Bahi Khata for Small Businesses

We have conducted a candid interview with Mr. Harsh Pokharna, founder – OKCredit, who digitized the Bahi Khata of Small Businesses. Read on how their journey became the source of strength and inspiration.

1. What inspired you to launch OkCredit?

The idea to build OkCredit came from our personal experience. We (the co-founders – Aditya Prasad, Gaurav Kumar, and Harsh Pokharna) used to buy groceries on credit from a nearby store, but settling it was a tedious process. The problem lied in the way it was recorded- sometimes on the register, sometimes on loose scraps of paper, leading to a mismatch in our and shopkeeper’s accounts. There was a clear opportunity to build something that would help, not just the shopkeepers with record-keeping but customers as well. And thus, was born OkCredit.

OkCredit uses the power of the internet and technology to bring micro-businesses online. With the OkCredit app, every time something is bought on credit the merchant sends out a message to the customer. This app also enables the end uses to view their outstanding balance with that merchant via a web page link that provides a monthly breakdown of credit purchases. This improves transparency in business transactions and facilitates a higher degree of trust among the participating individuals.

2. Who can benefit from your services? Would you brief me about OkCredit and how it works?

OkCredit empowers small business owners by digitizing their bookkeeping function through a simple and easy-to-access mobile app. These small business owners in our case are small shops and neighborhood stores.

The OkCredit app has given a complete digital makeover to the traditional register book – ‘Bahi Khata’ and made the daily bookkeeping task simpler and effective for millions of small businesses. The app not just helps small businesses keep track of credit transactions – both payments and receivables, it sends timely reminders and makes it easier for them to collect and settle balance amounts quickly through an integrated reminder feature via WhatsApp and SMS.

Once a merchant registers a transaction on the platform in a customer’s name, the customer is simultaneously informed through text or WhatsApp. This app allows merchants to send collection notifications to customers in case of delayed or missed payments and enables credit payments digitally across the country.

To solve the trust problem, OkCredit allows end customers to view his or her outstanding balance with the merchant via a web page link, which also provides a monthly breakdown of credit purchases. This improves transparency in business transactions and facilitates a higher degree of trust among the participating individuals.

OkCredit is a part of an ecosystem of apps aimed at digitizing small and medium businesses (SMBs) across India. Ok Network comprises an ecosystem of apps such as OkShop, OkStaff, and other products that facilitate interaction between businesses, suppliers, customers, and employees. OkShop helps merchants to open their shop online while OkStaff is a free-to-use staff management app that lets them manage their employees’ payments, attendance & more.

3. How COVID 19 has impacted your business plan?

Just like any other business, the digital bookkeeping segment too had to go through its ups and downs last year amidst the Covid pandemic. Our business dipped 26%, 31%, and 38% in tier 3, tier 2, and tier 1 cities respectively in April last year. Things, however, changed with heightened business activity among the micro, small, and medium enterprise sector and rapid adoption of digital business tools among them to drive efficiency and growth.

Our growth, in the unlock phase of the Covid pandemic, was particularly strong in small towns and hinterlands as OkCredit witnessed a strong recovery in demand from tier 3 cities followed by tier 2 and tier 1 cities.

At a business category level, different magnitudes and pace of recovery have been observed by OkCredit since February 2020. We witnessed double-digit growth in business from medical and Kirana stores at 21% and 15% respectively in September 2020. This was after a dip of 12% in business from medical stores and 22% from Kirana stores in April last year.

Before the second wave, OkCredit has seen an increase in both the number of transactions and transacting merchants. Compared to February 2020, our transactions were 15% higher in February 2021. Our user base has grown by 34% since March’20. The merchants adopting digital payments has increased by 250%

In all, OkCredit captured 0.5% of India’s total GDP of $2.6 trillion in 2020 in terms of the total value of transactions on the platform. This was made possible through over 800 million transactions on the platform in 2020 amounting to $40 billion worth of transactions. We added over 70 million new merchants in 2020.

