Harsh Chamria is associate vice president for Magma Fincorp Limited, a retail lending business in India founded by his father, Sanjay Chamria. Magma’s tagline — “investing in the smallest dreams” — is quite literal. The company provides loans to small business owners and consumers for revenue-generating assets including construction equipment, taxis, and tractors, as well as commercial vehicles like trucks and buses. Magma operates primarily in rural and semi-urban regions of India, and nearly half its customers do not have access to bank credit. He discusses entrepreneurship, what he learns from customers, and why irrigating your farm is a good sign of your ability to repay loans. He received his MBA from Stanford GSB in 2014.
In 10 words or fewer, what is the big idea behind your business?
No dream should go unfulfilled for the lack of funds.
What is the best advice you’ve ever received?
At a Stanford GSB interview, Oprah Winfrey said to “align your personality with your purpose in life.” Visualizing the end goal and working backward to design a lifestyle and a personality that would lead to that focused goal yields the best results.
What was the most difficult lesson you have learned on the job?
Right after graduating from college I worked at a mobile payments startup in Silicon Valley called Bling Nation. I learned that changing consumer behavior and habits is very difficult. We ended up with a good return for our investors but it required us to change the business model entirely. I’m now more thoughtful about why consumers should use my product versus simply how I can increase adoption.
What advice would you give other entrepreneurs on how to build a great business?
Design your day so you can spend more time on what’s important for your business, rather than what’s urgent in the short term.
If there was one thing that has enabled you to be successful as an entrepreneur, what would it be?
It is only the beginning of my entrepreneurial journey and hence success is far away! I make sure I meet at least one customer every day. They’re the best critics, and a great source of information on competition.
In our business we need to know our customers deeply to evaluate the likelihood of future default. Our customer might be a farmer who is hoping to buy his first tractor or a truck driver who wants to start his own transport business. Since there is often no credit history, we built our own scoring algorithm. We study our customer’s living patterns, such as whether the family has a renovated home (sign of recent disposable income), or whether the wife also works (supplementary income), or the children are in school (sign of progressive thinking). We look at business experience and acumen through questions such as: When was the last time you irrigated your farm? We also do a social network check and interview neighbors to see if they have seen money-collectors come to the customer’s house or whether the person has a good social reputation. Our field agents track this information on low-cost tablets. Our default rates are about 10 times lower than those of the average public bank in India.
What inspires you?
Meeting with my customers, especially the smaller ones, like the truck and tractor drivers. Many of them could not get funding anywhere else. Some people come back to us multiple times for small business loans and tell us they have grown their businesses multifold because we believed in them. That is very inspiring.
What do you consider your biggest failure?
I started a new product line at Magma for giving car loans online. I didn’t research my customer well enough. The person who is searching online for a car loan is very different from our typical customer. It is not a business we should be in.
What values are important to you in business?
Integrity. Loans given today could result in losses three years later, so it’s incredibly important to have a long-term view.
What impact would you like to have on the world?
We give loans to customers who were traditionally considered unbankable by analyzing surrogate sources of information. My dream is to unlock the entrepreneurial capital in India by democratizing credit. I would like to combine the fields of technology and finance to vastly expand our impact.
Why are you an entrepreneur?
I love to be a change agent. I like to take risks and challenge the accepted norms, which isn’t easy to do while working for someone else.
What was your first paying job?
When I was 15 years old, I built a software module that tracked in real time the daily cash collections across Magma branches all over the country. The project helped Magma account for the collections quicker and reduced manual data-entry errors significantly.
What is the best business book you have read?
Built to Last by Jim Collins.
What businessperson do you most admire?
Steve Jobs — for his ability to repeatedly churn out innovations throughout his life, and his marketing prowess that has resulted in a cult following around Apple.
What is the most valuable thing you took away from your time at Stanford?
I learned that a company is essentially a group of people, so if you want to build a great company, you need to be extremely careful about whom you bring on board. Identify the critical positions in your company, and make sure to hire A-players in those positions.
What do you think is the greatest innovation in the past decade?
The idea of crowd-sourcing innovation and knowledge from around the world. An example of such a platform would be the iOS App Store.