Prabhaav Loans: Innovative Financial Solutions Empowering India’s MSEs

Mr. Nilesh Ghuge, Chief Executive Officer, Western Capital Advisors and Prabhav Loans unveils the Future of MSME Financing with Prabhaav Loans

In the heart of India’s bustling economic landscape, where micro, small, and medium enterprises (MSEs) flourish with untapped potential, Prabhaav Loans emerges as a harbinger of change and growth. At the steering gear of this transformative journey is Nilesh Ghuge, the visionary CEO of Western Capital Advisors Pvt Ltd, who, with Prabhaav Loans, is redefining the contours of financial empowerment for MSEs across Maharashtra and beyond. This initiative is an evidence to Ghuge’s commitment to filling the critical credit gap confronting MSEs, driving forward India’s ambitious economic goals through ‘Impact Financing.’

Prabhaav Loans’ Genesis: Given the vast landscape of MSMEs in India, what was the motivation behind launching Prabhaav Loans, and how does it aim to address the specific needs of MSEs in Maharashtra?

Empowering MSMEs is a core focus for WCAPL, aligning with India’s aim to reach a $5 trillion GDP. Despite contributing significantly to the GDP, exports, and employment, MSMEs encounter challenges such as limited credit access and lack of formal documentation, leading to a substantial credit gap. However, the emergence of millions of new MSMEs signals ongoing growth. All this put together highlights the inherent demand for retail credit in the Indian market.

Recognizing this need, Prabhaav Loans was established to tackle MSME financial exclusion.

As we embarked on defining our brand, we delved deep into introspection, posing fundamental questions about our purpose, intentions, and aspirations. Amidst varying responses, three pillars emerged with resounding clarity:

Staying True to Our Expertise: We committed to leveraging our core business strengths and experience, ensuring alignment with our established segments.

Creating Value: Our focus extended beyond profit to encompass creating substantial value for all stakeholders, seeking opportunities where our presence could make a meaningful difference.

Contributing to India’s Growth Story: Anchored in our dedication to contribute to India’s growth narrative, we aimed to align our endeavours with the nation’s journey towards prosperity.

These core values gave rise to the vision for Prabhaav Loans: a platform dedicated to providing “Impact Financing” to Tier 2 to Tier 6 cities. This focus area represents the perfect intersection of our expertise and aspirations to empower grassroots enterprises.

Our journey began in November 2023 with a small, three-member team. We faced the daunting challenge of launching a business within a tight four-month timeframe. With meticulous planning, strategic decision-making, and a spirit of adaptability, we were able to overcome numerous obstacles. And this very unwavering commitment to delivering results reflects not only our company ethos but also our dedication to serving our customers.

While we acknowledge future challenges on the horizon, we are confident that our core values will continue to guide us. We are poised for success, ready to empower MSMEs and contribute to India’s economic growth story.

Impact Financing: Can you elaborate on the concept of ‘Impact Financing’ as envisioned by Prabhaav Loans and its potential to transform the economic trajectory of MSEs in tier 2-6 cities?

Micro, Small and Medium Enterprises (MSMEs) are the engine of India’s economic development. These dynamic businesses contribute a staggering 30% to GDP, employ over 110 million people, and drive over 40% of exports. Yet, despite their undeniable power, MSMEs face roadblocks to further growth, particularly limited access to formal credit due to a lack of documentation.

WCAPL recognizes this challenge and sees a tremendous opportunity within the retail loan sector, particularly in housing and Loan Against Property (LAP) segments.

This opportunity is fueled by several factors. Firstly, With India’s Retail Credit to GDP ratio at 9.4%, much lower than global averages, there’s untapped potential for credit access. Additionally, the high number of freehold houses exceeding active housing loan accounts presents a vast potential market for LAP or home improvement loans. Thirdly, housing loan penetration remains extremely low, especially in Tier 2-6 towns where over two-thirds of India’s population resides. Even developed states like Maharashtra have a meagre penetration rate of 9%. Despite these low figures, retail loans already hold the dominant share of banking credit in India at around 32% as of FY23, and are projected to grow at a rate of 13-15%. In addition, recent policy changes like RERA and GST are expected to increase demand, highlighting the inherent need for credit in the Indian market.

Recognizing the immense potential and aligning with our commitment to inclusive financial growth, WCAPL launched Prabhaav Loans. This initiative focuses on providing “Impact Financing” to Tier 2-6 cities, empowering grassroots enterprises and bridging the credit gap.

