised about 300 million for you know, midsize companies that’s real into manufacturing space, you know, very small niche form, just to raise funds, you know, debt and equity. And this happened in you know, in terms of, you know, generally you know, after ibanking, you, you know, either you become a VC fund, you know, investing into companies or you want to start your NBFC right, but how this exactly happened, you know, although, when I was investment banker, all also I was always focusing on manufacturing companies, so that a lot of employment generation in India, so, all my deals were in manufacturing companies, you know, at events or time, you know, when I was running this boutique investment bank, but this was this happened in 2015 when I hired a driver, person driver, who is still with me, and you know, after every 15 days, you know, after getting his salary, he would ask me more money. And then he told me that I borrowed about two lakh rupees in my village, on which I’m paying 6% monthly interest. 6%

Michael Waitze 9:23
Monthly, that’s tell people what to lock is.

Deepak Aggarwal 9:27
So, so two lakh is about 2500 USD in six months. So, people are saying actually, per month, yep. 3% per month, so, like, 6% a year. Yeah. And then it’s a it’s an ever, ever, never ending loan. Yeah. So you’re just paying interest for two years. So then, you know, because we are we were always been into corporate lending, you know, doing, you know, like half a billion, you know, 100,000,050 million kind of loans. And then immediately we realized We used to thought that you know, there is this MFI segment microfinance institution, which we you know, easily. So getting money of one lakh two lakh might be easy, but that is the time when we really realized that it is so, so difficult. You don’t even have five players in a country like India, who are focused on giving a loan, which is 1000, you know, say $1,000, to say $10,000, right, there is a significant very significant gap there. You know, although you have, you know, sub $500 category, you have like 250 players, but but there, you don’t have a player. So that was the kind of inspiration that, you know, we thought that we are going to solve this problem there.

Michael Waitze 10:47
So just for people to get a sense for scale, right. I think sometimes people misunderstand, just like how big India is and how big the opportunity is. It doesn’t even have to be an exact number, right. But how many people do you think would need microfinance? Here’s the thing to 3% is egregious. It’s like worse than credit card debt in the United States, which can sometimes be 25 to 30%. Right. But these loans can sometimes be like life threatening, because you’re just stuck in it forever. Yes. But how big is that? How big is that group of people in India? Right? I think you call it the missing middle, like how big is that people that those people that can’t get like general regular finance, and have to pay 30 something percent a year just to borrow 2500 bucks.

Deepak Aggarwal 11:30
So the market is unbelievably large. When I talk about numbers. It’s about a gap of USD 22 billion, right, you know, talk about the number. But if I talk about, you know, just in the segment we can do, we’re in say that you don’t ride 47% of the India’s GDP comes from the rural market, the share of credit is just 9%. Wow. So I mean, that’s the kind of gap, you know, where we are, you know, half of the Indian population, you know, yeah. Is and we are a very, very huge population. Well,

Michael Waitze 12:05
that’s the point, I wanted to make sure that it’s not like 10,000 people over there. It’s like 500 to 600 million people that can use microfinance to change their lives and potentially take themselves out of,

Deepak Aggarwal 12:15
and especially a little lot higher amounts. So you know, this typical MFI, typical microfinance, which is like, you know, sub 600 USD, it’s still there adequately. So go ahead. But you can’t buy this one cattle on that. No, no, you know, to scale. So that is the biggest. So one, I would say, typically $1,000 to $10,000. That’s an area which is really, really problematic in India.

Michael Waitze 12:44
So here’s something that I really want to understand better. If you’re working at Bank of America, or if you’re working at Deutsche and you’re doing 500 million, a billion, billion deals, right? For the most part, you have, you know, GAAP, you have generally accepted accounting principle, balance sheets and income statements, you have data you can use that historically has been used to understand people’s credit worthiness. But when you move from that, into what money box is doing, you’re dealing with like, alternative data. Is that fair? Like I’m presuming that this is true. So what kind of how do you go from? How do you keep that analytical rigor, where there’s an accepted way of doing things into building and a new way of doing things with data that’s completely different, and maybe you can categorize what some of that data is as well, that you’re looking at and what it means.

