Arunkumar Padmanabhan On Making Loans Worth $545 Million To Empower Women Entrepreneurs In India

One man’s journey stands out as a beacon of hope for millions in a world driven by financial complexities. Arunkumar Padmanabhan, a visionary entrepreneur originally from Chennai, South India, has carved a niche for himself in the financial services sector.

Arun has also become a catalyst for positive change in the lives of thousands. In this captivating interview, he shares his remarkable journey from the traditional corridors of banking to the frontlines of social entrepreneurship, demonstrating that impactful business can be the bridge to a more inclusive society.

Arun’s initiative, Svasti, has attracted funding from top-tier investors like Sajid Fazalbhoy, Kayenne Ventures (Singapore), Adar C. Poonawalla, and  Nordic Microfinance Initiative.

In this episode, you will learn:

• Arunkumar Padmanabhan’s journey from traditional banking to social entrepreneurship demonstrates the power of aligning financial services with impactful social initiatives.
• Svasti’s microfinance model empowers women entrepreneurs in Mumbai’s slums, providing unsecured loans with a community-driven group guarantee.
• Beyond financial support, Svasti’s holistic approach includes medical insurance, addressing the vulnerability of entrepreneurs to unforeseen health crises.
• Scaling operations successfully, Svasti emphasizes a people-centric business model, offering its employees rigorous training and meaningful career progression.
• Arunkumar’s advice for aspiring entrepreneurs underscores the importance of meticulous planning and securing substantial resources early in the venture.
• Svasti’s vision goes beyond profits, aiming to make the right to finance accessible to all, irrespective of income or circumstances.
• Arunkumar’s journey is a testament to the transformative potential of small loans, fostering economic independence and resilience in marginalized communities.

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About Arunkumar Padmanabhan:

Arunkumar Padmanabhan, director with Svasti Microfinance Private Limited, is registered with the Ministry of Corporate Affairs (MCA), bearing DIN 01890656. He is an Indian staying in Mumbai, Maharashtra, India.

Arunkumar Padmanabhan is currently associated with 4 Companies and is a director with Svasti Financial Services Private Limited, Ardhanareeswaran Properties Private Limited, and Svasti Foundation.

The total paid-up capital of all companies where Arunkumar Padmanabhan holds active positions is ₹64,570,340.00.

Connect with Arunkumar Padmanabhan:

• RocketReach
• LinkedIn
• Crunchbase
• The Company Check

Read the Full Transcription of the Interview:

Arunkumar Padmanabhan: Um, ah run how I could.

Alejandro Cremades: Edited so it will be edited. Okay, all right? So here. We go all righty hello everyone and welcome to the deal maker show. So today. We have a very exciting founder a founder that has been pushing his business for over sixteen years now you know the incredible impact that he’s had. And today we’re going to be talking about all good stuff. You know like for example, finding your customer first figuring out the product market fit then also having an impact you know with what you’re doing I mean in their case they have invested 400000000 into many many many many many areas that they have produced an incredible impact with 2000 employees a hundred and forty two branches and on and on so without further ado. Let’s welcome our guest today a room Kumar Patma Naban welcome to the show.

Arunkumar Padmanabhan: Yeah, yeah, yeah, very nice to be here. Thank you for having me.

Alejandro Cremades: So already originally born in Chennai South of India so give us a walk through memory lane. How was life growing up.

Arunkumar Padmanabhan: Yeah, channa is a pretty traditional city and I come from a very traditional indian family very conservative. Um, my my father worked in financial services. My mother was mostly a homemaker. Um. And you know we are very religious ah family traditional hindu family. Yeah, so that and my school. Ah, again, you know focused very heavily on academics ah less on sports and extra calulars. So yeah, so pretty standard upbringing in south indian traditional family I went you know I did my entire schooling and my college undergraduation in Chennai. Um, before moving to. Ah, city called Pune in Western India to do law so I qualified as a lawyer. Ah you know after graduating in in Chennai. Yeah.

