Case: Meeting unmet needs in lending Organization: Baja Finserv

1. Team
Gold Diggers
Priyadarshi Gangopadhyay
Aayush Agarwal
Pratik Agarwal
Sufal Mahajan
Mayank Jain
Meeting the unmet
needs in lending
IMT Ghaziabad

2. 2P a g e
What is the problem?
Research

3. Presentation name goes here
Primary Research
22
Information Asymmetry
85% of the respondents
opined that they would
never get loans from banks
and that the only means
available to them was to
avail of non-institutional
credit thus wilfully
submitting to subjugation
at the hands of pawn
brokers and money lenders.
Working Capital
56% of the respondent
employees narrated incidents
of humiliation and delays in
availing loans from
institutional and non-
institutional sources.
Employee Loans & ICM
36% of the employees received
loans from their employers subject
to funds availability and delays in
disbursement. The remaining 64%
either resorted to ICM’s for their
needs or remain credit-starved.
56%
85%
36%
Sample set
48 salaried blue-collar and black-collar workers
Managers in 5 SME’s and 3 Large companies

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Credit unavailability
99.8% of the non-agricultural labour class
of the country does not have access to any
formal credit means.
- NSSO 59th Round data
Short-term Loan Interests
Interest Rates for short-term emergency loans
from pawn brokers and money lenders
average at about 36% and may be as high as
100% in some cases.
- ILO Working Paper #37 2015
Low
Penetration
Credit penetration in
the country averaged
around 56%.
- CRISIL 2016
Loan rates
33% of the
non-institutional loans
carried an interest rate
as high as 60%.
- NSSO 59th Round data
Secondary Research

5. Presentation name goes here 10
EPF Loans mandates a minimum employment history,
and can be availed for specific exigencies only.
Furthermore, it depletes the retirement benefits
Co-operative Loans require a creditworthy guarantor
who may or may not exist in a fiduciary relationship
with the borrower.
Employer Loans are inefficient use of company’s funds,
unable to solve the purpose of financial inclusion
Informal Credit from non-institutional sources (money
lenders, pawn brokers, etc.) exploit loan seekers with
hefty interest rates that may be as high as 60%.
NBFC Start-ups incur a high interest rate, with a limited
presence only in South India
Institutional
Loans
Non-Institutional
Loans
Current Offerings

6. Presentation name goes here
The poorer the group, the
greater the exclusion.
Even with 100 million Indians constituting the labour
class of our country, there remains structural issues that
prevent financial inclusion.
Demand-side issues
Financial illiteracy, reluctance to visit banks
Supply-side issues
Unavailability of bank branches, misrepresented
client eligibility and product availability
Focus on SMEs
Needs of labour class overlooked
Need Gap

7. 7P a g e
What is our idea?
What

8. Presentation name goes here
An employee-loan scheme
that leverages the fiduciary relationship
between the employer and his employees
thereby providing small ticket loans to
those without any credit history
without taking additional risk.
Bajaj Finserv Saarthi

9. Presentation name goes here
Explaining the Idea
Saarthi is a unique and innovative loan scheme:
For those with a fixed salary, but no existing credit history
Realizes a creditworthy employer’s aim to incentivize employees
Minimizes documentation, time delays and human interference
Enables remote access to loans instantly via our mobile
application
Allows Bajaj Finserv to enter an untapped market without
taking much risk

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Enrolment
Employer registers
for the loan
scheme
Training
Employees are educated
about the loan scheme and
its features and relevant
documents are procured
Availing Instant Loans
Employees avail of credit
according to their needs and
requirements
EMI Payment
Monthly instalments are
automatically deducted from
the employee’s account
Employee Default
If employee suddenly
leaves the job, the
employer makes the
outstanding payment
Process Flow

11. Presentation name goes here
For Credit Providing Employers
Saarthi is a unique and innovative loan scheme:
Frees up otherwise occupied business capital
Customizable interest sharing ratio
Competitively priced interest rates in comparison to entity’s
cost of short-term funds
Loan administration costs borne by Bajaj Finserv
Default risk reduces as compared to inhouse disbursement of
loans due to provisioning by Bajaj Finserv