Deepak Aggarwal 13:31
So So basically, you know, when, whenever you’re doing a corporate analysis, or even a larger company, you know, what you track is income statements, the balance sheet and the profit and loss account and you arrive at ratios. You see the banking, you see the income tax returns, you see the GST returns, that direct tax and indirect tax returns, right? In this cases, none of that thing is available, and that’s the primary reason why the suppliers sonus. So, you neither have income statements, there is no income tax returns, there is no GST returns, the banking is not good enough to analyze. So, you have those challenges. So, you can assume you cannot cater to this segment, you know, neither in a conventional manner or in a typical FinTech format, which will just have the banking analysis or you know, GST ITR and, you know, sanction and loan in five minutes. So, typically, that is the biggest challenge of this segment. And that is the biggest opportunity. So, what you have to do here is, you still have to be very technologically able, because, you know, you need to process, you know, alone in two to three days time, because this system works on scale. But at the same time, you need to dig very deeper into each segment you’re lending to, so if you’re cattle, you need to really under Standard, how the income works for a cattle owner, how much money he will make on each cow, how much money he will make on his fellow, what is the terminal value of each cattle. So over the over the tenor of life of a 20 year of cattle, how much money he will generate? And month on month cash flow, how would they will like so, or when we do Khurana it’s it’s a typical case, when we do grana, we analyze all the top items which are sold in Canada, whether it is pulses, rice, sugar, you know, wheat floor, you know, spices. So we typically make for each of the segment, we typically in a 90 minutes time, we make a PNL account, we make a balance sheet, we make a network statement, we calculate all the ratios, we see the credit history of the client. And you know, how much is the borrowing of the client?

Michael Waitze 15:56
Are you actually build because this is something I was thinking about, right? In other words, if you want to lend to them, you do have to understand their businesses in a way that’s completely different than how you were looking at these larger businesses. But at the end of the day, you do need to know what their cash flows are. And you do need to recreate their income statements, their balance sheets, their p&l is as well. Do you give them like, the tools technically, so technologically? Do you give them the tech that says, we’ll do it from today, but from now on, you feed it into this thing that then feeds into money box, and then we can you know exactly what you’re doing now as a business, you can understand your cash flows and your income statement and balance sheet. But we also can understand it, we can adjust, hopefully higher the amount of credit that we can give you access to so that over time, you’re giving them the technology platform so that they can run their businesses better, but then you can understand it in a faster way to give them better credit worthiness. Does that make sense?

Deepak Aggarwal 16:49
That makes a lot of a lot of sense. And that’s like an eye opener as the exam, something to discover on that side. Today, we don’t give them any tool, we have the internal tools, which we owe to our employees, based on which you know, after spending 90 minutes doing all those 250 data points analysis, wow, they are able to make this these data points, you know, taking their bills and all. And you know, it is all 100% paperless. So we don’t take a single hardcopy from them. It’s all moves on the system, app driven, which comes to our, you know, central credit office and the loan assumption. So all we have the system here, but But yes, this is a point that, you know, we can, you know, tell our clients to use some of the tools available so that, you know, they can get higher credit in future.

Michael Waitze 17:39
Yeah, sounds like a massive opportunity to build tools for them as well.

Deepak Aggarwal 17:43
Right? It’s absolutely true,

Michael Waitze 17:45
I really want to understand, and I want the listeners to understand as well, just like how transformational it is, for somebody who doesn’t have access to credit, who can now get access to credit, what the impact is on those businesses, whether it’s somebody who has, you know, a herd of cattle, or somebody who has like a small manufacturing businesses that didn’t have access to credit before. So it was literally just like living off their own cash flow, and had no technology to understand what that cash flow was, but for like two generations, or three generations was just going, I think we’re gonna be okay, next month. How transformational is this?

Deepak Aggarwal 18:22
It’s absolutely amazing. I mean, you will never see that kind of change in a corporate, you know, even when you when you lend 100 million, you can’t see the change. Yeah, not at that level, right. The impact which comes for our clients. So you know, it’s just a simple thing. When I lend to a credit guy, when a cattle guy, right, he having mostly at the start of it, he’s having five cattle. And after two to three years, he’s having at least 10 cattle, right?

