Building a balance sheet of a sandwich seller and then lending him a loan..

This is a superb tale from Kshama Fernandes of IFMR.

She narrates how an IFMR executive built a balance sheet of a sandwich seller and gave him a loan:

I met today with the promoter and CEO of one of our newer Small Business Loan Originators and visited some of their end borrowers in Bombay. I heard an interesting story of their very first client not too long ago. This was a sandwich vendor who runs a makeshift stall outside the Bombay Stock Exchange (BSE) and has been supplying sandwiches to the entire BSE crowd for years.

Imagine a business with a captive clientele in one of the oldest and the largest exchange in India. One would think the vendor must be an attractive credit opportunity for any sensible lender. Well, it so happened that the gentleman had no access to formal credit for decades despite being located on Dalal Street – traditionally considered the nerve center of India’s capital.

Till the day a credit officer from our Originator discovered him. As expected he had little to prove his credit worthiness. So the credit officer spent two days standing next to his little stall and counting the number of sandwiches he delivered to the BSE building from morning to evening. This was followed by a personal assessment through a Q&A session, a visit to his home and a few conversations with neighbours.

Using the sandwich-movement-activity based cashflow and other observations, the credit officer built the sandwich vendor’s P&L and B/S. The vendor was given a one-year loan of INR 9 lakh. He repaid the loan in 6 months and reapplied for a larger loan, tapping into a formal source of finance for the second time in his life.


This is how it used to happen in the past as well. Only a few had a collateral and  either relations or similar informal arrangements were made gauging cash flow/balance sheet of the person.


The CEO told me that when he left behind a promising career in a mainstream commercial bank and decided to get into a more interesting and possibly a higher margin business, he thought he would have to go to far flung areas of the country in search of those who had no access to credit. He was wrong. He found many such down the street from his office. I visited some of them today.

India is indeed a promising land. We simply need to look a little closer and go a little deeper into the lives of people around us – people whom we always ignored because we never thought they had potential. We need to stop looking and start seeing!

Urban exclusion is as big a problem as rural one. Infact urban exclusion will become bigger as more and more people come from rural to cities without any paper etc to show.

Banking has always been a social activity. It is a pity we have reduced it to just topline and bottomline analysis. Lot is assumed and lot is ignored while discussing and practicing banking. There was a time when a banker knew almost all the people in his locality. He had an idea of  basic cashflow of most individuals and knew whom to lend and whom not to lend. Now, it will be a rare things if a branch manager even knows the  profile of his neighbor.

For inclusion etc we have to revisit old practices of banking. Otherwise much is artificial really.

I mean even economics was lot around seeing things and writing about them. Now it just means to look at equations and wonder what to see in there..


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