India was the largest beneficiary of loans from the World Bank’s International Development Association (IDA) for the period between 1945 and 2015. The IDA is the member institution of the coveted World Bank Group and is primarily focused on providing loans at concessional interest rates to underdeveloped countries. Recent statistics released by the World Bank’s International Development Association pointed out that over the last 70 years, India has been the biggest beneficiary of concessionary loans – the amount stands at over $100 Billion. Quite evident is the fact that things have worked out for the better, with India easily clocking a 7-8% growth in annual GDP, and is today recognized as the fastest growing economy in the world. Note that when we talk about loans from organisations like the World Bank and their impact on the country’s economic climate, we must also consider a flourishing internal credit market that has, by way of offering secured and unsecured credit Personal Loans, to Indians, inspired economic development.
India doesn’t, however, borrow from the International Development Association (as fundamentally, the IDA provides loans to the world’s poorest countries). Speaking of internal credit, India today has an established credit market, with several lenders offering personal loans and instant credit to essentially help several working-class Indians improve their purchasing power and enjoy financial freedom. In this article, while we highlight some related parameters that are influencing the country’s economic growth. We also look at the general credit climate in the country, how credit as an instrument has evolved, and how instant credit has become more penetrative in the recent past.
In the current day, India borrows from the International Bank for Reconstruction and Development, one of the 5 arms of the World Bank Group that funds rural infrastructure projects to fuel rural economic growth and ultimately achieve an improved standard of life among rural masses.
The importance of access to credit in a growing economy
Credit access, both secured and unsecured, is crucial to an economy’s long-term growth prospects. With a robust working-class population, the necessity of credit instruments cannot be understated. The good news is that there are several lending institutions that have emerged to solve the problem of under-penetrative credit markets that developing economies often reel from.
While banking institutions have upgraded their delivery systems to ensure seamlessness and convenience in access to credit, a good number of new-generation lenders in the form of P2P lending platforms and Fintech companies have emerged as well, adding more muscle to a market replete with potential. It must be pointed out that these new-age lenders have ensured a dimensional shift in the way individuals access to credit in India.
Speaking of the importance of credit in a growing economy, the advantages of enhanced credit access are literally endless. Yes, at the other end of the credit tunnel are of economies collapsing because of fundamental flaws in the credit system, but this happens (and has happened) mostly because of the absence of stringent regulatory laws. Let’s not delve into that too much – let us instead focus on the positives of what a bustling credit market can devise.
Perhaps the foremost advantage of enhanced credit access is the improvement in the consumers’ purchasing power (we’re of course looking at the larger picture here). An upliftment in purchasing power proportionally contributes to economic growth, as more goods and services are purchased in the market. In an environment like this, the demand for goods is high, creating an enabling funnel for the supply to also increase in correspondence. More so, an environment that is symptomatic of increased supply fuelled by an increased demand almost always adds up to robust economic progress.
Going forward, the internal credit market can be better understood through the lens of the two forms of credit – secured credit and unsecured credit. We know the difference between the two of course – secured credit involves collateral in the form of a legal asset, while unsecured credit does not involve any form of collateral. Home loans and car loans are the best examples of secured credit, while Quick Personal Loans (an evolved form of personal loans) and credit cards are the most prominent unsecured credit products. Note that personal loans these days go by several names including instant personal loans, online loans, quick personal loans, so on and so forth.
The role of Fintechs in improving the credit market in India
Fintech companies, short for Financial Technology companies, are organizations that have incorporated advanced technological systems to make access to financial services more convenient and seamless. The end goal of the adoption of financial technology (in the lending space) is to provide the end user with a truly enhanced experience. Note that a process that focuses on transforming the end-user experience almost always brings tremendous value to the table, with prospects of growth and profits indubitably tagging along in the process.
There are several Fintech companies operating in the Indian lending space. Qbera is one such Fintech company that is at the forefront of transforming the lending climate in the country. Let’s look at some points that highlight the role of Fintechs in revolutionizing the Indian unsecured credit market.
Loans for Individuals with Low Income
Fintechs have ensured that a larger segment of working-class professionals gain access to credit in India – speaking of which, Fintech lenders like Qbera offer loans to individuals with low-income levels (which is an awesome thing). A large section of middle-class, working professionals find it hard to get access to credit owing to stringent income eligibility parameters adopted by top private banks.
Personal finance options to individuals with low credit scores
Fintechs offer loans to individuals with low credit scores as well. For instance, in the case of Qbera, individuals with a minimum credit score of 600 can qualify for personal finance. This is not quite so in the case of private banks – individuals need to have a minimum credit score of 750 to be eligible.
Employees of uncategorized companies aren’t left out
Private Banks and popular lending players who’ve cemented their presence in the market have a list of organizations/companies in their database – they provide credit options only to individuals employed with these companies. Fintechs like Qbera, however, offer credit to individuals working in unlisted companies as well.
As a matter of fact, this very aspect has ensured that a large number of salaried individuals in India are able to get instant access to credit and enjoy financial freedom. Currently, Qbera offers loans to individuals employed with over 7lakh companies in India.
By offering instant personal loans to individuals with low credit scores and low-income levels, companies like Qbera are serving a large section of traditionally underserved customers, a process that is massively contributing to the country’s success story.