Michael Waitze 18:51
doubles. That’s a big deal, though.

Deepak Aggarwal 18:54
It’s a very big deal from it’s actually a very big deal in a rural area, that his monthly cash flow doubles. And that’s true for even other our other customers like a Khurana shop, because, you know, when we give him two lakh, you know, he’s able to double his, you know, stock. I mean, so, you know, on that money, even if he’s selling like, you know, say, I’m just quoting a number, but that number is not important. The percentage is important. Yep. So, you know, if he gets to sell two lakh worth of, you know, more good, and you know, he makes 15% margin. Incidentally, we see that, you know, in two to three months, he can actually double his income. So, the return on capital because there is less of labor involved. There is no machinery involved. It’s all his hard work. So the return on investment is really huge.

Michael Waitze 19:47
Do you see on an individual business on an individual customer or partner basis that once they start working with money box, let’s just say again, they’ll borrow? Let’s just say to lock and when you go back a year later they’re like, Hey, can I borrow five now because my business is actually growing because I have a better understanding of my cash flow. And just having that access to credit, like you said can take me from either five cattle to 10 or a Khurana shop which if I’m right, it’s like a mom and pop store. It’s like a mini convenience store right that sells a whole bunch of different things that can have different configurations, but can still benefit from credit. Yeah.

Deepak Aggarwal 20:21
Yeah, which is which is happening. So, that’s the reason you know, we really started when we started our average loan ticket was like, you know, one lakh or 1.25 lakh and now, after four years of operation the ticket I mean, three lakh was a maximum we used in fact, when we started two lakh was the maximum amount we were giving really and the maximum amount is seven lakh and a majority of portion is going to our existing customers. So, because they borrowed you know, amount of say two lakhs from us, you know, one year back and now, they are boring, like, you know, four to five lakhs with you know, sometimes security given most of the times sure, because, you know, now after two years, they’re comfortable that you know, we are there to help them you know, in many ways right then lending just lending. So, they are giving us you know, as a security their their house and then taking higher loan and you know, doubling So, we have cases like the customers who started with five Catalan today have 35 cattle in about three years time. So, so, we are really inspired with, you know, those kinds of stories.

Michael Waitze 21:27
So, this is where it gets really interesting for me, what is the rate differential between what where money box lens and where they were borrowing before

Deepak Aggarwal 21:36
up, so, I would say that, the biggest part is that the unavailability of funds for the customer more than the lending rate, that you know, they did not have that availability of funds. And the rates in terms of you know, as I said in the beginning is like, they were paying a flat rate interest, you know, which is, you know, leading to almost 40 45% to sometimes 50% annually, in with us, it’s reducing 30%. So, so, one is that interest rate is significantly lesser, and, you know, and then, you know, they have, they have now into organized lending space, right. And then we try to give them other services which are complementary, say, for example, if it’s a cattle owner, we, we have a very unique feature of hiring vets in the branches. So, the vet doctors, so, they will visit our borrowers, they will guide them on how to improve milking immediately by giving them better food, you know, then you know, how to improve the breed, because these are all qualified weights and who have who would have done 1000 AI’s themselves. So, they will guide them on improving the breed of the cattle, the vaccination of the cattle, the treatment of the cattle, the various schemes which are offered by the government, so, it’s a full plan and then since all of these borrowers are farmers also, we also run a program where we distribute free fruit bearing trees to them, which are you know, there could be a case wherein, a borrower has borrowed two lakh from us, and we are giving him 30,000 worth of please complimentary

Michael Waitze 23:27
and what’s the reason? What’s the reason for doing that?