12. 12P a g e
Who is Saarthi catering to?
Who

13. Presentation name goes here 27
Manufacturing
Companies
15 lakh small, medium and
large manufacturing
establishments employ more
than 3 crore labourers
Construction
Enterprises
India’s construction labour
force is estimated at 3 crore,
with women accounting for
41% of it
Oil & Mining
Companies
572 working coal mines in India
employs an estimated labour
force of 10 lakh workers
Courier & Delivery
Services
Comprising of large courier and
smaller local delivery companies,
the courier industry employs
18.2 lakh individuals
Target Employers

14. Presentation name goes here
Saarthi has the potential to
encapsulate all the salaried
employees in an organization
thereby providing a
homogenous solution for credit
requirements.
29
Blue Collared
Workers mainly working
as manual labour
Black Collared
Workers mainly employed
in mining or oil industries
Pink Collared
Women workforce in
construction and
manufacturing industry
Target Employees
Blue, Black and Pink collar workers whose
credit needs remain unmet
All the workers who currently pay hefty
interest rates to non-institutional sources

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Credit to the rural and SME sector has been
the focus for the Government and the
Financial Institutions.
Labour employees
Formal sector
2.4 Crore1
Labour employees
Informal sector
2
Self employed3
10 Crore
25 Crore
21
Opportunity Size

16. 16P a g e
How is Saarthi catering to its customers?
How

17. Presentation name goes here
Bajaj Saarthi Application
The application enables an
Instant Loan Facility
for the employees.
The employer application will allow employers to track availed loans,
loan repayments and manage employee listings for the organization.
The benefits of the employee application are:
Instant loan credit
Pre-verified employees will be credited the loan
amount instantly
Track credit score
Employees can track their credit score to evaluate
their credit worthiness
Multi-lingual support
Enable easy understanding in vernacular languages

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Employees owning a WhatsApp enabled feature phone
or smart phone can avail the hassle-free WhatsApp
Loan service to avail services or receive updates on the
go. Unlike a one-way text message communication,
employees will be able to engage with Bajaj Finserv.
WhatsApp
Banking
Kiosk
Branding
Channels for Saarthi
Saarthi on WhatsApp
Table-top tablet kiosks will be setup at manufacturing
units with a large employee footfall. Employees lacking
the access to a digital platform can use these kiosks to
transact with Saarthi, avail loans and track repayments.
Kiosks at Manufacturing Units

19. 19P a g e
What are the benefits for the stakeholders?
Why

20. Presentation name goes here
39
Providing financial credit to employees
without affecting business finances
Contributes to employee retention by building loyalty
and improving morale
Reduces Trade Union demands for rampant salary
inflation
Reduced capital requirements and savings in loan
administration costs for employers already providing
credit facilities to their employees
Employer Benefits
Minimal risk due to partial default provisioning and
adjustment against F&F settlement
The employer receives any amount that is provisioned by
Bajaj Finserv, yet not adjusted for employee defaults at
the end of 2 years

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39
A ‘saathi’ to bank upon, in the hour of need
Pre-approved loans providing access to instant credit
Interest rates lower than any existing loan scheme
Flexi loan facility enabling on-the-go credit and multiple
withdrawals
Employee Benefits
No unwarranted interference by human intermediaries
Evolving credit history empowering individuals for their future
Less financial stress and enhanced commitment to work

22. Presentation name goes here
An opportunity for Bajaj Finserv
to meet the unmet needs in lending through an
innovative and risk-averse business proposition
33
Providing loan to the
credit-starved population
through a business model
that transfers risk of
default to the employer
Capitalizing on a sizeable
portion of the Indian
population with
consistent demand for
credit
Ability to leverage the
evolving credit history of
the employees for other
services and financial
products, without
incurring additional
marketing costs
Bajaj Finserv Benefits
Unmet Needs First Mover Advantage Customer Acquisition
Business model to
minimize risk due to
default, possible only in
the case of employer
bankruptcy
Minimal Risk

