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Hello reader,
According to an ancient Tamil proverb, “one grain of rice is enough to tell if the pot is cooked.”
After seeing its latest financial results, I couldn’t help but feel that this is true of Grab.
Earlier this year, investors in the VC community and my banking sources told me that the super app’s financial services arm was doing quite well. Since Grab seemed to be getting the math right on this one unit, it might be symptomatic of how things are in its other businesses.
On Thursday, Grab’s financial services segment reported a Q2 revenue growth of 223% year on year, and 43% of this revenue originated from its lending business.
Analysts I’d talked to said that lending to a captive base – in this case, Grab’s ecosystem partners, including merchants and delivery riders – was a “smart move.”
What was smarter was Grab offering flexible repayment schedules to this base. A Grab spokesperson told me that the company realized that the cash flows for a driver would be widely different from that of an IT professional, who gets their salary credited monthly.
“Monthly repayment of loans can become arduous for drivers, so we offered them the ability to repay on a daily or weekly basis,” said the spokesperson.
Another innovation was Grab using its AI and data analytics capabilities to determine the credit worthiness of its driver-partners. “If we see that the driver has taken a lot of trips, has a low cancellation rate, is rated highly by users – then we know he’s a good bet for a loan,” said the spokesperson.
Banking sources also said that Grab’s efforts were noticed in the industry because of the speed with which it scaled up this business.
So, do read my colleague Simon’s in-depth story, where he looks at not just Grab’s financial unit but the topline and profitability of all Grab’s business segments as well. With adjusted EBITDA having improved by 92% year on year, Grab could be close to turning profitable. Read on to find out more.
— Rachel
THE BIG STORY
Image credit: Timmy Loen
3 Trends to keep an eye on
2 Eye-popping facts
The one you didn’t see coming
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