Greenfield Opportunity Looms In India For Online Financing

With an eye on what could be called a true greenfield opportunity, alternative lending platform Biz2Credit is launching its small business lending products in India. As has been reported, the nation offers grist for the small business lending mill, with the firm stating in its announcement last week that its push into India comes as the market is defined in part by as many as 29 million small businesses, where smaller firms contribute as much as 45 percent of the nation’s industrial output as a whole and slightly less than that as a percentage of total exports.

Rohit Arora, cofounder and chief executive officer of Biz2Credit, told PYMNTS that, given the wide berth occupied by SMEs in India, across a plethora of verticals, the initial demand would most likely come from the regional big cities in the country and the small businesses within those cities — most likely entrenched in services and technology.

Drilling down a bit, the key areas of lending, said Arora, “would be the working capital needs” of small businesses and a sweet spot tied to those needs, where $150,000 to $250,000 loans would be used to furnish inventory, equipment or ramp up staffing. In short, said the CEO, “not as much in the way of startups … but instead, through efforts to grow their businesses and manage payroll.”

There, of course, remain some issues to be handled that are partly cultural, and Biz2Credit is aware of what gaps exist in reaching out to nascent businesses, said Arora. One of the key challenges is, of course, that financial data is not necessarily collected or easily accessible. In addition, said Arora, mobile usage is prevalent among India’s citizens (rather than, say, desktops), and so for Biz2Credit, the use of mobile features and “making it very easy to call” or work with online lending, even via text messaging, is important to establishing an online lending presence in India. By way of precedent, he continued, the country itself is experiencing a digital push, where government agencies are increasingly moving to interact with citizens online — witness the mandate of filing tax returns digitally.

For the loans themselves, Biz2Credit has estimated that online lending, on the whole, could capture at least 10 percent of the estimated $300 billion lending marketplace within the nation’s borders. The terms of the Biz2Credit loans themselves, said the executive, retain rates of between 13 percent and 18 percent, while the uncollateralized nature of the loans demand the metrics and risk management that can be provided by scorecard technology (such as that employed by his firm) in order to help keep an eye on the loan portfolios once loans are indeed completed.