Alejandro Cremades: Now in your case you know like why low out of all things.

Arunkumar Padmanabhan: Ah, well I Um, you know my goal was to work in corporate and commercial law and in banking. Um, um, and and that’s that’s the intent with which I started I mean pursuing law as a career. Um. And I knew at that point that I would want to do something in financial services entrepreneurial at some point and I thought banking would be a doorway to do that man and you know I saw law and corporate commercial banking law as a doorway to Entering. Banking. Yeah.

Alejandro Cremades: Now talk to us about that day shift shift that happened you know because directly you joined a bank you know and you were there for a few years you know for about 6 years ah but how did the opportunity of the bank. Come about you know because it’s a little bit different from you know the traditional path that a lawyer you know would follow of joining a law firm or opening your own practice. So how did the whole opportunity of the bank. You know come come knocking.

Arunkumar Padmanabhan: Yeah, so ah while I was studying law I pursued an internship specifically in the bank because it was my intention to um, you know, um, you know work in financial services. Ah, and you know I went and did an internship on my final year of law. You know bank and and I got a preplacement offer from them and I joined them soon after I graduated yeah, that’s how I started working in the bank. Ah, and how was that? Yes, yes, and ah, yeah, and and.

Alejandro Cremades: And you were there for about 6 years you were there for about 6 years so yeah

Arunkumar Padmanabhan: In the six years um I had I had great exposure in that bank. It was India’s largest private sector bank at that point and ah you know I was part of a core team ah of that bank that set up international banking for that bank. So it had this bank which is called Icsc Bank at that point had only operations in India and and in 2002 they decided that they should go global and I was part of the team that set up international banking for them. So my work was to be part of that team and I was. Providing legal support. So which means I was I was I went to many countries. Ah and you know figured out what is the best strategy for this bank in that country. Um, you know in some countries or you know we set up a wholesale bank in some countries we set up a consumer bank in some countries we set up. Ah. You know a wealth management business. Ah so depending on on what would you know the local laws and licenses would permit for us and you know what type of strategic fit. We saw we set up different businesses in different countries. It was it is a business that grew from 0 to $5000000000 in the. 5 years that I was associated with it. Ah so it was quite exciting to see that growth. Um, and this is what happened between you know, 6007 you know during the time that I was on this bank. Yeah.

Alejandro Cremades: So the the whole social economic you know or the social developmental you know type of sector. You know how did you start to create that interest towards it because that obviously resulted in ah in a meeting. With the ah Susanne and my Michael Delll foundation which was pivotal for you. But how did you start to really develop that thing that interest around the area.

Arunkumar Padmanabhan: Yes, well while I was working in this bank I was also volunteering with a few nonprofit organizations in Mumbai while I was based in Mumbai and I used to travel international a lot. And I was so you know volunteering with an organization called Aid India which had chapter in Mumbai and it also had chapter in many other countries. Ah you know it was basically a students organization of indian expatriate students students from India who went abroad to study had formed this organization to help. Um, grassroots ah movements in India and do you know to help ah low income communities in India so this was the purpose of that organization I was a volunteer with that organization based in Mumbai and I had worked with the um, um, with them. Um, you know in slums in Mumbai so I had some exposure. 2 slum communities in Mumbai and I understood the way of life some of the challenges that they face and I was only a volunteer really I didn’t do a lot of you know, very active work but in 2005 in Mumbai. There were huge floods that happened because of you know, very massive rains and I was. I was part of relief and rehabilitation work in slums in Mumbai and somewhere between 2005 and 2006 as I was involved in all of this I started feeling the need to try and make that part of my career in some way and I was very dissatisfied because you know my volunteering work was impacted because of my work in travel.

