R Thyagarajan, the founder of the Shriram Group, stands out as one of the world’s most unique financiers, especially considering his remarkable success in an industry that has posed challenges for many others worldwide. Thyagarajan’s approach to lending has been unconventional, aiming to provide credit to low-income individuals who are typically overlooked by traditional banks. He built the Shriram Group into a conglomerate encompassing diverse sectors like insurance and stockbroking, employing over 108,000 people.
A trailblazer in extending credit for vehicles like trucks and tractors to India’s underserved population, Thyagarajan’s approach was to demonstrate that lending to those without established credit histories or stable incomes could be less risky than commonly believed. He refutes any notion of novelty in his business model or in his decision to generously distribute a stake in Shriram, currently valued at over $750 million.
Hailing from Chennai, India, Thyagarajan is driven by an analytical and egalitarian mindset, which led him to study mathematics and statistics before embarking on a finance career. His journey included positions at significant institutions like New India Assurance Co. and Vysya Bank. His foray into lending began organically as he offered loans to individuals seeking to purchase used trucks. Gradually, this evolved into Shriram Chits, a collective savings scheme, and later into a conglomerate comprising over 30 companies.
Thyagarajan’s fundamental insight was that lending at rates slightly lower than prevailing market rates, but still higher than global standards, could offer a safer and more affordable option for borrowers. He maintains that his approach aligns with both private-sector entrepreneurship and market principles. Shriram Group’s success underscores its unique ability to collect over 98% of dues on time, highlighting the effectiveness of its lending decisions.
In an industry often marred by ethical issues and volatility, Thyagarajan’s approach stands out. Shriram’s offerings support India’s newly banked, underwriting loans and products that conventional banks often cannot provide. While some might view lending to the poor as a form of socialism, Thyagarajan’s model demonstrates its potential to be both sustainable and beneficial.
Thyagarajan’s influence extends beyond his business strategy. He places a cap on employee salaries, believing that excessive income comparisons can lead to unhappiness. This distinctive compensation structure fosters a more humane and flexible work culture, attracting dedicated employees who value stability over extravagant pay.
Notably, Thyagarajan lives modestly himself, driving a simple car and eschewing the distraction of a mobile phone. His commitment to equitable wealth distribution led him to give away his stake in Shriram to a trust benefiting a group of executives, emphasizing his lack of need for excessive wealth.
As Shriram Group continues to thrive, Thyagarajan’s left-leaning perspective and innovative approach to lending have left an indelible mark on the industry. Despite potential challenges, his legacy serves as a testament to the enduring success that can be achieved through unconventional and socially conscious financial practices.
