Now, personal loans head towards small towns
Financial services companies are adopting innovative models to pursue the personal loans customer in newer markets. Companies are using technology as well to woo the bottom of the pyramid with loans.
According to Reserve Bank of India, the personal loans segment saw growth falling to 13.2 per cent compared to a growth of 30.6 per cent in 2006-07.
“This is the third phase of the evolution of the loans market where companies are trying to replace the local moneylender,” said an enthusiastic Harsh Roongta, chief executive officer of loan portal Apnaloan.com. “Many new players including local players like Mallapuram or global ones like Fullerton are entering the market and they are regulated by the Reserve Bank. It is a great thing.”
Over the past few years, many companies have entered this segment, including Citifinancial, Indiabulls, Barclays and Reliance Money. Now, newer entrants are directly targeting the mass market and employing thousands to hook the customers.
Magma Shrachi Finance Ltd, which has a Rs 7,400 crore portfolio of other kinds of loans, launched its personal loans products on Tuesday.
“We are deploying a 1,000-strong people network for offering loans,” said Sanjay Chamria, managing director, Magma. “We will interview people at their homes. We will prefer to give loans to people who own some land or if their family owns some land.”
The company is keen to go into the rural market and build “intimacy with the borrower” that will allow its employees to judge their ability to repay. The company wants to start offering Rs 30 crore a month. It’s USP according to Chamria: home lending. “Many banks may have the reach but how many can interview the borrower in their home?”
While Magma is bringing loans of a minimum size of Rs 1 lakh, Fullerton India is offering loans starting as low as Rs 20,000 with loan tenures starting at six to eight months. “We have 750 centres in cities and small towns in India,” said a senior spokesperson at Fullerton. “Now we are conducting pilots in eight states for our rural move.”
Fullerton, a subsidiary of Singapore government owned Temasek, has brought in its knowhow with unsecured loans from its experience in Indonesia. “We have a 14,000 strong team and employ only local people,” the spokesperson said. “Often our colleagues have helped our customers open their first bank account for availing of the loan.”
The company also uses bio-metric cards that get loaded with the loan amount. “Many times, a customer wants to borrow money for a wedding and carry it to his native village. We load the cash on the card and he can withdraw it from any ICICI Bank ATM close to his village.”
Roongta of Apnaloan adds: “This is a very healthy sign for our market. However it will be a long battle to replace the money lender as they exist today even in advanced markets.”