Arunkumar Padmanabhan: And I was not very happy with ah you know with with with what I was be able to accomplish and somewhere I started feeling if there was an opportunity to do that as a full time carrier that would be good but then my background was financial services and I was always thinking in terms of you know, being in banking all or you know. As a careerier so somewhere I thought if there’s an opportunity to work in an entrepreneurial initiative that will involve financial services associated with ah you know, low income population that might all bring various things that I that together to you know motivate me. So it was at this stage that I started exploring an entrepreneurial initiative in in social development space in general and the first person that I met was someone from the Michael Lens Susanindel Foundation who said that if I were to set up and microfinance company that would work in slums in Mumbai. They were willing to provide a small grant support to it. Ah so that sounded exactly like what I should be doing because it was it aligned with you know my priorities of being in financial services being in banking. Ah, and also you know working with low-income communities. All of these things came together in that proposal. And so I took that opportunity. Um and and started this company called swasti along with my partner. Um, you know Nara and so the 2 of us are co-founders of this company and we setups was the you know after I left the bank in 2007. It took me a year to set it up and we started lending.

Alejandro Cremades: What were the what were the early days like

Arunkumar Padmanabhan: In 2008 yeah

Arunkumar Padmanabhan: So ah, right at the beginning. Ah, we started this as a not-for profit initiative simply because we did not have the minimum capital that’s required to set up a regulated financial institution to do this business as a commercial or a for- profit initiative. Ah, so so our strategy was to demonstrate that this is a viable business opportunity that is microfinance in urban slums in Mumbai particularly we wanted to establish that this is a viable business ah and and and we we decided to do it in a non-profit framework. And and set it up to a certain size and scale. Ah and and that’s exactly what we did between 2008 and 2010 it took us about ah close to 2 years to to build a small portfolio and to demonstrate that this is indeed working. That it is. It is viable that the people who are borrowing are indeed repaying. We had 100 person repayment record during this period we built a very small portfolio of about something in the range of about two hundred two hundred and fifty thousand dollars touching about close to you know 3000 borrowers and and as we did that you know we were able to go to commercial private private equity or find share capital investors and prove to them that this model indeed works and we are capable of scaling it up and we also built the peace technology for this business ground up.

Arunkumar Padmanabhan: Ah, and and built a ah team so using this team and the technology and the and the sort of intubbation. Um accomplishment of about roughly two $50000 of portfolio we we prospected and raised commercial capital for this business and made it into a for profit. Business in the year two thousand and ten so that’s how ah, but.

Alejandro Cremades: How difficult how difficult is it to go from ah Nonfor profit to a for profit. How difficult is that transition.

Arunkumar Padmanabhan: For us. The transition was easy simply because this is what we had planned for so really, it was not that that you know it was fairly straightforward. Ah because once we had commitment from investors that they would invest into the for-profit business. Then all we had to do was we we created an entity um you know and got a license effectively. We acquired an entity with a license and we moved the forpro or nonprofit business into the for-profit business and that was a fairly quick process. It just took it took about five six months overall um but once we had the commitments from the investors. It is just a matter of you know routine transition. So that transition itself was quite simple and anyway it was always our intention to set up a large scalable sustainable profitable and a high impact company. This is what our goal was so right from the beginning. So it was just a step in that path.

Alejandro Cremades: So for the people that are listening to get it. What ended up being the business model of zvasti. How do you guys make money.

Arunkumar Padmanabhan: So what we do is basically we borrow money from banks and institutions ah in India and abroad and we also use our own capital. So we raise capital based on the capital we borrow money and using this pool of resources. we lend ah and ah we lend to only women. Ah who are in the low income segment in India so typically our customer is somebody who has a monthly income ah that could range from about ah I would say about one hundred and twenty five dollars to $400 this is the broad range I would say ah ah we are servicing a customer whose household income is in the range of one hundred twenty five dollars to $400 ah and and what we are doing is we are giving them loans. Ah these are women entrepreneurs who are running some small business. Ah, that is giving them an income of 1 $25 to $400 in that range and what we are doing is we are providing working capital financing or we are providing you know financing which they use you know to to build something. Um you know, associated with their business more than 90% of our loans go. You know for business purposes some sort of business or commercial activity that they are running ah and we typically have repeat borrowers. So once we make a loan to a woman. Ah you know she then? ah you know would would repay that loan in a period of 12 to twenty four months so typically our.

