With loans for specific purposes such as illness, fintech firms are targeting the bottom of pyramid
It is not just banks and finance companies’ business that fintech start-ups are after. Some of them are eyeing business that banks are either ignoring, oblivious or unable to serve.
Alternative yet popular financing routes like loan sharks, debt collectors and brokers are also facing the heat of growth in fintech innovation.
Loans for schooling
Education expenses have been on the rise in India, right from schooling. While loans are available for college-going kids, some start-ups are catching the early bird. Singapore-based peer-to-peer lending platform Finmomenta entered India recently, is targeting parents who are keen on sending their wards to international schools with one of its products.
“Large schools charge anywhere between Rs 1.5 lakh and Rs 5 lakh during admissions which has to be paid upfront. Most parents tend to put this debt on credit cards, which can turn expensive. We intend to provide 14-15% savings and we are talking to large schools to tie up with them for these loans,” says Brahma Mahesh Khaderbad, co-founder and CEO, FinMomenta. The digital platform, Tachyloans, uses big data and artificial intelligence to assess credit scores and eases KYC.
EMIs for surgeries
Illnesses turn many patients insolvent. Long-term hospitalisations coupled with absence from work leads to a cash crunch, pushing them to the likes of pawn brokers for short-term borrowings.
“Around 30% of urban Indians and 70% of rural Indians take loans to fund medical expenses. Half of these people take loans from loan sharks at exorbitant rates and only a very small percent actually go to banks. This is because banks don’t have a medical loan product and only disburse personal loans which take a lot of time to originate,” says Nivesh Khandelwal, founder of LetsMD.com.
The start-up provides medical loans with faster turnarounds, among other products. While it intends to reduce the burden of hospitalisation, it also serves an enormous section of under-served loan seekers.
Catching ’em young
It is very easy for a young professional in the first year of his job, to get a loan to buy a car to commute to his office. The lender seeks no interest and is extremely flexible with the repayment plan. That’s because the lender is a parent or a close relative.
Yet, not all youngsters have the advantage of cash-rich elders and banks do not consider new professionals in early 20s for loans, due to lack of credit history.
Finomena, a Bangalore-based digital lending platform devised its own method of assessing credit risk from habitual and behavioural patterns for small loans. With a large section of the population under 25 in India, the start-up hopes to find many takers.
Payment collectors for digi-businesses
Small companies with sound products and business models are mushrooming due to social and mobile sales. However, they also face two-edged troubles from delayed payments from customers and strict credit lines from banks. Incorporated in Dubai, Telr intends to solve both these problems and add value to either of the parties by integrating payment gateways into their businesses.
The start-ups provide social media identity and sales channels to promising small businesses, extract payments from customers digitally.
Since they aid payments and are aware of business details, they vouch for them with banks. Even banks gain from the extra assurance of small businesses and improve their debt quality as they support home-grown businesses.
Small loans do matter
A large section of the population find it tough to access bank and financial institution-led credit due to the size of their requirements. Mumbai-based PaySense targets the unconventional yet valuable customers, to provide pocket loans starting from Rs 5,000 leading to Rs 1 lakh.
Large sizes of finance companies with branches and other expenses do find it viable to provide small loans but digital-lending platforms with better cost control and data science led an assessment of creditworthiness can loan and gain from these customers, with less or no competition at shorter timeliness.
...& ANALYSIS
- Finmomenta is targeting parents who are keen on sending their wards to international schools
- LetsMD.com provides medical loans with faster turnarounds, among other products
- PaySense targets the unconventional customers, to provide pocket loans starting from Rs 5,000 leading to Rs 1 lakh
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