Introduction:
India faces a critical problem with a $38 billion credit shortfall, affecting 56% of Micro, Small, and Medium Enterprises (MSMEs) dealing with working capital gaps, while 97% suffer from delayed invoice payments, impeding their growth and sustainability.
A major challenge stems from inflexible lending criteria, where banks and NBFCs impose stringent capital provisioning rules, making uncollateralized loans nearly unattainable. SMEs and MSMEs struggle to access overdraft and invoice discounting due to their size. Existing processes are cumbersome and paperwork-intensive. The unsecured working capital loan market is primarily dominated by NBFCs, commanding a 55% market share, while banks offer traditional banking services. A comprehensive, one-stop solution remains elusive for businesses.
Arthum emerges as the solution to address the above challenges effectively. Their operational model is comprehensive, featuring an integrated credit line, automated repayment processes, stringent transaction monitoring to prevent fraud, cost-effective fund management, and specialised employee banking services. Arthum's strategic partnerships with banks and NBFCs further enhance their capabilities making it a one stop solution..
What truly sets them apart is their advanced offerings, such as automated loan disbursement and collection and precise control over fund usage. This unique set of features gives Arthum a competitive edge and addresses a crucial gap in the market, making them a standout player in the financial industry.
Arthum, established by Darpan Sharma and Vishal Mishra, stands out due to the leadership team's expertise in the banking and consulting sectors, accumulated over a remarkable 35+ years across various industries. Their previous entrepreneurial ventures were in domains like EdTech and SaaS, demonstrating their solid track record and deep understanding of the business landscape. Their prior experiences as founders or key members of founding teams underscore their competence in steering Arthum toward success.
Market Opportunity:
Arthum finds itself in a promising market landscape with ample growth potential. India is home to a staggering 42.5 million SMEs, and these businesses have consistently demonstrated an impressive 10% y-o-y growth rate over the years. What's noteworthy is that SME loans make up a noticeable chunk of total bank loans. Additionally, the recent emergence of approximately 167,000 new businesses in the country adds to the pool of potential clients for Arthum. This vast and dynamic market offers Arthum a substantial opportunity to thrive and make a meaningful impact.
100X Thesis:
There is a significant demand for flexible financing solutions among SMEs, especially those facing cash flow challenges due to delayed payments from customers. Arthum addresses this need by offering quick and accessible lending options. Leveraging technology and data analytics to streamline the financing process, assess risk, and provide faster lending decisions, the founders digital approach is aiming to improve efficiency. That in-turn allows the company to serve a larger customer base. India opportunity excites 100X and our conviction to back the founders is strong.
Conclusion:
Arthum addresses India's financial challenges by revolutionizing SME financing. Existing processes are paper-heavy and dominated by NBFCs, leaving a gap for comprehensive solutions. Arthum's model includes integrated credit, automated repayments, fraud prevention, and employee banking. Their standout features, like automated loan management along with their industry experience gives them an edge. India's vast SME market offers significant growth potential. Arthum's digital approach streamlines operations, allowing them to efficiently serve a broader customer.
