According to a BCG report, digital lending in India will become a $1 trillion opportunity in the next five years
With credit disbursal seeing a general slowdown in the economy due to stress in the non-banking financial companies (NBFCs), fintech players are trying to ease the situation at their end. One such player is Satin Creditcare Network Ltd (SCNL), a micro-finance institution, which has entered into the digital lending space to provide micro-loans up to Rs 25,000.
H.P Singh, chairman and managing director, SCNL talks to Moneycontrol to share his views on the scope of digital lending in India and the newly launched platform, LoanDost.
Take us through the journey of how you arrived at this decision to start a digital lending platform?
SCNL has been diversifying its portfolio to new business areas such as housing and MSME finance. We believe that fintech has the power to reach millions of Indians, bridge the credit gap for them, and change their lives for good. Therefore, after careful consideration, we decided to launch LoanDost, a digital lending platform that provides small ticket loans. A borrower just needs to sign up, upload the basic identification documents. The profile is extensively verified by other analytics engine. Post verification, the borrower can receive the loan (up to the eligible limit) directly in his bank account, within 20-30 minutes. This is a cost effective way to obtain short term loans. As we scale up, disbursal time will also come down substantially.Who is your target audience? How do you plan to reach out to them?
The mobile first platform will target salaried individuals between 20 to 40 years, who are open to experimenting with technology. Since they are already digitally active, we will roll out our digital marketing campaign shortly. This will create buzz about LoanDost and expedite the on-boarding process.What are your views regarding the scope of digital lending in India? Which are the most attractive regions for this business?
In the last decade, India has seen unprecedented growth in terms of smartphone access and internet penetration. As per a recent report by e-Marketers, more than a quarter of Indian population will have access to smartphones by the end of 2018 (not far from now). The 16 percent Year-on-Year (YoY) growth registered in smartphone shipments to India is highest in the world. Smartphones become the gateway for accessing digital loans. In the past few years, we have witnessed the country leapfrog in terms of e-commerce growth. The same can be easily replicated for digital lending.
According to a recent Boston Consulting Group (BCG) report, digital lending in India will become a $1 trillion opportunity in the next five years. The report also states that about half of the loan applicants with internet access applied for or borrowed digitally over the last 12 months. Moreover, the ticket sizes of digital and physical loans are comparable. These trends indicate that the Indian borrowers are ‘digitally ready’.
While urban Indians between 20-40 years are the most ‘digitally-ready’, we believe that there is also a huge opportunity in the tier II and III markets as well. Hence, the potential borrowers exist in every regional pocket.Is there a difference in uptake of loans, digitally, between rural and urban/semi-urban areas? What do you think are the challenges and opportunities?
As I said earlier, urban Indians are the most ‘digitally-ready’ for small ticket, short term borrowing. However, the trend is picking up in semi-urban and rural-pockets as well. The most important trigger for this is the credit gap which arises out of insufficient banking penetration in these areas. Tedious documentation, collateral requirements and longer disbursal cycle by banks also attract consumers to borrow digitally.
The biggest challenge is functional knowledge using internet and digital borrowing. This, however, is also getting resolved due to government’s efforts to accelerate digital transaction and financial literacy. We impart financial literacy among our microfinance clients and will extend knowledge of digital transactions and its benefits, with respect to LoanDost.The government has recently launched a web portal which will sanction loans within 59 minutes. How is your platform different from that and others?
Most other platforms limit their operations to metro cities and do not have reach to semi-urban and rural areas. However, LoanDost values the people in other parts of the country where big banks do not have adequate reach. Based on artificial intelligence and machine learning, the platform works without any human intervention and provides instant loans. SCNL has partnered with The Hong Kong and Shanghai Banking Corporation Limited, India (HSBC) to manage the digital collection of EMI payment, using the UPI platform.
In the first phase of its launch the app will be only available for android users in English language shortly, we will work on user experience and analytics capabilities to make the platform more sophisticated and user friendly.What is the limit up to which one can borrow funds from your platform? Tell us about the interest rate, repayment cycle or any other charges that a customer might have to pay?
LoanDost currently has two products with 9 and 11 months tenure for availing instant loans of Rs 20,000 to Rs 25,000. The interest rate is close to 25 percent interest. We also offer 2 percent cashback at the end of the term to those borrowers who pay every EMI on time, without failure. Soon, we are also going to launch other loan products which are more flexible in nature.India is seeing a huge pile up of non-performing assets (NPAs) in the loan segment. How will you ensure timely repayment of loans?We have ventured into digital lending business with about 30 years of experience in the microfinance industry. The experience was helpful in devising some behavioural parameters to understand and manage risk. Our holistic approach considers not only the ‘ability to pay’ but also the ‘intention to pay’. We conduct an extensive check to verify the intention to pay. An important check is a psychometric test.