Arunkumar Padmanabhan: Loan duration is 12 to 12 to twenty four months and in this time she has taken the loan from us and she starts paying us back in Emisee equated monthly installments. We do either weekly collection or monthly collection. So some of them are paying us every week some of them are paying us every month and in a period of 12 to twenty four months their loan is finished. And then a good number of them then come and take a second loan from us. Ah so we have a you know 70% plus renewal rate. Um and and so on and so forth. So this is what we do and to the woman herself this loan is completely unsecured so there is no security but we encourage her to form a group of. Typically 5 women who come together and they are these ladies know each other quite well. Ah so and they are so they know and they are neighbors they live near each other and they they are aware of what’s going on in each other’s house and each other’s businesses because they are also friends and neighbors and they are. Willing to guarantee each other so because we don’t have any collateral or security from them. Ah and and this is also a segment where it’s very difficult to ah, very perfectly assess the income of these households because largely it’s undocumented income. They are all earning in cash and spending in cash. Ah. But even if you can assess that income quite accurately. It’s ah like I said it’s a small income one 25 to $400 and and typically you know the model involves 5 of them guaranteeing each other and giving us the assurance that if one of them is not able to repay the other four will support and and and and pay her.

Arunkumar Padmanabhan: Installments and with the support of this credit guarantee and a mutual guarantee of these 5 women. We make a loan to each of them. Our average loan. ah amount is is about ah is currently about I’m just doing the math in my head $100 they thought it’s about $500 yeah, we lend about $500 to each woman. That’s the average ah loan that we make so the range of the loan varies from $500 to about $1200 per woman. Ah so 5 of them come together and take this loan and then they repay over 12 to twenty four months and at the end of this tenor after they fully repay. They can come and they are eligible to take a higher loan. So the the per people who have taken $500 the next loan they can take $700 ah and so on and so forth so this is the essence of our model so the the income that we ah we make is the interest difference between our borrowing rate and the lending rate. So this is the difference. Ah, the income that we make and this income has to go towards meeting all our expenses because it’s a very people intensive business because the process of assessing the income and running the operations. You know? of course there is a very strong technology element to it. Ah, but equally there is a people element to it so the cost of the people the infrastructure the technology all of that is part of our operating expenses which has to be funded by the income that we make and apart from that there are some amount of credit losses loan losses.

Arunkumar Padmanabhan: Ah,, which also we have to fund using the income that we make so broadly. Um you know and of course we have to pay our but our lenders whoever pay us. So Basically you know the income that we make goes to repay our lenders. It meets our operating expenses and covers the losses that we make credit costs. And on top of it. We make some profit So that’s broadly the model but not only this We also provide other financial services to the women. What we we One of the services we provide is ah is a medical insurance. Facility. So This is also a segment where which is very vulnerable to. Um, you know, medical emergencies and the cost of meeting a medical emergency. You know is is quite high for them because you know they are running daily Businesses. You imagine you know if one day they are not opening their shop and running that business. They don’t have income for that day. Ah so they don’t have you know. Any Social security or any other support system. So if somebody’s sick and they have to be medically hospitalized for that many days. Of course they have to suffer the medical expenses. Also the business doesn’t run. Ah, a key earning member is incapacitated the business doesn’t run and the house doesn’t make any income so we have ah a medical insurance that we provide for a small Fee. We Insurance Premium We We provide them What is called a hospy Cash coverage. Ah, which gives them a daily income support.

Arunkumar Padmanabhan: Something like three thousand rupees in indian terms which is about say $40 ah of per day of hospitalization if somebody is in the hospital for four or five days then you know 40 into five say $200 is paid to them which supports them. Ah you know.

Alejandro Cremades: And and what about what about you guys too I mean how have you guys financed the operation and capitalized the business. Okay.

