How KreditBee won 'middle India' by reaching where the large banks didn't

For KreditBee, one of the key players in India's unsecured digital lending space, nothing came easy. Neither its first cheque nor the first customer. The fintech also had to battle through challenging events, from the COVID-19 outbreak in 2020 to the Reserve Bank of India's (RBI) continued clampdown on unsecured digital lenders.

"Before Covid, there were some 1,600 digital lending apps on Google Play Store and most of these were making money in 2019. After six months of the lockdown, only 80-odd existed. It is all about resilience during these cycles, and that's the hard truth of lending. Covid and regulatory guidelines have impacted many lending companies in India," Madhusudan Ekambaram, Co-founder and CEO, KreditBee, shared in a conversation with YourStory Founder and CEO Shradha Sharma at TechSparks Mumbai.

On the growing regulatory action around unsecured lending, he opined, "The RBI wants to stabilise the growth to see if there is any systemic risk since there has been a spurt in digital lending."

Despite the hard times, the growing appetite for small-ticket loans, especially in middle India, has ensured that KreditBee not only thrived but also survived.

Today, the instant credit platform services 400 million customers, 77% of whom hail from India's small towns—where large public and private banks have little to no penetration. This 400-million user base largely includes people that don't have credit scores either.

"The banks are competing heavily for the top 3% of the population that is residing in Tier 1 cities. In Tier 2-3 cities, you mostly find just one PSU bank (SBI) where you have to go with your passbook. Even the ATM is located inside the bank branch," the founder shared.

"But now, this middle India wants the convenience of digital transactions... that is how the market has changed. Since there is no distribution of private banks in these areas, we have been able to cater to them," he added.

Most of KreditBee's customers typically work in SMEs, from kirana shops and bakeries to roadside dukaans. While business loans and personal loans are its predominant products, KreditBee has also started offering gold loans to cater to rising consumer demand. Almost 11 crore people have downloaded the KreditBee app, revealed the founder, and the platform has disbursed loans to about 1.1 crore customers.

What's driving this sustained demand?

Ekambaram observed, "For middle-class people, earlier they would get loans only from their friends and family, but that is a major status quo issue today. The other option for them was moneylenders who had a very tedious way of structuring the loans. More than 15 lakh customers that came to us were 'new-to-credit' and today they have a house loan from us."

"The ultimate goal of middle India is to own a house. We have been a part of that journey, and that's why we see a lot of customer loyalty and stickiness," he revealed.

KreditBee has been profitable for a few years, and wants to go public in the future. The founder reckons that "an IPO is the holy grail for most startups" today with several success stories already out there in the public market.

But, profitability is a more urgent goal for the fintech. "Lending is not new in India, it has been happening for years, and you are bound to make money in this business at some point of time," Ekambaram said, adding, "But we have been displaying profitability for a few years, and are now looking at an ideal timeline for going public."

Even though the first $1 million cheque was hard to come by, KreditBee has raised $350-400 million in funding since then. In 2023, it completed a $200 million Series D funding from private equity investor Advent International. Armed with fresh capital, it aims to surpass over $1 billion in AUM in the next few quarters. "The first break is very critical, and then investors will push you in the right direction," Ekambaram added.