The Sindhis are largely the bankers of the subcontinent. They provide business loans. I've rarely seen a Sindhi delve into loans for marriages etc.
Obviously, they charge a hefty interest, and the Indian average of 3% per month is not unheard of.
However, for collection, the Sindhis have a very unique method.
They do not do monthly EMIs. They travel to the Asami's (debtor's) place of business every evening, just after the bulk of the day's earnings have come in, and before it is time to do the accounting for the evening, and they take the day's share.
This system has many benefits. Here are a few that I could see:
A. Businessmen make their earning everyday. So a small daily contribution pinches less than a bulk monthly instalment. This is the greatest advantage of this system. It aligns itself to the cash flow cycle of the debtor.
B. Frequent Contact. Usually, these visits also become a time for small talk, perhaps a chai some day, etc. This allows the creditor to remain in touch with the debtor and also, as the confidant, become privy to business fluctuations before they become apparent to the market. The creditworthiness of the debtor is also assessed everyday. The creditor can, when he goes there, see how well the shop is doing, how many visitors appear, how stress free the debtor appears etc.
C. Low loss. Because the EMI is divided into 30 small parts, in the event of non payment, at least some part of the EMI has been recovered.
Has anyone in the corporate sector used this?
I think that Sahara India had this, but for their daily savings scheme, not for their loan collections.
I am not aware of anyone else.
The businessmen NEVER sends an employee to do this daily collection. It is always the seth himself. That is a very improtant point. The Munim can do the paperwork, but the daily collection is always physically done by the seth or his family member.
Obviously, they charge a hefty interest, and the Indian average of 3% per month is not unheard of.
However, for collection, the Sindhis have a very unique method.
They do not do monthly EMIs. They travel to the Asami's (debtor's) place of business every evening, just after the bulk of the day's earnings have come in, and before it is time to do the accounting for the evening, and they take the day's share.
This system has many benefits. Here are a few that I could see:
A. Businessmen make their earning everyday. So a small daily contribution pinches less than a bulk monthly instalment. This is the greatest advantage of this system. It aligns itself to the cash flow cycle of the debtor.
B. Frequent Contact. Usually, these visits also become a time for small talk, perhaps a chai some day, etc. This allows the creditor to remain in touch with the debtor and also, as the confidant, become privy to business fluctuations before they become apparent to the market. The creditworthiness of the debtor is also assessed everyday. The creditor can, when he goes there, see how well the shop is doing, how many visitors appear, how stress free the debtor appears etc.
C. Low loss. Because the EMI is divided into 30 small parts, in the event of non payment, at least some part of the EMI has been recovered.
Has anyone in the corporate sector used this?
I think that Sahara India had this, but for their daily savings scheme, not for their loan collections.
I am not aware of anyone else.
The businessmen NEVER sends an employee to do this daily collection. It is always the seth himself. That is a very improtant point. The Munim can do the paperwork, but the daily collection is always physically done by the seth or his family member.
