The lending space in India is open for disruption. On my recent visit to Mumbai, I wondered about the factors which disallow a roadside sandwich maker from seeking a financial loan. Here is a person, who can easily demonstrate his repayment capacity and cash collections through the bank accounts where he regularly deposits his daily/monthly earnings. Historically, a CIBIL score has determined whether one was qualified for a loan. That was a pre-goods and services tax (GST), pre-Unified Payments Interface (UPI), pre-digital payments era. Because of this financial exclusion, there is a large, undocumented and parallel economy of informal cash-based money lenders.
Even today, there is the “gold loans” segment where consumers have to unwillingly mortgage their ancestral gold as collateral. Unsurprisingly, the interest rates are upwards of 18% and go up to 100%. At Orios, we are actively on the lookout for startups having the ability to re-imagine the fintech sector to solve this problem. On scanning the peer-to-peer lending platforms, we understood that most CIBIL-absent customers approach platforms to seek loans for emergency medical expenses, weddings, debt consolidation, etc.
This highlights that there is a large market viable for a lending business to disrupt and bring alternative credit scorecards that make loans easier for borrowers, financial institutions or private investors. Today, these operations can be done digitally to bring down the cost of operations.
Fintech startups have the opportunity to build platforms where the roadside sandwich maker, or a gig-economy entrepreneur working with a cab aggregator, are able to access credit and loans at interest rates below 20%. Platforms and startups, which solve such problems can help in developing a more inclusive financial outlook.