“The cost of loan origination is going up steadily for NBFCs and banks, the number of successful applications is declining and through these partnerships the institutional lenders can cut down on incurring origination of loan and administration costs,” said VVSB Shankar, Founder of i-lend.
For instance, if an NBFC receives 10 loan applications, rejects six and accepts only four, it will have to pay intermediary agencies for receiving the initial 10 applications.
Shankar said the decline in the number of applications could be attributed to several factors such as competition among institutional lenders, quality of borrowers or involvement of non-performing assets. The company’s loan book size is about `1.5 crore and lenders on the platform can opt for borrowers who pay 18-21% interest.
Through partnerships, such as the one firmed up by i-lend, peer-to-peer players will earn up to 3% per transaction fee while the institutional lenders gain access to borrowers and receive returns through interest earnings. MicroGraam, which caters to tier-II cities and rural parts of India, is on the verge of finalising two partnerships, one with an NBFC and the second with a bank within a month, the company’s founder Rangan Varadan said.
Besides capital infusion into the platform, these partnerships will enable select institutional lenders to gain access to a largely underserved market, he said.
Peer-to-peer platforms have reported an increase in the number of high net worth individuals or HNIs they have attracted over the past six months. “HNIs and family offices are showing interest in the peer-to-peer space. Since there is a criterion for lenders to have an income of over `10 lakh, this is bound to happen. Our top lenders have invested more than `40-50 lakh each, with the highest being around Rs 60 lakh,” said Rajat Gandhi, Founder of Faircent, which has a loan book size of Rs 6.5 crore.
Smaller players including LenDen-Club said they have also seen increasing interest from HNIs, specifically from Maharashtra and Gujarat, spending about Rs 15 lakh individually. Since retail investors are central to how such platforms function, the companies aim to firm up a select few partnerships with institutional lenders over the next one year.
Sanjay Swamy, Managing Partner at Prime Venture Partners said that given the trend prevalent in the UK and the US it is a natural progression for Indian peer-to-peer platforms to begin partnering institutional lenders.
Source: The Economic Times