Analysts believe sector set to grow further
Concerns about the sector notwithstanding, the digital lending segment is seeing a boom with increased demand for easy credit from customers and fund raise by many of these firms.
Digital lenders including IndiaLends, KreditBee and True Balance (for its lending arm -True Credits) have raised funds via equity as well as debt in recent weeks.
Easier availability of credit through these lenders has been a draw for customers, especially with job losses and salary cuts since Covid-19 led crisis. A number of these companies are also looking at offering other products such as virtual credit cards and insurance.
Analysts believe that the sector has shrugged off the liquidity crisis during the Covid-19 pandemic and are set for more growth and tie-ups with banks and NBFCs.
A report by Credit Suisse estimates that retail digital lending has delivered about 43 per cent CAGR over the past seven years, reaching $ 110 billion in size by 2019, differentiated mainly by faster disbursements.
“Digital lending is being led by the emergence and growth of many specialised digital lenders like pay day, SME, unsecured retail and BNPL lenders who differentiate mainly through faster disbursements,” said the report, adding that they have gained more than a 40 per cent market share in new personal loans and over 20 per cent in unsecured retail loans. It also noted that they have been the worst impacted by the Covid-19 pandemic.
According to Monish Shah, Partner, Deloitte India, “We will see digital lending grow exponentially over the next few years on the basis of this data dividend, the unmet needs and increasing digital maturity across the segments. So the sector will require a fair bit of growth capital to drive customer acquisition and servicing.”
Shilpa Mankar Ahluwalia, Partner, Shardul Amarchand Mangaldas noted that the sector has dealt with some negativity over the last few months but this has been triggered mainly because of a few bad actors that misappropriated personal data. “The sector is positioned to grow and once they have created the distribution channel for customers, there is the potential for growth of multiple financial products,” she said.