Social media giant Facebook launched Small Business Loans initiative that allows small and medium businesses to avail loans ranging from Rs 5 to Rs 50 lakh across 200 cities in India on August 20.
The company has partnered with Indifi, a lending platform, for loan disbursal. India is the first country where the programme has been launched.
Announcing the launch of the initiative, Ajit Mohan, Vice President, and Managing Director, Facebook India, told the media that there is no collateral required for the loan that comes with a pre-defined interest rate of 17-20 percent within five days. For women led-business, there is a 0.2 percent reduction in interest rate as well.
The loans initiative, Mohan said, is to address the challenge of access to credit faced by the small and medium enterprises (SMEs) in the country.
The initiative comes after the $100 million Facebook Business Grant the company announced in September 2020 for 30 countries including India. Close to $4 million were deployed to 3,000 Indian SMBs across the five cities, New Delhi, Gurgaon, Mumbai, Hyderabad, and Bengaluru for the companies impacted by the pandemic.
While the programme has been co-designed with Facebook, Indifi will be taking the key decision on the loan disbursal and also recovering the loans. Though there is no cap on the number of loan disbursals for the businesses, Mohan expects other players to come on board and more capital to be available in the market.
“The role we are playing is engaging with small businesses, who advertise on Facebook and therefore we are aware of growth opportunities that are constrained by lack of access to capital. We have the opportunity to let them know that there is access to this through the partner,” Mohan explained.
According to Mohan, Facebook’s self-interest here is for the small and medium business ecosystem to grow massively, which in turn will also help the company as well.
“What we are getting in return is that we hope some of these companies will go on to become extremely successful global businesses and most of them will become very successful national businesses. I think that is good for us and also the economy as well,” he added.
There are about 200 million businesses globally that use Facebook apps such as Instagram and WhatsApp every month to engage with customers, and a significant number of these businesses are from India. On WhatsApp alone, the company has 15 million business users in India.