23. 23P a g e
How will Saarthi reach its customers?
Where

24. Presentation name goes here
Pilot Testing
Initial education and
awareness activities.
Pilot test in select
districts like
Ahmedabad and Noida.
Phase 1
Operational set-up in Maharashtra,
Gujarat, Tamil Nadu & Uttar
Pradesh. Business development
activities to acquire firms with high
number of employees.
Phase 2
Organic business growth in areas
of Phase 1. Operations setup in
10 other states with special focus
on East & North India
Phase 3
Extensive marketing activities in Phase
1 & 2 States. Setup in 14 States & UTs
focusing on North-East India.
Establishing presence and credibility
in 80% part of the country.
Phase 4
Operations set-up in all remaining
parts of South India. Ability to offer
other financial services of Bajaj to
the existing customer base
Go-To-Market Strategy
Expanding into other markets like M/SMEs with modified offerings: 36+ months
7
months
13
months
22
months
30
months
36
months

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Business Magazines
Advertisement in business
magazines will help in reaching
our to niche audiences,
generating 4x return amongst
all visual print media.
Trade Shows
Contextually relevant trade
shows provide pre-show,
during the event and post-
show follow-up, face-to-face
interaction and relationship-
building opportunities.
Direct Marketing
Direct email marketing, postal
mails, telemarketing to
potential employers, kiosk
branding creates business
opportunities with measurable
responses.
Thought Leadership
Create TheUnsaidHeroes – a
forum to discuss and debate
best practices for employee
relation, recognition, and
retention. Redirect social media
posts to TheUnsaidHeroes.
Employer Marketing
A A
E E
A: Awareness Campaigns
E: Engagement Campaigns

26. Presentation name goes here 29
Employee Marketing
Awareness Campaigns
Billboards and street
furniture advertising at
community gathering points
Social Outreach
Bajaj Finserv would conduct
digital education workshops
for the employees of Saarthi’s
partner employers
Engagement Campaigns
Missed call marketing campaigns
to share regional content with
promotional advertisements
Educating the target
employees about the existence
of a solution for their needs.
Identify industrials clusters to be targeted
Generate demand amongst employees
in those clusters

27. 27P a g e
Is it cost effective?
When

28. Presentation name goes here
All figures are
in Rs. Crores Year 1 Year 2 Year 3 Year 4
NII 186 585 1160 1914
PAT 98 314 647 1073
EPS in Rs.
(Incremental) 2 5 11 18
Advances 1855 5845 11602 19140
NET INTEREST INCOME AND ADVANCES
18
Income Statement
0.00%
0.10%
0.20%
0.30%
0.40%
0.50%
12% 13% 14% 15% 16% 17% 18% 19%
EMPLOYER'S SAVINGS
297
1763
2672
3525
4342
5288
5993
6698
8015
9166
10576
11355
12691
14101
15140
16922
18035
19742
21152
22915
24677
26718
28203
30281
32080
34697
36738
39484
41951
44419
46887
50097
53436
56405
59930
63456
66981
71917
76147
83903
INTEREST EARNED
Scenario 95% CI
Rs. 27 crores
Base Case
Rs. 334 crores (40%)
Large Manufacturing firms save more loan administration cost
whereas SME’s save more in interest rate differential 5.0%
10.0%
15.0%
20.0%
25.0%
2.5%
7.5%
12.5%
17.5%
22.5%
0.0%
5.0%
10.0%
15.0%
20.0%
0.0%
2.5%
7.5%
12.5%
17.5%
F Y 20 F Y 21 F Y 22 F Y 23 F Y 24
MARKET PENETRATION
Phase 1 Phase 2 Phase 3 Phase 4