Arunkumar Padmanabhan: Through the days that they are incapacitated So ah.

Arunkumar Padmanabhan: So we have equity in the business we have raised about ah about $20000000 overall in equity over and above that we have made some accumulated profits over the years so that’s this is called our net worth of our business right? ah. And using this network worth. We have borrowed. so um so overall ah you know a network worth I mean just in indian ruy terms currently is about 220 cros which is roughly um about um, you know, almost? Ah ah, ah. $30000000 somewhere but around 27 $ 28000000 that’s the amount of network worth we have and against this network worth. We have borrowed about $100000000 ah, you know overall and we have used this pool of capital of both the network and the borrowing to ah make loans. Ah, to our customer. So our portfolioos are about 1200 growth or in indian Rupe Termss which is about um, one hundred and twenty five hundred and thirty million dollars which is funded by the you know hundred hundred twenty hundred and ten million dollars of borrowing and about 25 $ 28000000 off Net worth.

Alejandro Cremades: So in total how much how much have you financed the in loans is it about four hundred a million or how much have you financed.

Arunkumar Padmanabhan: Um, and so.

Arunkumar Padmanabhan: So so the 454000000 um is something that is all the loans we have made since 2008 you know the loans that we have made and repaid and made and repaiyed and mepaid that the aggregate of all of that is about four fifty million dollars right and but the current outstanding.

Alejandro Cremades: Ok.

Arunkumar Padmanabhan: Ah of the loans. Ah that we have made totally will be about one hundred and thirty million dollars what is outstanding as of now of 425000 borrowers ah and 130000000 yes

Alejandro Cremades: Okay, now now for you guys. You’ve been able to scale the operation nicely. You have over 2000 employees in one hundred and forty two branches how has it been to the journey of scaling this business on the on the human capital side.

Arunkumar Padmanabhan: Yes.

Arunkumar Padmanabhan: So so this business is a people centric business. Um, you know while there’s a very strong technology element to this. Um, you know the the contact with the borrowers is primarily with our team so we have each of our branches have 10 employees who are meeting and. Closely engaging with around 4000 borrowers so 4000 employee or borrowers are in touch with these 10 employees practically ah and you know they are practically meeting them very often as well to do collection activity and they are sourcing loans. So the same same team does both the role loans sourcing as well as loan collection and and this ah ah you know so so it’s it’s very important to have the right type of employees. You know our employees also very similar to profile in profile to our customers who are with very basic. High school education you know and with no college education people who speak local languages who come from the same community as our borrowers. So even our employees come from a household that are earning between I would say a hundred dollars to $400 a month. Ah. And so ah from a segment that’s very similar to our customers. So we have a very rigorous training ah you know strategy and training process ah that to put them into training and to make sure that they have all the skills that they need.

Arunkumar Padmanabhan: To do customer engagement customer assessment credit assessment and and all the activities that are associated with our process and how they use our technology so we train them very rigorously. We also provide very good career progress for them. This is something that we very do very well. Our values are called people First this is our values which means we whatever we build. We build with keeping our people at the front and center of our business so you will find in our company. A very vast majority of people who have been with us and joined us at entry level and who have. Scaled up their carrier for multiple promotions and have become middle management and senior management staff. Ah so we are very focused on that. Ah, we are what is called a great place to work certified company 4 times in a row. Ah you know there’s an institution that certifies human resources practices. In companies. Ah you know, um, across the world and in ah in India as well and we have their certification so we are very focused on on making sure that swasti is a great workplace and and swasti provides a fantastic career progress opportunities to that our team members. So yeah, so it’s ah it’s a very. People intensive business and we are very focused about maintaining our values and culture across all our branches and offices. Yeah.

Alejandro Cremades: So imagine if you were to go to sleep tonight a run and and you wake up in a world where the vision of svasti is fully realized what does that world look like.

