How We Started Issuing Loans to the Self-Employed and Discovered the Huge Potential of This Segment

When we launched our business in India, our initial focus was only on the salaried segment. We believed that the demand was high and that we should target this group first. In December 2023, we began providing loans in two Indian states, targeting just salaried individuals. Potential clients could get approval in just 9 minutes with two documents.

Self-employed applicants were initially rejected based on our risk rules. However, we noticed a significant number of applications from self-employed individuals despite clearly marking our website and application as “salaried only.” This observation led us to question why we were excluding such a high-demand segment.

We decided to test the market and assess self-employed individuals based on their behavior as private individuals. We provided loans without asking how the funds would be used, and many recipients used the money to grow their businesses.

Once we started offering loans to self-employed customers, we observed that the average loan amount increased. This wasn’t due to demand but rather because we determined loan amounts based on risk quality—the better the risk quality, the higher the loan limit.

Initially, 100% of our clients were salaried individuals. However, after opening up to self-employed individuals in February 2024, 23% of our sales came from this new segment. Currently, around 30% of our new sales come from self-employed customers, indicating very high demand.

Interestingly, we don’t conduct any paid campaigns targeting potential self-employed clients. They find us through organic search, an acquisition cost is almost zero for us.

The average loan amount for self-employed individuals is about ₹46,000, compared to ₹38,000 for salaried individuals. The share of self-employed customers utilizing the grace feature of the credit line product (50 day period) is marginally higher than that of salaried customers.

I’m pleased we expanded our focus. We should continue targeting self-employed individuals and even create a separate product for them. However, we must keep it simple, as the high demand is partly due to the simplicity of our current product.