AYE FINANCE

FinTech Group Assignment

GROUP 27

FT221074- BANUGU SUHAS REDDY

FT221095-YEDDULA RAKESH REDDY
FT224029- SHIVANANDHREDDY
FT222090- PRIYANKA POTNURU
FT224033-SHREENIDHI M R
What is a FinTech?
Technology related to financial services is tasked with improving and
automating the way financial products and services are delivered and used.
Fintech is used to improve financial operations, processes, and lives of
companies, business owners, and consumers through the use of
specialized software and algorithms. Finance and technology are combined
in the term "Fintech". 

By using machine learning, artificial intelligence, prediction behavioural

analytics, and data-driven marketing, financial decisions will be more
predictable and better informed. Those apps that learn will not only learn
their users' habits, often hidden from themselves, but also engage them in
learning games that improve automatic, unconscious decisions to spend
and save. Fintech has also been quick to embrace automation for customer
service, using chatbots and artificial intelligence to assist customers with
issues and to keep staffing costs down. By using payment history
information to flag transactions outside the norm, fintech is also being used
to combat fraud.

Block Chain technology is also a buzz word in the FinTech industry. It

provide financial transactions to be secure and immutable allowing fraud
less transactions. This decentralized approaches had given birth to
FinTech crypto-currencies such as Bitcoin.

About Aye Finance

Aye Finance, which is a non-banking finance company (NBFC) focused on

lending to micro units, has a loan outstanding of about ₹1,700 crore. It has
173 branches across India.

This NBFC head office is located at Gurgaon, Haryana. Aye Finance is a

modern fintech organisation that uses the data of the customer to cluster
them into the groups, Using the huge data of the previous loans history of
the similar transactions these clustering have been made.
The Artificial Intelligence and Machine Learning techniques such as
Logistic Regression, K – Means Clustering, K – Median Clustering,
Random Forest and Decision Trees are used building these models on the
data and take accurate decisions.

Target Customers and Problem Solved

All the middle and High range business men maintain good financial
documentation such as GST, Income Tax Returns year on Year, Current
account, Company registration, Good Banking Transactions etc. But, Low
range businesses do not have all these financial documentations.

All the Banking sectors take CIBIL score into consideration which will
include all the above mentioned documentation and payment cycle of the
previous loans. If the person if he do not have any previous loans then his
CIBIL score will be -1.

So if not enough documentation provided and if the CIBIL score is not so

great. The chance of getting a financial aid from the banking sector is very
less.

This problem can be solved using the AI ML techniques and ICE

methodology. Using the previous data of the Bad loans. They have
developed algorithm which gives the probability of defaulters. The variables
that are considered are Job, Age of the applicant, Collateral, Future Scope,
Bad loans in the particular clusters.
Low range businesses are the target segment with low documentation and
AI/ML techniques this can be solved.

Clustering
ICE Methodology

ICE Methodology stands for Industry, Cluster and Enterprise. In the each
phase of ICE there are different factors that are taken into the consideration
as shown.
 Industry - Suppliers, Buyers
 Clusters – Cash Cycles, Profit Margins
 Enterprise – Productivity Levels

As the Accounts are not very clear for this small scale businesses the
following factors

 Kacha and Pakka Bills

 Machinery
 Number of workers
Focus Area

Key Factors of Success

Products:

 Hypothecation Loan : Hypothecation of stocks, machinery, working

assets and book debts. Max Debt of 2 Lakhs

 Quasi – Mortgage Loan: Depending on your repayment capacity

you can choose your EMI from 6 months to 48 months tenure for a
maximum loan amount of Rs. 5 lakhs. The loan availed can be used
to either fulfil your working capital requirement or asset purchase
requirement.

