Small businesses have long been the backbone of Bangladeshi society, with corner stores, local pharmacies, and neighbourhood food stalls keeping cities and rural areas alike up and running. Yet these businesses are often overlooked by the financial system.
Sayeed Hasan, one of these small business owners, owns a pharmacy in the Dakshinkhan area of Dhaka. Once when he needed a loan for his business, social stigma and too much paperwork discouraged him from getting a traditional loan from a bank or through a microlending institution.
But since people from DrutoLoan had visited his shop earlier and helped him fill out the paperwork, coupled with the discreet payment and repayment they offered, Sayeed found it more comfortable to avail loans from the organisation.
Repayment is also easier as he uses bKash, so Sayeed does not have to go to a physical location. He pays an extra Tk200 on his repayment as well, which is stored into his savings account. The approval process was also quick — loans are deposited into the client's account often within as little as three working days.
Mohibullah Mojumdar, owner of an auto-rickshaw garage and recipient of several business loans from DrutoLoan, said, "I have built my business with the support of DrutoLoan. They have been with me since the beginning."
He said he is one of the first customers of the service and he received loans within just one working day.
Mohibullah added that he tries to clear his payments ahead of time, which also gives him a chance to build a trusted relationship with the company. He too uses bKash as his repayment method, taking out the hassle of physical repayment.
Inspired by personal struggle
It was Abdul Gaffar Sadi's, the co-founder and CEO of the company, personal experiences while growing up in a middle-income family that led to the birth of DrutoLoan.
As a child, Sadi saw his father struggle to grow his business due to a lack of funds. He observed that absence of the necessary paperwork and poor understanding of the lending process puts a lot of small businesses on the backfoot when it comes to expansion.
Sadi decided to solve this problem.
Determined to simplify financing for micro, small and medium enterprises (MSMEs), he planned to start a nano savings scheme, which proved highly successful. With a cooperative licence, the company soon embarked on its lending journey.
Sadi had to convince his co-founders to join him during their university days.
"I had a whiteboard in my room. We started jotting a SWOT analysis of our business model on the board. In no time, the board was filled up with weaknesses and threats — we had no space to jot down the strengths or opportunities."
But they decided to move forward.
"We said you know what, let's start and we will figure it out as we go."
Thus, the journey of DrutoLoan began in February 2019 with the aim of bringing financial access to all.
Initially, they were short on funds and had to convince people to deposit small amounts. Adaptation was key, as they refined their credit and deposit policies based on market feedback.
The journey was filled with ups and downs, but the team never wavered and constantly tried to improve their offerings. Their success stories kept them going, like helping a borrower during childbirth or supporting another through an accident.
"Witnessing the transformation of MSMEs from small shops to flourishing businesses fueled our sense of purpose and intrinsic value for others," said Sadi.
How DrutoLoan works
According to Sadi, many small entrepreneurs do not even consider going to banks for a loan and some are not even aware if they are eligible. Then there's a social stigma of being seen at a co-op for a loan as Sayeed said, it is "not good for the ego" or his "social status".
DrutoLoan solves this problem through agents who go directly to the clients, or potential clients.
To help a small business secure a loan, Drutoloan will first send their representative to the customer and help them fill out all the necessary paperwork.
This paperwork can be filled out through their app or website too, but as Sadi said, most of these clients are not tech literate. So, a lot of the time, a little supervision is very helpful for the clients. In certain cases, the company also helps its clients to acquire mobile phones and bank accounts.
But a business has to have certain criteria to avail DrutoLoan's services.
"Our ideal customer will have a physical shop with a business that has been running for at least two years. They also need to have Tk10 lakh worth of inventory and a trade licence."
DrutoLoan does not charge any interest on its loans, just fees that are predetermined. The instalment amount depends on multiple variables such as tenure, purpose, loan amount, etc.
Returning big amounts at one go can be tough for small businesses. Sadi said that they try to collect the money every week rather than every month. For instance, paying Tk10,000 every month might be difficult for a small business owner, but it is easier for them to pay back Tk2,500 each week. This is where Druto Loan is trying to disrupt the microlending sector. They have collectors who go and collect money from their clients to make sure that they are on par with their payments.
Many small businesses may not have all the paperwork sorted and DrutoLoan also helps them with it. In a short span, the company has managed to give out over 3,000 loans worth more than Tk14 crore. It also boasts a default rate of 0%.
Although the institution's prime focus is on loans to small businesses, it also offers seasonal loans, emergency loans, travel loans, and medical loans, catering to diverse needs.
DrutoLoan operates with a multi-pronged approach, tailoring its services to the unique needs of its clientele. The company's commitment to innovation is evident in its direct lending, partnership lending, and digital lending models.
The direct lending approach, where loan officers venture into the community, allows DrutoLoan to truly understand the needs of its borrowers. Partnering with organisations like banks and NBFIs like LankaBangla Finance extends the reach of their services, ensuring maximum impact. The digital lending model, embracing the digital age, offers a swift and convenient way for borrowers to access funds. The company's online application process eliminates the need for physical visits, making it more accessible.
In the coming years, the company plans to expand its reach across Bangladesh, leaving no stone unturned.
"We want to launch 1,000 SME centres in the next two years all over Bangladesh. These will be 5x8 feet small shops which will provide holistic financial inclusion i.e these shops will help people with opening bank accounts, loans, financial literacy, insurance, etc."
Drutoloan has also partnered with companies like Bimafy, to provide customised micro insurance loans for MSMEs.
In the next two years, they aim to serve every corner of Bangladesh. Following that, the plan is to expand their services to South Asian countries and beyond.