It is prevalent information that India is predominantly a money-based economy and digital payments, up till lately, weren’t extensively employed. Besides this, even at the basic level, a substantial chunk of India’s population did not have bank accounts even a decade ago. And for a developing economy such as India to come to be more robust and progress more rapidly, monetary inclusion is one of the important pillars of achievement. Recent years have seen an improved emphasis on monetary inclusion with the government producing it one of the key targets in terms of financial policies. One of the crucial elements of monetary inclusion is sufficient access to credit for the country’s population regardless of their geographical place.
However, effortless access to credit from formal sources continues to stay a main challenge for a important aspect of the country’s population, specifically the reduced-revenue segment and even salaried men and women. In such a socio-financial situation, digital lenders play an instrumental part by developing several channels for the underserved population and championing monetary inclusion. That mentioned, here’s how digital lenders can contribute to monetary inclusion.
Rising demand and the altering lending landscape
There has been a surge in demand for seamless access to credit and prospects who fall beneath the New-to-Credit category such as millennials, GenZ specialists, and the underserved population, specifically the salaried men and women in Tier-II, Tier-III, and Tier-IV cities, are increasingly searching for much easier access to credit from verified sources. Although salaried men and women can apply for loans from formal institutions such as banks or NBFCs, they are normally denied access due to a lack of credit history. In Tier-II and Tier-III cities, poor infrastructure is also a main cause for insufficient credit access. As the demand surges and the credit landscape modifications thanks to technological innovations, the emergence of new-age digital lenders has been a significantly-required respite for borrowers.
New-age digital lenders: Facilitating monetary inclusion across the nation
Despite not becoming an completely alien notion, digital lending has gained traction only more than the previous handful of years with the emergence of tech-driven startups and the digital revolution. A potent force, digital lenders transcend geographical boundaries with revolutionary options and rapid loan sanctioning to enable prospects even in the country’s hinterlands, much easier access to credit.
Furthermore, digital lenders have a larger threat appetite as opposed to banks, thereby enabling them to lend to reduced-revenue segments of the population as effectively as these new to credit. They also present revolutionary items such as microloans and brief-term loans that enable reduced-revenue men and women to progressively develop a credit history with little loan amounts without the need of falling into a debt trap or facing an immense burden. This is in contrast to banks as they commonly favor substantial ticket loans that have a longer tenure which normally is not feasible for men and women belonging to the reduced-revenue segment.
More than metro cities, it is the Tier-II, Tier-III cities, and the country’s remote regions that majorly lack access to credit and locate it a hurdle to avail credit from trusted, formal institutions. Digital lenders, by leveraging cutting-edge technologies and digitizing their finish-to-finish loan application and approval method, come to the rescue of this underserved segment of the population.
Moreover, rising online proliferation and smartphone usage have permitted digital lenders to facilitate monetary inclusion for the underbanked population, enabling them to avail loans from the comfort of their properties with no paperwork and rapid processing. Interestingly, India now has more online customers in smaller sized cities and rural regions as compared to metros, establishing the breakneck pace at which technologies is becoming adopted. The pandemic has only additional accelerated this and simultaneously led to an evolution of the lending landscape. As digital lenders largely rely on digital and banking information, the reduced-revenue segment of borrowers can be incentivized to transact digitally and by way of on line banking which additional provides an impetus to monetary inclusion.
By way of user-friendly, rapid, and safe digital infrastructure, digital lenders not only allow persons to avail credit more rapidly and more seamlessly but also make their small business expense-effective and can effortlessly scale their small business to newer geographies and target markets. At a time when the world is facing a pandemic that has forced us to stay clear of physical make contact with, digital lending platforms are a welcome respite to men and women in need to have of credit as they can do it with the click of a button with minimal documentation.
Final word
The digital lending landscape has evolved unimaginably in current years and will indisputably continue to be driven by technological innovation and new-age startups in the sector searching to revolutionize the way lending takes place and make certain that India’s underserved population gains hassle-cost-free access to credit. The post-COVID era will see more and more persons in search of credit at very affordable interest prices to revive their lives from the pandemic’s devastating influence. By focussing on the country’s reduced-revenue segment and underbanked population providing them immediate loans that are more practical, digital lenders are reputable sources of credit and are bound to be at the forefront of driving monetary inclusion all through India in the coming years.
by Abhishek Soni, Co-Founder & CEO of Upwards