On Friday, Small and medium businesses (SMBs) that advertise on Facebook may get quick loans through independent lending partners through Facebook India’s ‘Small Business Loans Initiative’, announced the company.
India will be the first country where Facebook is inaugurating this programme. Businesses registered across 200 towns and cities of India can avail this facility.
Ajit Mohan, Vice President and Managing Director of Facebook India, informed the media during the program’s inauguration that no collateral is required for the loan, which has a pre-determined interest rate of 17-20% and is repayable in five days. There is also a 0.2 per cent loan rate reduction for women-led businesses.
He said the loans initiative is to address the credit issues faced by the small and medium enterprises (SMEs) in our country.
“It’s going to be an arm’s length relationship with reputable and reliable lenders, but within the construct of a programme that has been co-designed with Facebook… Indifi is the first lending partner and the idea is that as we scale, others can follow,” he added.
He emphasised that the programme does not include revenue sharing for Facebook and that SMEs are not obligated to use the loan proceeds on the social media platform- Facebook.
“The role we are playing is engaging with small businesses, who advertise on Facebook and therefore we are aware of growth opportunities that are constrained by lack of access to capital. We have the opportunity to let them know that there is access to this through the partner,” Mohan explained.
Facebook has joined hands with Indifi to execute the plan of providing loans to SMEs. Indifi will be looking after loan disbursal and recovery. Since there is no limit on the number of loans that may be disbursed to firms, Mohan anticipates more participants to join them and more money to be accessible.
FICCI President Uday Shankar said the industry organisation has long supported greater private sector engagement in India’s MSMEs’ growth, and he applauded Facebook’s Small Business Loans Initiative for making financing more accessible to the sector.
“We look forward to collaborating with Facebook over the coming months to develop programs and solutions that can provide an impetus to the sector,” he said.
In the last year, Facebook took several initiatives to support the economic recovery of small businesses, this includes providing grants to small businesses and expanding the company’s industry-leading skilling initiatives to aid offline to online transformation journeys of small businesses.
The proposal follows Facebook’s announcement in September 2020 of a $100 million Facebook Business Grant for 30 countries, including India. For the firms hit by the pandemic, almost $4 million was distributed to 3,000 Indian SMBs across five cities: New Delhi, Gurgaon, Mumbai, Hyderabad, and Bengaluru.
According to Mohan, Facebook’s intention here is to see small and medium business ecosystems grow massively, which will also help the company as well.
“What we are getting in return is that we hope some of these companies will go on to become extremely successful global businesses and most of them will become very successful national businesses. I think that is good for us and also the economy as well,” he added.