The 2nd phase of the pandemic however has been relatively less severe as more merchants adopt digital business tools. We have registered an overall decline of 15% in transaction value in April this year as compared to a 53% decline in March last year before the nationwide lockdown was imposed.

As per our data on user behavior, the micro-retail players are adopting digital bookkeeping solutions and enrolling more customers when compared to the first wave. This is reflected in an overall 15% increase in transacting customers on our platform in the period between March last year to April this year.

Similarly, transacting merchant data indicate only a 9% drop in April this year in comparison to a 32% drop in March 2020. This is true for all business categories including essential services, like grocery and medical stores.

As Covid rages, we have doubled our efforts to create awareness about OkCredit and the convenience it brings to small businesses. We have already launched our innovative new solution called OkShop which allows small merchants to set up their online presence.

4. How different are your services from others offering similar services?

At OkCredit, our strength lies in the robust, feature-rich product that improves the transparency in business transactions and helps in building a higher degree of trust among the participating individuals. The app is completely free to access and ensures 100% safety, data security, and accuracy.

OkCredit app has an impressive retention rate and generates positive word of mouth through merchants who have found the platform to be simpler and easy to use leading to a strong referral-triggered growth pattern.

5. How do you plan to expand your company in the prevailing pandemic?

OKCredit is an innovator in the digital bookkeeping space, discovering the category and attracting the attention of VCs and other entrepreneurs in solving problems for SMBs in India. We were the first to prove that SMBs could be acquired for using an app without deploying feet on the street.

Despite the covid pandemic, we continue to work towards solving some more problems for small business users. We endeavor is to help them at every stage of their business cycle to enable them to grow their profits by going online and integrating with the growing digital economy.

In this direction, we have already taken some steps by launching OkShop and OkStaff to solve another set of pain points for some other types of businesses. Our single-minded focus is to empower the underserved SMBs by democratizing access to technology and capital for them.

6. According to you, how can OkCredit simplify the accounting and bookkeeping process for businesses?

OkCredit empowers small business owners such as small shops and neighborhood stores by digitizing their bookkeeping function through a simple and easy-to-access mobile app. OkCredit has been a pioneer in the digital bookkeeping sector, creating a category where none existed. The app not just helps small businesses to keep track of credit transactions – both payments and receivables, it sends timely reminders and makes it easier for them to collect and settle balance amounts quickly through an integrated reminder feature via WhatsApp and SMS.

To solve the trust problem, OkCredit allows end customers to view his or her outstanding balance with the merchant via a web page link, which also provides a monthly breakdown of credit purchases. This improves transparency in business transactions and facilitates a higher degree of trust among the participating individuals.

7. Do you think the policies of the Indian Government will help MSMEs financially to thrive and sustain themselves in this uncertain economy?

Government support in the form of bolder and well-directed reforms is critical to the survival of the MSME sector amid the Covid pandemic. It can unleash a new wave to thrust the industry to soar higher.

Fiscal Policy Support from RBI to the stressed MSME sector will make funds more readily available for them as banks are exempted to maintain cash reserve ratio for the loans disbursed from January 1 to October 31 2021 to the first time MSME borrowers.

Furthermore, RBI’s decision to allow Non-Banking Financial Companies (NBFCs) to avail bank funding under Targeted Long Term Repo Operations (TLTRO) will promote incremental lending and push the revival of stressed sectors. Under the scheme, NBFCs will be able to provide a credit lifeline to cash-starved MSMEs.

The provision in the Union Budget 2021-2022 to infuse Rs 15,700 crore for the sector will bring much-needed relief to the capital-starved MSMEs. The decision to incentivize the incorporation of One Person Companies (OPCs) in the budget will also feed the MSME ecosystem. Not to mention the decision to redefine MSME which has brought many micro and small units under the sector and make them eligible to benefit from various measures, schemes, and concessions.