Arunkumar Padmanabhan: Well, our vision is to make sure that we fulfill the right to finance for everybody irrespective of their income right? or their circumstances. So just like you know we we take it for granted. That if you have you know middle. Ah, you know if you look at anywhere in the developed world or say the affluent segments in even in a country like India ah we take it for granted that we are all going to have access to finance. This has just taken as something that is absolutely you know, um, you know for granted. Ah, but the reality is that for a vast majority of people in India and in the rest of the world access to finance is not easily available at all. Ah, you know, maybe you and I can get credit cards. We can get you know car loans to buy. Ah you know automobiles we can get home loans. We can get business loans. But if a person is poor in in ah in this case I’m talking about people who are making say two hundred three hundred dollars per month. Income. Ah these things can’t be taken for granted they are just not available. It’s not that easy. It is also not economically viable for banks to service them. So there are ah and also they are seen as vulnerable people who are not very good credit. So for all of these reasons I would say that in in a country like India or there are at least 50600000000 people who don’t have access to finance. You know the way the rest of the population has and and my goal.

Arunkumar Padmanabhan: Is to make sure that this problem is addressed and everybody regardless of their income should have access to finance and right to finance as a matter of right and they should be able to access it that is proportionate to their income and their needs and their capacity. You know it may be small needs and small capacities. Ah, but we must be able to find provide this to them. So This is this is our vision and this is what we we want to Accomplish. So.

Alejandro Cremades: So obviously you know incredible vision here I want to talk about the past two with the length of reflection if I was to put you into a time machine and I was to bring you back in time maybe to 2007 where you were thinking about giving up your career at the bank and starting something of your own imagine if. You know, right? after that meeting that you had with Susa Michael Dell which got you thinking if you had the opportunity of having a chat with a younger self and giving that younger self one piece of advice before launching a business. What would that be and why given what you know now.

Arunkumar Padmanabhan: So ah well I would say that you know the biggest challenge that that younger person would face is in raising capital because ah you know he was getting into a capital intensive business with absolutely no capital.

Arunkumar Padmanabhan: So um, you know personally at that stage I didn’t have access to any capital neither did I have capital of my own. But ultimately the raw material for my business is money and I got into it without you know, sort of having a strong financial position personally. Ah, nor having access to large institutional support. So I think my advice would be to plan this a little better. Um and make sure that you get much larger resources and access to you know capital secured earlier in the game. Um, then later. So I think this has been one of our largest biggest challenges over the years you know we have been ready to scale to much higher levels than we are today but throughout our journey we have you know, kind of struggled ah you know to raise as much capital as we want it. Of course we are on the verge of sort of resolving some of those challenges but it’s it’s taken many many years ah you know the industry itself. It’s also been vulnerable and it’s been exposed to many big catastrophic events. You know most recent of which being covid and prior to that you know certain. Legal regulatory. Ah, ah, transition time in India so you know to navigate these sort of big challenges if you’re in the business of you know, providing capital you need to have access to a lot of capital. Yeah I think that’s what I would say. Yeah.

Alejandro Cremades: So for the people that are listening that will love to reach out and say hi. What is the best way for them to do So for the people that are listening that are inspired I will love to reach out and say hi. What is the best way for them to do so.

Arunkumar Padmanabhan: Ah, sorry, can you say that again I miss you.

Arunkumar Padmanabhan: Well, ah look you know? Ah, this is a commercial business. So If if you are interested in exploring this further. You know, However, you want to engage or explore. We are always open. Um you know? Ah, if you want to come and see how we work. Visit Any of our branches look at our technology. Ah you know, um, maybe work with us or you know help us raise money we are open to you know any of these ah any of these engagements from from those who are who have interest to pursue this? yeah.

Alejandro Cremades: Amazing. Well hey everyone thank you so much for being on the deal maker show today. It has been an honor to have you with us.

Arunkumar Padmanabhan: Yeah, yeah, thank you Thanks a lot and thank you for having me and it’s been fun having this discussion with you? yeah.

*****

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