29. Presentation name goes here 18
Earnings
0
50
100
150
200
250
Sunny
Pleasant
GreySky
Sunny
Pleasant
GreySky
Sunny
Pleasant
GreySky
Sunny
Pleasant
GreySky
Sunny
Pleasant
GreySky
FY20 FY21 FY22 FY23 FY24
EARNINGS PER SHARE
EPS Forecast EPS Saarthi
Sunny: Factory growth ~4%, Penetration rate of +2.5% from pleasant sky, Pleasant: Factory growth ~3%, Penetration rate of 5%, Grey Sky: Factory growth ~2%, Penetration rate of -2.5% from pleasant sky
Saarthi will contribute around 18% to the
profitability of Bajaj Finserv by FY2024. Profits
from Saarthi will rise exponentially and surge to
Rs. 1615 crores in the fifth year.
Saarthi would contribute around Rs 27 per share and take Bajaj
Finserv’s EPS from forecasted of around Rs. 152 to Rs. 179 in
the base case.
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
0
100000
200000
300000
400000
500000
600000
700000
800000
900000
1000000
1 2 3 4 5
PROFITABILITY
PAT Bajaj PAT Saarthi Saarthi Profit Contribution

30. Presentation name goes here 18
Return Ratios
0%
2%
4%
6%
8%
10%
12%
FY20 FY21 FY22 FY23 FY24
ROA & NIM
NIM Saarthi NIM Bajaj
Bajaj Finserv PAT/Adv Bajaj Saarthi PAT/Adv
Return on Advances for Saarthi would improve to 5.62%
FY2024 as compared to 3.27% estimated for Bajaj Finserv. NIM
would be on an average around 10%
Estimated Return on Equity for Bajaj Finserv is around 27% by
FY2024 but with Saarthi it will rise to 37% in the next 5 years
19% 21% 23% 25%
27%
1%
2%
4%
6%
10%
0%
5%
10%
15%
20%
25%
30%
35%
40%
FY20 FY21 FY22 FY23 FY24
ROE
ROE Bajaj Incremental ROE Saarthi

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RISK MATRIX
Risk Assessment
With a 95% confidence interval and simulation over 10000
points, in case of default loss would not exceed Rs 84.16 crores
which is 1.13% of advances
Margins would be affected due to changing macroeconomic
parameters and increase in provisioning on account of default
MONTE CARLO SIMULATION
156
401
520
651
779
891
1009
1136
1247
1403
1520
1653
1781
1900
2078
2182
2338
2468
2650
2805
2922
3117
3266
3429
3607
3800
4008
4230
4453
4750
5010
5344
5700
6078
6680
7214
8015
9084
11875
RISK
Rs. 84 crores
Likelihood
Impact
Low Medium High
Low
Employee
Default
Operational
Risk
Employer
Default
Medium
Legal risk,
inflation
Declining GDP
growth,
Increasing
Competition
High

32. Presentation name goes here 25
Impact of Saarthi
57,53,305
Loans disbursed
under Saarthi
scheme
22,95,852
People
financially
included
67,187 Cr
Credit amount
disbursed
50,458
Firms’
relationship
leveraged
We are not just making loans available, we are making customer for a lifetime!

33. Presentation name goes here
Saarthi leverages the fiduciary relationship
between a creditworthy employer and his
employees to reduce the risk involved and aims
to provide budgetary and non-budgetary
benefits to each stakeholder.
09
Employee
Loan Scheme
Financial
Inclusion
Why Saarthi?
Sustainable
Affordable
Across the counter
Risk-free
Technologically advanced
Holistic
Inclusive

34. Presentation name goes here
Saarthi is a solution with limitless scope
in changing how financial needs of Indians are met
33
A scheme that envisages
all employees (from
managerial to ancillary
staff) on payroll and
provides loans based on
their credit history and
income
Providing credit to the
labourers in the informal
sector by formalizing the
transactional system in
informal businesses
Leveraging the fiduciary
relationship between self-
employed people (e.g. auto
drivers) and relevant
entities (e.g. auto transport
Union) to extend credit to
other sections of the
marginalized society
Future Scope
Expanding the TG Informal Sector Self-employed

35. 35P a g e
Team Gold Diggers
IMT Ghaziabad
Thank You