Shubham Housing Development Finance Company (Shubham) is a specialist mortgage lender committed to making it easier for India’s emerging consumers to buy their first home.

The company operates in nine states across India, leveraging technology and its vast network of trained sales agents to provide access to finance for previously underserved consumers. Shubham has tackled this issue with a range of technologies, processes, and efficiencies, in particular drawing on data collection, predictive analytics, and machine learning to help make sense of applicants who may have no formal documentation to prove their income. This strategy of digitally enabled underwriting involves building rich data lakes from the profiles of thousands of low-income customers, and from this data constructing statistical models that determine reliable benchmarks to assess their income.

For instance, Shubham’s modelling has shown that a shopkeeper selling footwear in Delhi, who is paid in cash and has no formal proof of income, is likely to earn a higher salary than a schoolteacher. Traditionally the schoolteacher has been able to secure a loan, while the shopkeeper has been excluded from home finance. Shubham’s algorithmic benchmarking of professions and average incomes allows for sensible lending rates to shopkeepers and similar undocumented applicants and is supplemented by a range of other checks.

For instance, even informal small businesses have bookkeeping records, receipts, and inventory that are used to validate income. Neighbours and employers are interviewed to help supplement this picture. A standard trading margin for different types of goods like food, textiles, or mechanical parts, is applied to check if a store owner is likely to turn the profit they claim in their application.

Through these methods, Shubham can assign a credit score to an undocumented or thinly documented worker and allow them access to home finance for the first time. Customers are motivated to access these home loans for a range of reasons. Insights from Shubham’s customers include stories like “We faced multiple problems with landlords and had to move house every 1-2 years, so we wanted a home of our own,” and “We wanted a safe place for our family after our second child was born”.

Shubham has been able to build a business around serving these low-income consumers, who now comprise 80% of its customers. It is also able to collect home loan repayments in cash or through WhatsApp, further helping those in the informal economy to service their loan. Shubham now has a loan book of INR 20Bn (US$270m), and 30,000 customers.