Alternative credit on the rise in India
As one of the world's most rapidly developing economies - with 7.4 percent gross domestic product growth projected by the International Monetary Fund for 2018 - there is no shortage of ingenuity in India, as major Indian successes in the financial and tech frontiers have shown in recent years. It should therefore be no surprise that finance-sector entrepreneurs in the second most-populous nation on Earth are also taking the lead in alternative lending.
"Estimated year-over-year transactional value growth in Indian alternative lending is in excess of 100 percent."
The stats regarding these innovative financial products are simply staggering. However, far more important is the potential they have to bolster the financial well-being of India's underbanked population.
A portrait of rapid growth
According to a report by PricewaterhouseCoopers, 2017 alone saw more than 225 alternative lending firms founded within India. This might seem, on the surface, like too much expansion too quickly, but the sheer population of the country means that demand for such services is easily commensurate with availability, with more room to grow in the future.
A case of significant need
The significant number of Indian individuals who can benefit from alternative credit platforms due to their limited traditional credit histories and access to traditional banking only increases the likelihood that there will be more than enough business to go around for fintech owners.
Based on figures from the country's 2011 census, Entrepreneur India stated that just 58.7 percent of Indian households had easy access to banking services at that time. While nearly all households - 99 percent - have at least one resident with a bank account, per 2016's Household Survey on India's Citizen Environment and Consumer Economy, the simple fact of an account's existence doesn't guarantee either reasonable access to it or even any sort of relative financial stability.
This issue is indicative of the broad economic disparity that exists within India: Forbes noted that rich and poor often exist right next to each other even in places like Delhi and Bangalore that are increasingly becoming known as finance and tech hubs. The Delhi capital region's per-capita GDP is $4,000; by contrast, U.S. GDP per capita is more than $57,000.
How alternative lending can help
Mobility is one of alternative lending's chief advantages regardless of location. In India, where PwC states more than 1 billion individuals own mobile phones or can easily access them, this makes it much easier for people to get ahold of capital right when they need it.
The broad variety of different alternative lenders also means it is more likely for Indian residents to find the specific creditor for their needs, whether it's quick cash to make a near-overdue payment or a five-figure capital infusion to get a business off the ground. PwC also noted that the Reserve Bank of India recently instituted regulatory guidance for these new lending methods, to help protect consumers from those who might use these platforms unscrupulously.