Deepak Aggarwal 23:30
So, so one is that it’s the entire cost is not on us, it’s largely funded through a CSR initiatives. So, maybe we take 30% of the cost the CSR partner is taking 70% The cost now, but the reason is that you know, what we have found that a farmer can really you know, increase his income by five six times by just changing the crop. So, if say suppose because in India you have still in irrigation problem, right and you know, sometimes agree can become a speculation if the rain is not good or there are Munson but you know, with trees what happens if he is growing say like mangoes guavas, the yield is is like five six times higher. The only problem is that there is this gestation period of two and a half to three years right. So, the farmer is not ready to spend initial amount which is high and then wait for that time. So, what we are trying to do is we are giving them you know, complimentary trees through CSR partnerships of agroforestry. So, you know, you have impact on climate change, you have less usage of fertilizer because you know, trees generate nitrogen, you know, and so, it helps the other crops. So, we just plant on the borders and then you know, after two and a half, three years they will have a commercial production of fruits. So, so, you know, we are trying to make an ecosystem we are in yes, they It is this money lending. But at the same time, you know, there is a very relationship focused approach, wherein the income elevation can happen, you know, they increase their income,

Michael Waitze 25:11
do you envision a scenario where you give access to you give access to credit to somebody who couldn’t previously get access, they go from having, and I’m just making up numbers, right five cattle to 35 catalysts over a four or five year period of time, because now they have a better understanding because they didn’t have access to lending before. And as their business grows, their income grows, right? You said you’re adding to their income as well, that they can actually then move into the traditional finance space where they’re earning enough money so that then they can actually take out a traditional loan? Do you know what I mean? Do you envision that happening as well? That’s the first thing. But the second thing is as an NB FC right, so as a non bank, financial company, you kind of can’t make traditional loans, but do you see an avenue for yourselves as well to get a banking license, you can then keep those customers in your ecosystem? Do you know what I mean? And then feed them in so that now that you’ve helped them grow to a point where they can participate in traditional finance, then you can also serve them once they get there?

Deepak Aggarwal 26:09
So I would say that Michael, really banking licenses, not necessarily for doing that, what effectively, I’m saying that, you know, there is lending at 29% Initially, that the next cycle, we reduced to 27%, even if it’s unsecured loan, there is next cycle, if he’s coming to for our secure loan, we reduce it to 24 25%. And then, you know, if it’s a good enough customer, because our cost of borrowing is also decreasing,

Michael Waitze 26:40
continuously, that was the next question was what your source of capital but go ahead,

Deepak Aggarwal 26:44
right, because, because the in the first year we used to borrow at 18%, today, we are borrowing at 13%, which is a 500 basis point decline. And in the next two to three years, I see declining, again 500 basis point, because for this the kind of loan we are giving, which is a priority sector lending, right banks, when you’re you know, you have a good rating, like you know, you’re rated A by credit rating agencies, they are happy to give you at 8%. So, so I’m saying that, you know, Bajaj finance today is very big without a banking license. So when your costs reduce, you can reduce the cost of them. So for a good period of time, you can have them and you know, a customer realizes that there are many more benefits of being associated with money box, like, you know, these web services agroforestry, God knows we, we want to help them, you know, even you know, doing better farming practices in future, so they will like to have us on board, maybe, you know, they’re on a 10 lakh boring, they will have like two lakh from moneybox. Anyway.

Michael Waitze 27:50
Can you explain us what what priority lending is? And is there some relationship between what the government regulators want you to do or what their target sectors are, and it can all be farming, right, I’m just trying to understand what this priority sector is.

Deepak Aggarwal 28:03
So, basically, priority sector lending is that you know, as per RBI guideline Reserve Bank of India, and the government guidelines says that, if as a bank, you are lending 100 rupees in a year 40% of that loan should go to priority sectors, and government decides that, you know, these are the priority sectors, we know, which says that, okay 10% of the lending has to go to small and marginal farmers, okay, out of that 1410 10 rupees needs to go to, and then you have Kurama, small and micro enterprises. So, basically, government wants to promote that, you know, the smaller players should get adequate funds. So, that’s the priority sector lending got it was, you know, banks are not able to achieve their targets on the private sector lendings they want to buy that kind of portfolio from smaller NBF sees like us, or they want to give us loan and take those loans from us at a very reasonable rate. Interesting, right. So that is the kind of portfolio you build, because for banks building a portfolio of one lakh, two lakh, it’s a very difficult thing, you know, logistically,

Michael Waitze 29:16
is there a way to sorry to get so complicated here, but if you’re selling the loans, is there a way for you to securitize them as well? Absolutely, as you know what I mean, right? Yeah, package them, do an analysis on them and then sell them on to the bank. So the banks that it can actually let other people invest in these loans and get higher returns or alternative assets for other people as well. Yeah.

