Peer to Peer lending has been in existence in our society since time immemorial.   Also known as crowdfunding, many peer-to-peer loans are unsecured personal loans. Of late, Indian e-commerce landscape has seen a number of financial services technology companies leveraging the power of the digital media to give this age-old funding model a more robust shape.  i2ifunding is one such online marketplace connecting borrowers looking for unsecured personal loans and investors looking for alternative investment opportunities.  Founded by Vaibhav Pandey and Neha Aggarwal, i2iFunding was launched in October 2015. SMEpost.com caught up with Vaibhav Pandey in an exclusive conversation on some of the fundamentals of this new industry in India and his vision for i2iFunding.

Q: What is i2iFunding all about? Please tell us more about your venture and your business model.

A: i2ifunding.com is an online platform connecting verified borrowers looking for unsecured personal loans and investors looking for alternative investment opportunities for higher returns. The personal loan can be used for multiple purposes, which include the purchase of consumer durable, debt consolidation (i.e. repayment of credit card debt etc.), medical expenses, education expenses, cash cycle optimization etc.

The entire process is transparent, quick and easy. Apart from providing end-to-end services, i2i diligently evaluates the credit risk of each of the loan projects, basis its evaluation, i2i assigns risk category and recommends an interest rate for that project (a borrower has the option to borrow at an interest rate, which is higher than or equal to this rate). This ensures that borrowers as well as the investors are not clueless and aware about the benchmark interest rate of a loan project.  In the process, the investors get an opportunity to earn higher ‘risk-adjusted returns’ while the borrowers get an opportunity to get funded at the lowest cost possible as per their risk profile and market-based demand.

Q: Peer-to-peer funding is a new concept. How it has been accepted in India?

A: In India, Peer to Peer lending has been in occurrence from decades in offline mode and in informal manner. Therefore, participation on lending side was restricted to very few people having muscle power. This also resulted in increased cost of borrowing for borrowers. We at i2iFunding are trying to formalize activity and bring more retail investors to this platform by providing them with various services like background verification of borrowers, risk assessment, opportunity to diversify the risk by investing small proportion of different loan requests, legal formalities, tracking and monitoring of repayments etc.

Slowly and steadily people are monitoring this segment. But it’s still very early days for us. So you can say that this segment is taking baby steps.  But we are sure that it will pick up. I see P2P lending to follow the similar growth trend that has been witnessed by ecommerce industry.

We started our operation in October 2015. Within 6 months of our operation, we have more than 750 registrations. We have already closed funding of around 40 loans and have more than 140 investors with an investment commitment of over 90 Lakhs.

Convincing customers about this new concept has been a challenge for us especially convincing investors. In India, retail investors have been cheated by many Ponzi schemes and chit funds in the past and they have become very skeptical about new investment products or concepts. But slowly and surly we have been able to convince lot of investors. Now people have started getting returns on their investments and they themselves are encouraging others to register on our platform and get maximum benefit out of it.

We are overcoming these challenges gradually by remaining honest to your cause. It is also very important to keep faith in your concept and the team when going is tough.  Unless you have the confidence in your idea you will never be able to convince others about it.

Q: What is your opinion on the future market size of Peer-to-peer funding in India?

A: P2P lending is still at a nascent stage in India, it is one of the leading means of financing in countries such as the US, the UK, Germany, China etc.and many p2p players have grown to become Billion dollar companies. It has been growing in leaps and bounds around the world, thanks to an increase in the internet penetration and tremendous acceptability of e-payments.

In India also, I see P2P lending to follow the similar growth trend that has been witnessed by ecommerce industry. . We currently have investors from all across the country; however, borrowers are mainly from Delhi NCR and Bangalore. We are looking to expand to all major cities of India in next couple of years. We are expecting to fund loans worth 5 cr. /month by end of this year.

Q: Tell us about the key features of i2iFunding that makes it unique and reliable.

A: There are quite a few differentiators, which set us apart from our competitors, like:

Some Key Differentiation:

 1. Investor Protection Reserve – Investor protection reserve has been created to provide guarantee on principal amount lent. Depending on the risk category of the loan, 40% to 60% of principal amount will be refunded by i2i to investors in case of any default. No other player is offering such a comfort to their investors.

2. One Loan one interest rate: All other platforms allow each investor to negotiate different interest rate with the borrower. We believe this is not scalable as negotiations inherently delay the process.

 3. Proprietary credit score model used to screen the loans before posting them on our portal – i2i is the only platform which perform a through risk evaluation of the borrower and interest rate is proportionate to the risk involves, instead of simple negotiation between borrower and investors.

Q: When was i2iFunding started? What is the current business size?

A: I2ifunding went live in October 2015. Within 6 months of our operation, we have more than 750 registrations. We have already closed funding of around 35 loans and have more than 140 investors with an investment commitment of over 90 Lakhs.

Q: Where are your lenders & borrowers coming from? Is it the metro cities or the two tier and three tier cities?

A: Although we are receiving loan requests from across India, but, we are currently giving loans only in Delhi NCR, Mumbai and B’lore. Investor can register from anywhere in India, but for loans we also physically verify the borrowers and right now we are doing this three regions mentioned above. In next couple of months we’ll be operational in Hyderabad and Pune as well.

Majority of investors are from metro cities only, but, we have also got some investors from Tier II cities and this is expected to grow further

Q: Are there any rules and regulations that are set up by the government of India for finTechstartups?

A: Reserve Bank of India is looking at ways to regulate this sector. Currently, it does not come under the ambit of the banking regulator. However, considering that this sector has been gaining momentum in the last couple of years, RBI is now looking at regulating this sector. Very soon wemight see RBI come up with guidelines to govern this sector.

Q: How do you manage the background check for investors & borrowers?

A: Any user will have to first complete the basic registration. After the basic registration, user will have to fill the form to become a borrower or a lender. Once the borrower fills the form and uploads the supporting document then his loan application passes through our proprietary risk evaluation model. This model determines the risk involved in terms of borrower’s ability to pay and intent to pay in future. Interest rate and maximum loan amount proportionate to the risk involved is determined. Benchmark interest rate helps in quick decision making from the lenders. A borrower can then post his loan application live on the portal at the same or higher interest rate.

All the registered investors can now see the borrower’s loan application and determine the amount which they want to invest. An individual investor can now invest maximum up to 20% of the loan amount in any loan request. This ensures that investors are well diversified and have limited exposure to one single request. Once the loan request is fully funded then i2i team performs the physical verification of the borrower. During physical verification all the original documents are verified and background verification is performed. One this process is complete them loan agreements is signed by the borrower and un-dated cheques are collected in favor of all the lenders. After this the lender disburses the amount directly to the borrowers’ account. From next month onwards the repayment starts in form of EMIs directly from the borrower’s account to lender’s account. Our system tracks all the payments till the completion of loans.

Q: Finance is a big concern for Small and Medium Enterprises. Do you see peer-to-peer funding playing some role in enabling the SME sector?

A: We have seen more demand coming in from the SME and the MSME sector, especially the ones that are new in the space because they find it difficult to get loan from the banks as they may not have the required income/bank documents etc. in place, as a result we have seen an increased demand from this segment. Yes, we also believe that peer to peer lending is ultimately going to help the SME sector meet their financial requirements at competitive interest rates.

Q: Would i2iFunding also venture into this space?

A: We already give loan to SME sector as well. We make their loan request live on our portal after performing the credit underwriting and analyzing the risk and the final funding depends on the interest shown by investors registered on the platform. We are confident that with time the share of SME loans being closed on our platform is going to grow.