There are 171 operational banks and numerous NBFCs in India. The MSME Sector consisting of 36 million units provides employment to over 80 million people. In MasterCard's ‘Micro Merchant Market Sizing and Profiling Report' released in collaboration with Confederation of All India Traders, the company has claimed small businesses make up for 45% of India's GDP i.e. around three times of what Corporate India contributes. Lending to MSMEs has repeatedly been emphasized as priority sector lending by the Reserve Bank of India. However, the credit gap is not improving. These small and growing enterprises are in dire need of capital. Traditional banks are generally unwilling to make small ticket loans to these micro and small enterprises due to risk of such businesses’ inability to assess repayment capacity and cash flow, especially without some form of collateral. For Microfinance institution, players in these segments are too big. Informal lending is readily available and the annualized interest rates charged can be as high as 100% -120%.
There is a large funding gap between microfinance and other NBFC & banks that can be filled by a formalized lending process to micro and small enterprises and it is this “missing middle” market that KUDOS seeks to address through its business models and products.
Kudos serves a niche market of small-scale urban businesses; those with a turnover of between Rs 20 lakhs - 1 crore. These businesses include kirana/general store, garment shops, wholesaler, retailers, distributor, trader, salons, allied dairy, hotels & bakery, home-based enterprise, shops and others which are the drivers of economic growth.
Kudos converges its attention upon this opportunity, thereby providing customized products tailored to these specific needs, in alignment with loan size and tenor. And the greatest benefit Kudos offer, which differentiates from the other players in the segment, is the fact that it does not demand any collateral for its loans.
The typical average loan size for a Kudos client is 5 lakhs.
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