Deepak Aggarwal 29:36
It’s very much prevalent today. Yeah. Okay. When big then we are today. People do securitize the loans. Yeah.

Michael Waitze 29:43
Got it. A super, super interesting. Is there also a priority from a gender lens perspective? Does that make sense? In other words, is there a government incentive to lend to people that haven’t been led to before not just from a sector perspective, but trying to get an even Wait between males and females to Yeah.

Deepak Aggarwal 30:03
Which is there. So entire MFI sector when we say microfinance with you know, 230 plus players, so it’s it’s 100%. Woman borrowers. So, so basic, okay. Yeah. So, so basically government is saying that you need to lend to woman borrowers. So that’s the way it happens. It’s a forming of group of women of, you know, whatever, six to eight to 10 women, and then lending them, you know, and wherein each of the women guarantees others loan. Right. So, there is a lot of focus on women. So I’m just to tell you 50% of what we learned is to women intrapreneurs got it. So which becomes a human empowerment thing. And we have also seen this that, you know, women are better, you know, in terms of borrowers, be everything, but yeah, yeah, right. Right. Right. Right. So, so that’s there. And 35% of our lending goes to NPC, which is new to credit cards, these are the customer who have never borrowed, you know, till now, with a lot of financial inclusion. Yeah,

Michael Waitze 31:13
tell me this. Yeah. Cuz financial inclusion is super important, right? I mean, we could talk about financial literacy, too. And maybe we’ll get to that in a bit. It appears to me, not just in India, but essentially, in every country, right? If you go into the second tier, third tier cities, and then some of the suburbs of those cities, that it’s just super hard for the existing financial institutions to reach them, because it’s just not, it doesn’t, it’s not profitable enough for them to put branches everywhere. So how do you address that? Do you put branches in these places? Or is there some kind of mobile application that they use? Or are you using, like the head of the village or the head of the small town, to organize all of this, and become a de facto distributor of these services, so that you know who to deal with when you get to that small town?

Deepak Aggarwal 31:56
Right, so so we follow that back branch lead model? Michael, the problem is that, you know, one is you have to decide that this customer in the rural areas where they just need to be served, and decide that they need to be served, they can’t be served just on a mobile application. Because see, these customer, you know, you need to have Collection model as well, you know, you you learn money, and then you know, you need to have a connect with them. Because the these are new to this system. And, you know, they can’t fill in their own data. Right. I mean, even if there is a mobile application, the, these cattle, livestock borrowers farmers, they won’t go to the app and fill in all the information. So the important part is that you need to have people there. So that’s what we have approach that we will have a branch lead model. So we can, you know, reach out to these people. But obviously, our branch model is not expensive as bank See, see, once you’re a bank, you have to work like a bank, your cost of branch, you know, you will have air conditioners in a branch you will need to have you know, paid those kinds of salaries, you know, you need to work on that kind of model, which becomes then you know, unviable for them, you know, when you have like, you know, you know, eight lakh road of book, you know, a very large book per se, you know, giving one lakh, you know, a smaller loans becomes very difficult. But for for NBF, see who is focused on this model, you know, then it becomes easy, because then you know, what costs are associated with this model? Yeah, and you work that way. Yeah,

Michael Waitze 33:40
look, we had on one of the other shows that I do, I’m trying to get this I’m trying to remember this guy’s name, Dee Dee rindra, might have a Nashi. Right, who’s the CEO and the founder of tournament was telling us some incredible stories about going into second tier and third tier cities and doing insurance distribution there as well. Once you have all these clients, do you think that there are other financial services that you can serve them in these smaller towns and smaller cities? And further to that, like do they actually need to have some financial education around this tool? And is there an opportunity for you to provide that

Deepak Aggarwal 34:16
I would say there is a very big opportunity see, when once you have these clients, right as borrowers see they are you know, they are everywhere they are attached to you, right, yeah. And and then you know, when we are saying that from five cattle to become you know, in two years they become you know, have or two to three years they have like 10 cattle and 15 cattle. So, there is always a surplus income, when there is a surplus income you can you know really tell them that you know you should invest in gold bonds, you know,

Michael Waitze 34:48
you can invest in all it takes no crop insurance or something right.