 Mortgage Loan: Depending on your repayment capacity you can

choose your EMI from 6 months to 72 months tenure for a maximum
loan amount of Rs. 25 lakhs. This product is for clients who want a
higher loan or for longer tenure and are willing to mortgage their
property

 ECLGS Loan: The facility is backed by 100% guarantee from

Government of India through National Credit Guarantee Trust
Company (NCGTC), The The facility granted under the scheme shall
rank second charge with the existing credit facilities in terms of cash
flows (including repayments) and security, with charge on the assets
financed under the Scheme to be created within stipulated time
Methods:
 Credit Appraisal: We use a host of financial and non-financial
parameters that are interpreted with our industry cluster knowledge.
This enables us to asses a client’s willingness to pay, ability to pay
and the resilience of their business network

 Technology: Aye Finance automation aims to create robust and

secure systems capable of boosting operational controls with low
cost delivery. Systems are aligned to provide a hassle free loan
origination process

 Analytics: Data science applications comb the rich granular data that
originate from our field distribution team. Correlating behavioural
propensities with traditional approaches creates deep business
insights

Aye Finance investors

Accion, SAIF Partners, Falcon Edge Capital, Accion Venture

Lab, CapitalG, LGT Impact Ventures, LGT Capital Partners, LGT, A91
Partners, LGT Lightstone, Funds managed by Maj Invest, MAJ Invest

Competitors:

 Equitas: This company was founded in the year 2007 and provides
micro finance, used commercial vehicle finance and housing financial
services. Raised a total fund of $136 million
 Ujjivan: It is a micro finance institution, which provides financial
products and services to urban and semi urban customers in India.
Founded in 2004 and currently operating with 16,571 employees
 Satya Capital: SATYA Micro Capital Ltd. is a microfinance institution
registered with the RBI that began microfinance operations in
January 2017. Over 8 lac customers have access to its 325+
branches in over 27,835 villages in 225 districts throughout 21 states,
seeking financial assistance for revenue generation and income
improvement in industries such as agriculture, commerce, and
services.
Who is Aye Finance’s client?

Aye Finance (Aye) is a non-deposit taking NBFI with a specific focus on

micro and small enterprises in India. Aye finances micro enterprises in
manufacturing and service clusters across 18 Indian States. Using tech-
based credit underwriting Aye is able to provide loans to customers who
otherwise would be locked out of the financial system.

Funding objective

The Finance Monitoring Organization(FMO) loan supports the expansion of

Aye’s loan portfolio in India. The loan is dedicated to micro entrepreneurs
and therefore supports FMO’s objective of reducing inequalities. Aye has
expanded to the States of Bihar, Jharkhand, Gujarat and Maharashtra
which have a prevalence of women entrepreneurship. The FMO loan thus
supports Aye’s loan expansion to women-owned enterprises and FMO also
offers technical assistance targeted at increasing Aye’s reach into the
women market.

Why does the company fund this project

India has a high number of enterprises which fall between the (smaller)
loan size ranges that microfinance companies offer and the (higher) loan
sizes that traditional banks and NBFIs offer, i.e., the ‘missing middle’ who
don’t have access to the formal credit system. FMO wants to support credit
extension to this segment in India by supporting innovative companies such
as Aye, which serve this target segment efficiently and at acceptable credit
risk levels

Strategic Outlook:

1. As part of its business growth strategy for the next two years this
fintech lender company plans to raise Rs 350-400 crore equity.
2. This company has a net worth of Rs 750 crore while its gross loan
portfolio was at Rs 1450 at the end of June 2021. It aims to have a
portfolio of Rs 2200-2300 crores by the end of FY22
3. Aye Finance aims to increase their centres across the country to
serve maximum number of clusters and fund various micro
enterprises.
4. Aye Finance aims to work with the most relevant technology to
facilitate better financial inclusion and to consequently serve micro-
enterprises across the country in a more holistic manner.
5. Aye Finance’s cluster-based credit appraisal approach and physical
model plans to bridge the gap between MSMEs and organised
lending norms.
6. Aye Finance aims to be a leading player in developing AI and ML
models to further ease the access of credit to the MSME sector and
is implementing to deploy advanced AI/ML solutions in most of its
critical business processes
7.