A report by Bloomberg shows how Foreign companies are changing the lending dynamics of India. Companies like Facebook Inc., Xiaomi Corp., are attempting to secure a foothold in India’s digital loan market what’s set to be a $1 trillion industry soon.
This month, Facebook launched a lending facility exclusively in India in partnership with Idifi to ease the credit facility system for small businesses that advertise on its platforms. The loans can be taken within the range of Rs 500,000 to Rs 5 million with pre-determined interest rates of 17%-20%, potentially submitting no collateral. Also, a 0.2 per cent loan rate reduction will be offered to women-led businesses.
As per the Press Trust of India report, Beijing based multinational electronics company- Xiaomi also plans to offer loans, credit cards and insurance products via tie-ups with some of the country’s biggest banks and startup digital lenders.
Amazon.com also made a one-of-its-kind investment in the country’s wealth management sector this month by participating in a $40 million Series C fundraise programme of fintech startup Smallcase Technologies Pvt.
Google is also set to take the lending industry up a notch. After offering wealth management products such as digital gold, mutual funds on the Google Pay platform, it’s now joined hands with Setu, a fintech startup, to enable its customers to book fixed deposits (FDs) through Gpay.
India’s digital payments market is gaining traction among the biggest tech payers as, during the pandemic, digital payments increased dramatically, and conventional lenders became cautious due to an increase in bad debt.
According to projections by the Boston Consulting Group, digital financing would raise $350 billion by 2023 and achieve a total of $1 trillion in the five years following 2019.
“The payment business hardly makes any money, but lending makes a lot of money,” said Saurabh Tripathi, managing director and senior partner at BCG’s financial institutions practice, in a statement to Bloomberg. He added, “Indian consumers are waiting for more appropriately designed digital experiences and many players are jumping at this opportunity.”
With the increasing potential of the lending industry, risks are significant too. By March, the country’s bad loan ratio is expected to be 11.3 percent, making it the poorest performance among large countries for the second year in a row.