Fusion Finance is making a big move to change its business model. The company plans to launch a new individual retail loan product in September. Right now, Fusion Finance mostly focuses on microfinance loans. About 88% of its current portfolio comes from microfinance, while 12% comes from MSME [Micro, Small and Medium Enterprises] loans. By shifting to individual loans, the company wants to reduce its microfinance share to 70% over the next two and a half years.

The new product will be an unsecured loan. This means borrowers do not have to provide collateral [assets like gold or property to back the loan]. Unlike traditional microfinance which uses a Joint Liability Group (JLG) model [where a group is responsible for each member's loan], these will be individual loans. Sanjay Garyali, the MD and CEO, said these loans will target people with an annual income of more than Rs 3 lakh. This marks a shift from their usual base of lower-income borrowers.

Fusion Finance has clear limits for these new loans. The average ticket size [the typical loan amount] is expected to be between Rs 1.25 lakh and Rs 1.5 lakh. The maximum amount a single customer can borrow under this scheme will be Rs 2 lakh. This strategy helps the company serve different types of customers. Those earning below Rs 3 lakh will stay in the MFI [Microfinance Institution] segment, while those earning above that mark can access these new individual products.

The company is also looking at its MSME business. Currently, their MSME lending is entirely secured, meaning the loans are backed by property. Most of these borrowers are small shopkeepers and retail business owners who use their own homes or shops as security. Fusion is using this mix of secured and unsecured loans to balance its risk. This diversification is important for stable growth in the competitive Indian lending market.

Financial health looks positive for Fusion Finance. In the first quarter, the company reported a write-back [reversing a previous entry for potential losses] of Rs 21 crore from its bad loan provisions. This suggests that their recovery and collection process is improving. They have seen similar positive trends in the previous two quarters as well. This extra cash helps the company invest more in its new retail venture and technology updates.

Looking ahead, Fusion Finance has set a big goal. They want to reach an Assets Under Management (AUM) [total market value of loans handled] of Rs 10,000 crore by the financial year 2027. To get there, they are focusing on tighter underwriting [checking the creditworthiness of borrowers strictly] and better collection efficiency. They are also using technology to make their staff more productive and reduce operational costs.

For bankers and aspirants, this story shows a trend of MFIs turning into diversified retail lenders. Fusion is aiming for a 4% Return on Assets (ROA) [a measure of how profitable a company is relative to its total assets] by the end of FY27. They also want to keep credit costs down to 2% and maintain a collection efficiency of 99.75%. This move will likely increase competition for small private banks and NBFCs who already provide individual personal loans.