Loans for the left out

Nimay Deonath is the first customer of Micro Housing Finance Corp. (MHFC). Deonath runs a small Chinese food stall in Mumbai's Mira Bhayendar Road and makes about Rs 30,000 a month.

In 2008, Deonath wanted to buy a new house for Rs 6 lakh, of which he could pay Rs 4 lakh. "No bank was willing to lend as he was classified as a hawker," recalls Rajnish Dhall, Director, MHFC, which formally approved the loan in May 2009. Deonath has so far paid all installments on the dot.

Mumbai-headquartered MHFC'S borrowers are people who fall through the cracks of the financial system- vegetable vendors, home visiting beauticians, cab drivers and so on. The houses should have a final price of not more than Rs 5-6 lakh.

"You might be making Rs 50,000 a month but if you don't have the paperwork to prove it, you won't get a bank loan," says Madhusudhan Menon, Director, MHFC. Both Dhall, 41, and Menon, 56, had worked for American Express for over a decade when they came back to India looking for an opportunity to do something that was socially relevant.

A meeting with consulting firm Monitor, which was working on a project to explore affordable housing, sparked the idea of their venture. The duo joined hands with Nachiket Shelgikar, 25, who was then working with Deutsche Bank, London, and MHFC was born. So, how does MHFC go where banks fear to tread? One, since these borrowers don't have any paperwork, MHFC plots a "storyboard" for every applicant. If it is a vegetable vendor, a loan officer hangs out with him to see how much he makes in a day.

MHFC then speaks to other vendors around to gauge their average earnings. Two, while banks require customers to come to them, MHFC takes its "branch" to the project site of properties up for sale.

MHFC has a capital base of Rs 33 crore, of which Rs 25 crore was raised in the first round funding, from India Financial Inclusion Fund and the Michael & Susan Dell Foundation in October 2009.

FOCUS: Affordable housing

FUNDING: Rs 25 crore, India Financial Inclusion Fund, and Michael & Susan Dell Foundation

BUSINESS: 200 loans disbursed; 1,500 targeted by year-end

EMPLOYEES: 27

BIGGEST RISK: Promoters don't complete projects on time

THE BEST ADVICE WE GOT AND FROM WHOM: It's not people who aren't credit-worthy. It's banks that aren't people-worthy

-Prof. Muhammad Yunus, Nobel laureate