Digital payments and lending have been the talk of the town for the last few years now. Given how the pandemic has severely disrupted small businesses, there has been a rising need for digital banks for MSMEs. Often due to a host of restrictions, smaller businesses are unable to approach traditional banks for their financial requirements, therefore losing access to important financial services that may help them grow. Digital fintech players like us, on the other hand, operate entirely online and have the capability and potential to offer end to end services for smaller players such as MSMEs, entrepreneurs, and OPCs (one-person companies).

We aim to become the preferred bank for small merchants by offering a wide range of financial services to our merchants – from various modes of digital payments, to working capital loans, insurance and a host of other products.

The traditional lending vs new age lending

Absence of proper documentation renders the merchants ineligible to secure loans from large banks. Their undocumented financials and the applicant’s inability to pledge collateral makes their case all the more difficult. Consequently, formal loan process ends up being costly to both the lenders and borrowers making the traditional lending model obsolete and purposeless for MSMEs.

Historically, small businesses turn to friends, family, or money sharks for their credit requirements. Unfortunately, informal sources of credit come with their share of risks such as high interest rates, tough repayment terms, etc. With the rise of fintechs, we have seen a change in the consumer behavior with more businesses being open to the idea of digital borrowing.

The expansion of the digital payment market in the last few years is a testimony to the fact that Indian merchants have grown comfortable in dealing with a digital system. According to a report by Omidyar Network and BCG, 30% of MSMEs in India showed interest and were willing to avail digital lending if given proper assistance[1]. It is estimated that by 2023, MSME digital lending has the potential to grow ten to fifteen folds to reach ₹6-7 lakh crore in annual disbursements. In the next few years, digital credit is poised to transform lending in India, bringing millions of small merchants, businesses, kirana stores into the formal market. Nano businesses — those with an annual revenue of less than ₹10 Lakh — are increasingly turning to the digital platforms to access new customers, and these could be another key target segment for fintechs.

The reason why digital lending is not so cumbersome

In the digital lending space, the turnaround time is shorter as KYC is done digitally. This removes the hassle of manual verification, thus, mitigating human error and / or bias and ensuring a faster closure. As far as the creditworthiness of the merchant is concerned, payment transactions help companies like ours understand the financial health and needs of the business owners. The transaction data helps us assess the credit health of the company and offers loans accordingly.

The low-cost working model allows us to deliver large volumes of small loans. Also, 100% digital model ensures that we are able to cater to merchant partners across the length and breadth of the country, since there is no need for physical presence. The power of digital enables us to touch the unexplored and the unbanked merchant base and empower their businesses. In terms of recollection, the merchant can opt to pay back in daily installments.

To conclude, BharatPe’s lending product requires no collateral and minimal paperwork, making it an absolute steal deal for the merchants. The disbursal is quick and gives BharatPe an edge over traditional banks, which often take weeks or even months in processing applications, providing approvals and disbursement of the loans.

 BharatPe has already given loans to over 1.5 lac merchants (as of March 2021). The company has facilitated disbursal of over Rs. 1200 crores since the launch of digital lending. It intends to scale this up 8-10x and address the credit problem of millions of new merchants.

In the digital lending space, businesses now have a friend, and their own go-to-bank, all in one – in the form of BharatPe.

Make sure you jump the digital lending bandwagon, and choose the right partner!

[1] Credit disrupted: Omidyar Network



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