Lending innovation in India is taking an fascinating flip. Whereas most headlines deal with flashy expertise and buyer acquisition numbers, some lenders are quietly redefining how credit score reaches India’s MSME sector.
A Chennai-based NBFC not too long ago crossed INR 350 crore in month-to-month disbursals. It didn’t construct one other app or enterprise into one thing uncommon. As an alternative, it centered on partnering with QR-based fee platforms to supply Equated Every day Installment loans to retailers
who have been already utilizing the fee platforms to gather cash from their prospects.
Lenders have historically struggled to serve the MSMEs sector as a result of the danger and value of acquisition are fairly excessive for the ticket measurement. This NBFC leveraged its present fee relationships and transaction information to make lending viable. On the identical time,
partnering with the QR platform enabled it to entry new debtors whereas nonetheless having a view and/or management of the funds since funds come by the QR platform itself.
The numbers from the sector have an fascinating story to inform. Although MSMEs contribute 30% of India’s GDP, they face a credit score hole of INR 20-25 trillion. Whereas alternatively, fee platforms are seeing their service provider base develop exponentially. Simply in
FY24, offline service provider acquisition witnessed exponential development with over 352 million QR deployments, marking a 34% enhance.
The Chennai-based NBFC banked on this chance and built-in with numerous fee platforms. With entry to wealthy transaction information that conventional financial institution statements typically miss, their EDI product went stay throughout main fee platforms in lower than 6 weeks,
and the affect was fairly speedy. Their buyer acquisition prices dropped considerably as they have been tapping into pre-verified service provider bases. The each day settlement mechanism by fee platforms helped keep NPAs effectively under the business common.
Introducing partnership-based lending
In India lending panorama, the innovation that may make the distinction will not be technical however strategic. Sustainable lending isn’t just about reaching prospects however about embedding your self of their on a regular basis enterprise flows. The partnership pushed lending
mannequin is proving notably efficient in India’s tier 2 and tier 3 cities the place conventional financial institution branches battle with MSME credit score evaluation. Cost platform information supplies visibility into enterprise patterns that may be exhausting to confirm in any other case.
The partnership method can be fixing one other crucial problem, i.e., collections. With repayments robotically managed by each day settlement on the fee platform, lenders can keep wholesome portfolio metrics even whereas scaling quickly.
Essentially the most thrilling a part of partnership-driven lending is its replicability. We’re seeing growing curiosity from lenders throughout the spectrum, from massive banks to small NBFCs, every bringing their very own strengths to partnerships.
In line with a current
Enterprise Customary article, UPI dealt with roughly 172 billion transactions, from 118 billion transactions in 2023. The funds
are rising quickly yr on yr, creating richer digital footprints that may inform credit score choices. Lenders who can faucet into this information by strategic partnerships are prone to have a big benefit within the coming years.
The Chennai primarily based NBFC’s success means that typically, the simplest innovation will not be about constructing a brand new expertise, however about discovering smarter methods to make use of present ecosystems. As Inda pushes for best monetary inclusions, such partnership
fashions could possibly be the important thing to creating credit score accessible to thousands and thousands of MSMEs that type the spine of our economic system.
