New Indian P2P Platform Emerges
A new online invoice finance solution has appeared on the Indian alternative finance scene. Smaller businesses in need of a fresh capital injection have a new option by the name of RupaiyaExchange.
The company was founded in late 2015 by Rohan Hazrati, former CFO of Amtek International - one of the largest integrated component manufacturers in India - and former consultant at Ernst&Young.
India has a long tradition of community-based financing in the form of societies and communities extending credit to its members and participants. This unorganized sector has been necessitated by the lack of access to bank credit that is faced by approximately half of the Indian population.
That's where RupaiyaExchange comes in. According to Rohan:
“The whole essence of this project is to make people talk about financial inclusion. There are a lot of people untouched by the financial institutions because of the lack of some documents or they don’t meet the criteria set by these institutions.”
RupaiyaExchange is a marketplace that connects lenders and borrowers, using a reverse auction mechanism, where investors make their bids, after having assessed the credit risk of borrowers.
For borrowers, all listings are screened, approved or rejected, and made live on the website. Reference Credit Rating is assigned to all combinations of borrowers and loan listings. The platform says it is leveraging documents submitted and social media to assess risk, determine a credit rating and assign it. The reverse auction continues until the loan amount is completed or alternatively the auction time period expires. Payments are only made once the final loan documentation is complete.
“The product is new, the concept is new, it’s a little difficult to establish trust between the lenders and borrowers. Also, to make them understand the advantages this system carries is another task.”
Undoubtedly, the Indian P2P lending sector is at an early stage in its development, with companies entering this arena only in the last few years. In the recent past, we have witnessed the emergence of pioneering players such as Kiva.org, Rangde.org, Milaap.org and Faircent.com - which was profiled by AltFi last January. Other incumbents include Lendbox, Cashkumar, i-lend and Easyrupaiya.
Despite the market's nascency it looks increasingly like a crowded environment. But it's also worth noting that nearly 50 per cent of all credit in the country is circulated amongst friends, families and small communities, which means that alternative finance could be a big hit in India if it does take off.