Deepak Aggarwal 34:51
Right, right. You can take the insurance, so, although for the loan amount we do the the insurance but even today, we are telling them you know, what are the government schemes available on cattle insurance. So, you can offer them you know, health insurance, car insurance. So, there are numerous products. So, even if I tell you we have so many I mean more than one lakh cattle today with our borrowers, they, they need to buy a lot of feedstock before they can write on a monthly basis, which is not a small number by any way, we have realized that, you know, if we source it, you know, somehow we can reduce that cost by 20% to them, because we have Karana customer, we have cattle customer in the same place. So, you know, we can you know, actually talk to manufacturer to place that stuff there, and you know, we can tie up that you know, because, you know, in a single town I have so, many borrowers We are sorry, so, many livestock owners, right, you can buy in bulk on a monthly basis. So, I mean, again, we can increase your income at the same time, we can make money on that thing, you know, so, so, the possibilities are unlimited, you know, you can do say automobile financing to them, because the pricing is even higher, you know, when we talk to dealers in those spaces, pricing is very high. So, so there are so many opportunities, so many cross selling opportunities, which you can have, so it’s, you know, this positive mindset that, you know, I have to change his life, you know, because, you know, Government of India, the Prime Minister wants that, you know, their income doubles in five years, we are seeing doubles in three years. And we are making a proper way to that, you know how to do that, you know, because, you know, that, you know, today in Haryana people are, you know, growing case, doing mushrooms, you know, making five times the normal income, you know, doing aquaponics, hydroponics, aeroponics, there’s so many things which you can, you know, zero budget farming with vermicompost. So, so there are a lot of things you can teach them. And then, you know, eventually, you know, this cross selling is there.

Michael Waitze 37:09
So, before I let you go, just one more thing, how important is it? How important is it for you, as an individual and for money box as a company, to actually change the lives to have impact on the lives of the people with whom you’re providing credit?

Deepak Aggarwal 37:25
For us, our business is based on that. So when we say wet, we don’t call it CSR, it’s a core, yeah, it’s a core to the business has to be, you know, if you have to make money the guy needs to make money. lending is the business, you know, we realized very early in life that, you know, if you’re charging more than what they are able to make from those funds, you will never be successful in future. I mean, over the long term, you know, you can you can generate the person which fintechs are doing today, but, you know, they need to make money on that. So, so that’s why I’m saying that this hiring of vets as employees is very important, go to the business that you know, and, you know, in future we vote mine hiring, even the guys who are specialists in farming, to help these guys. And eventually it will help us I’m not saying that it’s all social work. No, not at all. Yeah, yeah. Yeah, we are definitely a profit making company, for sure. We have high limbs, we have high spread, we definitely target a very high ROI, you know, RV, but within those areas, we know that you know, there are so many gaps, which these people are suffering from. So if on a larger scale, we can solve solve them. Because, you know, I know I have a friend who is running a 750 cattle farm, and he is paying 300 rupees per cattle is in show as insurance. But the person was five cattle, he needs to pay 2000 bucks for a cattle, right? So, six, seven times. Yeah. So if we have a larger portfolio, and we can, you know, directly, you know, discuss with insurance that, you know, these are my customer, right, I will do that group insurance thing. Yep. If you’re able to offer that same price. So, I mean, that goes for many, many areas. So, you know, once you grow, have this in mind that, you know, customer leads to generate so much, you know, like the generate from Apple product that they don’t care about the price. You know, it’s about the utility if they’re getting that, you know, the benefits are much larger, you know, they will come to us and they will stay with us.

Michael Waitze 39:45
Okay, I’m gonna let you go, Deepak Agarwal, the co-founder and co-CEO of MoneyBoxx. That was great. Thank you so much for taking the time and doing this today. I really appreciate it.

Deepak Aggarwal 39:55
Thank you so much. It’s really a pleasure talking to you.


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