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Indian P2P Lending: Catching Up with FairCent

Could you briefly introduce yourself and the platform for us?

a person wearing glasses is headquartered in Gurgaon, India. It is India’s largest peer to peer lending marketplace. It aggregates individual borrowers and lenders and matches them through its unique bidding mechanism, thereby reducing interest rates for borrowers and increasing returns for lenders.

Can you explain a bit about your background?

I have been in the internet business nearly since its inception in India in 1999. I have expertise in online classifieds and marketplaces, digital marketing and product development. I was part of the founding team of, and – India’s top ranked marketplaces for jobs, real estate and matrimony respectively. Thereafter I was India Head of Performics, a digital marketing agency of Publics Groupe where I was instrumental in acquiring and servicing marquee clients like Airtel, Microsoft, Reckitt Benkiser, Nestle and Air France, amongst others.

Why did you set up and why did you see a need for it within the India’s finance industry?

Inspiration for came when a colleague crowdfunded his purchase of a motorcycle through Facebook.

India is a capital starved country where the access and cost of capital is both an issue. Most Indians do not have access to formal credit and those who have end up paying very high interest rates. On the other hand most investors keep their money in dead assets like saving banks, moreover India doesn’t enjoy broad-based equity market culture. Therefore we felt there was definitely an unmet need for a service like this both at the demand and supply side.

Is peer-to-peer lending popular and a well-known source of funding in India? 

Formal bank credit In India is accessible to only 10% of Indians as per various reports by India’s central banker – Reserve Bank of India.

In the absence of bank credit Indians have traditionally relied heavily on loans from peers primarily amongst friends, family and the community. It has been till now an unorganised activity with no proper contracting, underwriting or recourse to recovery. This is the first time is organising this traditional mechanism of credit through the use of technology in match making, and underwriting.   

What attracts both investors and borrowers to your platform?

Faircent’s promise is very simple; it brings in transparency in rates, reduces costs and increases returns:

Transparency of Rates: Faircent’s proprietary reverse auction technology empowers the borrowers to ensure the lowest interest rates in a transparent manner. It also allows lenders to choose borrowers as per their risk appetite and desired returns on investments.

Reduced Costs: Faircent helps borrowers reduce costs as it disintermediates the banks and connects borrowers directly to individual lenders.

Increased returns: On Faircent the lenders are able to earn higher rates of interest than they would earn from bank deposits.

What is the average size of loan made?

The Faircent marketplace allows borrowers to seek personal and small business loans between $500 to $24,000. The average loan size presently is $2000.

How much volume has the platform transacted?

In the last 6 months of operation we have disbursed $80,000 and we have a similar monthly run rate of disbursal.

Could you give a quick overview of the peer-to-peer lending space in India?

In India peer to peer lending primarily operates in un-organised sector and it is very difficult to put a figure to it. Most estimates peg it to be as anywhere between 50-100% of formal banking sector. (This estimate is so vague as a large part of Indian economy is based on cash transactions and without any formal paperwork.) In the organised sector alternative finance sector there are few players like Kiva who are operating in the philanthropy space. Faircent is the only marketplace which is available nationally.   

What are conditions like for borrowers?

As I had mentioned access to credit is difficult for most Indians whereas on Faircent we are empowering borrowers through our unique bidding systems hereto never seen in India wherein borrowers get offers from multiple lenders and have the authority to accept or reject the loan offers, thereby reducing the cost of capital and offering total transparency in pricing.

What are the regulations surrounding peer-to-peer lending?

There are no specific regulations governing peer to peer lending in India. Though most borrowers and lenders are governed by various laws and acts with respect to income tax, source of funds and Indian contractual law.

Looking forward, what do you expect to happen in the space in 2015? What do you think the biggest challenges will be?

We expect three major trends happening in India in the p2p lending space – firstly we expect Institutional lenders will start trading on the platforms, we are already seeing quite a bit of interest from institutional investors. The second trend is the verticalization of p2p lending sites, we will witness highly focused marketplaces coming up which would concentrate on certain products or type of customers. The third trend is that India witnessing a drop in bank deposit rates will further accelerate the adoption of p2p lending as investors seek higher returns.

The challenge we feel is to manage risk for lenders and the need for regulatory frame work which would ensure robust growth for the sector.

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