As securing loans from traditional banking channels remains a challenge for credit-hungry Ministry of Micro, Small and Medium Enterprises (MSMEs) in the country, several businesses are now switching to digital lending platforms.
The trend has accelerated post-COVID and fintech experts believe that the digital loan market in India will soon become a $1 trillion industry, media reports said.
Seeing an opportunity, global tech behemoths, including Facebook, Xiaomi, Amazon, and Google, are now planning to foray into India’s digital loan market.
In fact, India will be the first country where Facebook will roll out its small business loan programme. The tech giant, in an announcement earlier this month, said that it will offer loans via a partner to firms that advertise on its platform. The loans, ranging from Rs 5,00,000 to Rs 50,00,000, will be given at an interest rate of 17-20 percent, likely without collateral.
Going a step further, Xiaomi has announced that it will not only offer digital loans but also credit cards and insurance products in partnership with a few of the nation’s biggest banks and startup digital lenders.
Meanwhile, Amazon has made an investment in the six-year-old fintech startup Smallcase Technologies. The e-commerce giant, earlier this month, participated in a $40 million funding round by Bengaluru-based Smallcase Technologies.
Alphabet-owned Google is also placing bets in the digital loans market. Recently, the company rolled out its digital gold plan on the Google Pay platform.
Digital lending presents a huge opportunity in the Indian context. A report by the Boston Consulting Group estimates that the total retail loans that could be disbursed digitally in the next five years could be over $1 trillion in India. Additionally, traditional money lenders have become cautious of bad debts in the aftermath of the COVID-19 pandemic, pushing businesses towards digital lending.
Thus, it shouldn’t come as a surprise if more tech giants plan to enter the digital loan market in India in the coming months.
Meanwhile, the Reserve Bank of India is planning to regulate digital lenders, which include more than 300 startups in the country.