Other important steps by the government to support the MSME sector include strengthening of NCLT framework and introduction of alternate methods of debt resolution, such as via e-courts and special framework for MSMEs; Rs 20,000 crore subordinated debt for MSMEs and Rs 50,000 crore equity infusion through MSME funds of funds under ‘Atma Nirbhar Bharat Abhiyaan’, and Rs 3 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS).

8. What do you think are the major areas a company should work on to improve their chances of settling and maintaining their accounts in this pandemic?

I would recommend organizations focus on making their product robust and feature-rich to address the specific needs of customers. It is also advisable to keep products or solutions simple and user-friendly to enhance the chances of acceptability and thus ensure better customer retention. This will also support the organic growth of the company by generating positive word of mouth through satisfied customers.

9. How people are responding to this concept, and how fast is it gaining traction? Do you see a need for more such companies in India? What is the future of such initiatives in India?

Digital bookkeeping solutions offered by OkCredit have become more mainstream than ever. The growing popularity of our solution has proved that with the right technology and features, the value proposition of digital bookkeeping can be immensely powerful. This will further spur demand for digital business solutions in the coming years and pave way for the new phase of growth in digital solutions for small businesses.

Before 2020, there was a small early adopter base among the current base of 50 million+ SMBs, who were exploring digital solutions. We see that going up significantly where even a normal businessman is curious about learning and trying out solutions that help him leverage technology towards business objectives. This indicates that there is a growing appetite for such solutions to solve problems of different segments of India’s diverse SMB base.

We sincerely believe that increased investment in digital infrastructure development, smartphone penetration, and increased consumer spending will write the story of the growth of digital business solutions in the coming decade. The fact that digital solutions make key business tasks simpler, digitized, and secure will form the crux of increased demand for such solutions going forward.

10. How was your journey as the owner of OkCredit, and what challenges did you face?

OKCredit has come a long way since its inception in 2017. Founded to move millions of ultra-small retailers from a traditional ledger-based system to a tech-enabled one, the OkCredit platform has been growing at a steady pace and has achieved over 20 Mn downloads to date.

Currently, OkCredit has over 5.5Mn active monthly users which include over 100 types of businesses like Kirana store owners, mobile recharge shops, medical stores, apparel amongst others across pan India. 15% of the active users on the platform are suppliers and 70% of the active merchants on the OkCredit platform record more than 10 transactions every day.

The OkCredit app can be accessed in more than 10 Indian languages, capturing 0.5% of India’s $2.6 trillion GDP in the year 2020 in terms of the total value of transactions on its platform. This was made possible through over 800 million transactions on OkCredit’s platform in 2020 and amounted to $40 billion worth of transactions.

While OkCredit is present across 2800 locations in India, our strength lies in the tier-2 and tier-3 towns, wherein we have seen great adoption of our product as well as retention. We are helping small shop owners expand their business by assisting them to keep a track of their borrowers and get their credit back on time, without having to leave the shop. This has played an important role in bringing the SMB community back on their feet during the Covid times as we helped merchants get back their outstanding dues and thus restart their businesses.

Today, OKCredit has scaled up from a single product company to a multi-product company solving problems for different segments of the diverse SMB base. We have created an ecosystem of digital solutions for small businesses to help them manage their business tasks such as digital bookkeeping, staff management besides creating an online presence to compete with more organized players.

We also identify the unique value of network effects in this and have also started pursuing that towards delivering more value to SMBs. We have raised $84.9 million from investors to date including Lightspeed Venture Partners, Tiger Global, and Y Combinator.

The biggest challenge for the adoption of digital tools including ours is trust and inertia. Merchants have been using registers traditionally and would not trust software when it comes to finances. However, by demonstrating the efficiency and convenience of our app, we have been able to attract many merchants to our platform.

Secondly, credit transactions (between small merchants and customers) are usually stronger in tier 2 and 3 towns as the customer-merchant relationship are strongest in small towns. But most of these transactions are still made in cash. Also, as the suppliers to small retailers generally deal in cash, the merchant does not have an incentive to make bulk purchases of stock using digital means. This is a big challenge in the adoption of digital solutions by merchants.

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