The nascent Indian peer-to-peer lending market has to date been progressed by two main contributors: Faicent and i-lend. The latter, which claims the title of “India’s first P2P lending / social lending marketplace”, facilitates lending between individuals. Vaddadi Shankar, Founder of the i-lend marketplace, sees a tremendous growth opportunity for peer-to-peer lending in India. The combination of cumbersome bank restrictions and an exploitative informal money market has created a credit vacuum into which P2P slots as a natural filler.
We caught up with Vaddadi for an interview about his platform and the state of the Indian market.
Can you tell us a bit about your background and why you decided to start the platform?
I am a C level executive with about 24 years experience in Technology and Engineering companies. I have held leadership roles as CEO in public listed companies and over my career, launched tech brands, created markets, raised growth capital and had a deal flow of around 50 M USD. That said the Indian financial space has seen little or no innovation in the last 25 years except for the advent of micro finance and with such a diverse market and a huge one at that, using tech to disrupt and introduce new liquidity into the money market country was an extremely challenging and interesting opportunity. Moreover the market potential in India is immense simply because of its high interest rates and also a humungous unorganised market exists which works on cash. A P2P lending platform and a marketplace were the way to go about to achieve disruption, introduce more efficient practices and to include more people into the credit system.
Can you give us a brief introduction to i-lend?
www.i-lend.in is India’s first P2P lending / Social lending market place and has pioneered this sector in India over the last two years. Presently i-lend is only P2P and all the loans disbursed through the platform are from individuals to individuals. i-lend allows a borrower to build his own credit story and create a listing for his or her requirements. There are various tools built in that will assess the repayment ability of the borrower and his financial ability to service the interest and repay the principle. Lenders who wish to lend can browse the profiles and offer to lend in part or full. However i-lend advises lenders to diversify their risk by investing in multiple borrowers. i-lend on its part verifies the borrower credentials, performs the KYC and provides the information to the lender who can than make an informed credit decision on whom to lend to.
Why is there a need for i-lend in the Indian market?
India is a huge country and with over a billion people across different social strata and income levels requires an eco system of alternative finance to be able to service and cater to most segments of the society. Conventional banking and financial companies have severe constraints on capital, costs and infrastructure in delivering affordable credit and an informal or unorganised money market that has taken root in the country leading to extremely usurious interest rates. Another reason is that these conventional financial institutions have little or no appetite to move from their existing policy based lending within a framework. Under the circumstances it is important that alternative financing models emerge to service these requirements both in urban and rural spaces. i-lend concentrates only in urban India and that too is home to a salaried class whose need for money is increasing every day.
Tell us about the regulatory framework that applies to peer-to-peer lending in India.
Presently in India we have two regulators. RBI which regulates banks, NBFC’s and other type of finance companies and SEBI which is the markets regulator. Our engagement with the regulators has shown us that there is no existing regulation for P2P and it is likely to evolve in the coming days. However some of the existing regulations do impinge on P2P’s operational and process model in certain ways unlike in the US and some other countries.
Looking at the specifics of the platform- what are the borrowing rates, fees and average interest yields?
Presently the interest rates are between 17 to 21 % with an average yield to 19.8 % to lenders. i-lend charges 3 % from the borrower and 1.5% from lenders as its fees. As a feature i-lend restricts interest rate to a maximum of 24%.
What type of consumer and investor are attracted to your platform?
Our typical borrower profile is young, between the age group of 22- 35 salaried working professionals with at least 6 months of work experience. Annual income of these people is between the range of RS 3 lakhs to 12 lakhs and users of the Internet. The average lender’s profile is slightly older, well qualified middle to senior managers mostly working in corporate or government roles who are getting access to the yields mentioned above.
How do the investors pick their loans? Is it via an auction model or are the funds auto-diversified?
Presently the auto diversification feature is not enabled on i-lend purely because of regulatory aspects. lenders bid on individual loans and indicate an rate of interest and the borrower can negotiate this with the lender and accept the loan at a rate which is mutually agreed upon.
What is the minimum and maximum loan sizes you can accommodate?
We are presently giving two loan sizes RS 1 lakh and RS 2 lakh with tenures of one and two years respectively. We will be launching other loan products soon.
What is the minimum investment amount?
The minimum Investment on the platform is RS 10000/- and thereafter in multiples of RS 5000/-.
Where do you see the platform in a year’s time?
We are seeing significant interest and need in P2P platforms and we are going to offer institutional loans through the platform both to individuals and businesses. We are also going to launch several new loan products, enroll NBFC’s, cooperative banks and other finance companies and offer several new products and asset classes to the market.