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Rural India to drive online lending segment in next 3-4 years: IBSI-TiE round-table

There are more opportunities than challenges in India’s burgeoning digital lending space and that smaller towns and businesses are going to drive the growth in this segment over the next 3-4 years. It was the sentiment at the recently organised roundtable discussion on “opportunity for online lenders as India is poised to become a $5 trillion market”. The conference was jointly conducted by a global FinTech research firm and publication IBS Intelligence (IBSI) and  Mumbai chapter of universal entrepreneurship organisation TiE (TiE Mumbai).

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The IBSI-TiE round-table, moderated by Sanjiv Anand, Chairman at IBS Intelligence, and Atul Nishar, Founder of Hexaware Technologies and President of TiE Mumbai, witnessed several entrepreneurs including Aditya S (Co-Founder of Credimate),  Bhavin Patel (Founder of LenDenClub), Manish Lunia (Co-Founder of FlexiLoans.com),  Naveen Surya (Founder of Fintech Convergence Council) and Adriel Maniego (Co-Founder of Jai Kisan). Vinod Keni, Partner, Artha Venture Fund also shared his perspective on the investments coming into the digital lending space.

Quoting data and insights from IBS Intelligence’s “Digital Lending” report, Sanjiv Anand explained online lending as a process in which consumers can seamlessly secure a loan online with minimal paperwork. Still, indeed, it was a big challenge given the regulations around KYC (know-your-customer) that has increased the cost of customer acquisition substantially, thus making it unfeasible for many players to sustain. Sourcing of alternate data and utilisation of that data legitimately is also a big bottle-neck that could strangulate the sector, Sanjiv said.

However, he was optimistic about the fact that the Indian opportunity was huge, with a need to tap over 190 million unbanked adults in the country. While a  strong digital push by the Government of India was in the right direction in expanding the lending market, associations such as Digital Lending Association of India (DLAI) and FinTech Convergence Council(FCC) have an essential role to play in getting the sector organised.

Navin Surya, the founder of FinTech Convergence Council, reiterated that for FinTechs to take off the “runways and airports” need to run correctly, and that is where the role of associations come into the picture. Surya was instrumental in the creation of industry body for payments called Payment Council of India.

“With a GDP of INR 2.7 trillion, India was in for growth in India in terms of FinTech. He added that availability of technology and information, the free flow of information, and the formalisation of business with GST are all paving the way for an explosion in the lending market not only in the metros but also in the hinterland in the next 4-5 years,” Surya added.

To this Manish Lunia, Founder of small-business lender FlexiLoans said that the company serves in about 24 states at present and is targeting small and micro businesses in Tier 2, 3 towns. “ So, what we see is the opportunity to target that $5 trillion economy is to look at this new credit and looking at the rural poor, where 70% of that population is involved agricultural activities.”

While the players were optimistic about lending small ticket size loans by containing the NPA levels through strong underwriting, players such as CreditMate stressed on the importance of collections and that too at a minimal cost.

The discussion also delved into the growing market for P2P (person-to-person) lending in India and regulations around it. Bhavin Patel, Founder of LenDenClub, said that stricter regulations can bring in trust into the segment and that it has a potential of becoming an alternative investment opportunity for high net-worth individuals given the fact that deposit interests are declining.

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