Prabhaav Loans positions WCAPL to address the evolving needs of Indian MSMEs. By directly engaging with these businesses, we contribute meaningfully to entrepreneurship, job creation, and overall economic development. Furthermore, Prabhaav Loans empowers bottom-of-the-pyramid entrepreneurs by integrating them into the formal credit ecosystem, fostering financial inclusion and improving their livelihoods. This strategic move creates a win-win situation for both WCAPL and the communities we serve.

Innovative Solutions: How does Prabhaav Loans differentiate itself in the crowded financial marketplace with its product offerings like Home Loans, Loans Against Property, and Unsecured Business Loans?

First and foremost, let me emphasise that our focus lies in a less-travelled path, the often overlooked MSME retail loan sector, specifically targeting micro-enterprises in Tier 2-6 cities. These businesses typically lack access to formal credit, presenting us with a unique opportunity to serve an underserved market segment.

Now, our differentiation goes beyond just target market uniqueness. We offer flexible loan solutions, catering to businesses with or without property ownership.  Think of us as a one-stop-shop for their financial needs,  providing a comprehensive range of solutions  from LAP (Loan Against Property) to UBL (Unsecured Business Loans).

In fact, we are committed to providing this array of business financial solutions in a distinct manner compared to the market. After all, it’s about “Sabse Tez, sabse zyaada, yeh hi hai prabhaav loans ka vaada.”This promise is built on a robust risk assessment policy focused on meticulous loan sourcing and underwriting. We prioritise service-oriented businesses, employing a template-based system with upfront checks to streamline assessments and minimise fraud risk. This system is a double win for us and the customer. Not only do we ensure the security of our investment, but the customer who is onboarded in our system after much scrutiny is also promised a higher loan amount than industry standards as quickly as possible.

Lastly, recognizing that our target demographic may not be technologically savvy, we’ve embraced a phygital approach. Our field staff are empowered to assist customers with loan applications and document submissions, bridging the gap between traditional and digital banking.

      About Nilesh Ghuge: With diversity of experiences spanning across banking, FMCG, and chemical manufacturing, Nilesh Ghuge brings a multidimensional perspective to the financial world. His tenure at Western Capital Advisors Pvt Ltd as CEO has been marked by a focus on setting up “PRABHAV LOANS” for impact financing. A management graduate from Jamnalal Bajaj Institute and a chemical engineer from LIT, Nagpur, Ghuge’s career trajectory is a blend of strategic acumen and a deep-seated passion for empowering India’s economic backbone – its MSE sector. His recent inauguration of a Prabhaav branch alongside his mother is not just a milestone but a symbol of Prabhaav Loans’ foundational values of community and empowerment.

      Navigating Challenges: What are the most significant challenges MSEs face in accessing formal credit, and how is Prabhaav Loans positioned to overcome these hurdles?
      Micro, Small and Medium Enterprises (MSMEs) are the backbone of many economies, and India is no exception. However, these enterprises, particularly those in rural areas, face significant challenges that hinder their full potential.
      A large portion of MSMEs are micro-enterprises, often family-run businesses in rural settings. These businesses frequently operate in cash, leading to a lack of formal documentation. This, in turn, makes it difficult for them to access formal credit, a crucial element for growth. For instance, the low number of MSMEs registered under GST (13.7 million out of an estimated 70 million as of FY22), reflects this challenge.
      The limited access to formal credit creates a significant credit gap (estimated at Rs 85 trillion). This forces many rural MSMEs to rely on informal lenders, who often charge high interest rates, further restricting growth potential.
      The disparity between the demand and supply of financial services in rural areas is further exacerbated by the lack of robust banking infrastructure. Factors like poverty, low income levels, and limited financial literacy further hinder access to formal banking for these businesses.
      Despite these challenges, the MSME sector continues to demonstrate resilience, with a significant number of new establishments in recent years (18.3 million units between 2016 and 2022). These challenges present an opportunity for the financial sector to improve its outreach and design solutions that meet the specific needs of rural MSMEs. By addressing the issues of documentation, credit availability, and financial literacy, the financial sector can unlock the immense potential of rural MSMEs and contribute to inclusive economic growth.
      Future Aspirations: Looking ahead, what are the long-term goals for Prabhaav Loans in the context of financial inclusion and empowerment of MSEs?
      At present, Prabhaav Loans is in its pilot phase, operating through five branches strategically located along the Samruddhi highway in Maharashtra. As we gather insights and refine our operations during this initial six-month period, we aim to leverage these learnings for our future endeavours. Our forward-looking strategy includes expanding our physical footprint beyond Maharashtra. Anticipating this growth trajectory, we plan to establish an additional 10 branches within the current fiscal year and aim for a total of 20 branches by FY’26.
      Prittle Prattle News composed this article as an Interview.
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