Small loans with smaller ticket size in high demand since start of Covid-19, experts say
The demand for credit and the easy availability of credit have led to a huge increase in low-cost credit loans since the COVID-19 outbreak, experts say.
Due to the onset of the second wave of the coronavirus, many people have faced job losses or pay cuts from their employers. To meet short-term demands such as medical or emergency expenses, purchasing health insurance policies, security deposits, etc.
âPeople felt comfortable spending for lower transaction value and additional technology combined with digital access helped lenders locate, reach and interact with new customers,â Kamra added.
On top of that, Kunal Gangal, analyst – Tavaga Advisory said first-time borrowers, especially millennials and Gen Zs with no credit history, were fueling demand as they struggled to get larger loans. from traditional sources of credit such as banks and NBFCs.
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âThe reliance of traditional lenders on formal credit history information has led more people to digital lending platforms. Unlike traditional credit channels, fintech lenders rely less on bank statements, tax returns, credit history details, and physical engagement with customers, and instead create an ecosystem where loan disbursement has been quick and transparent, âGangal said.
Additionally, Anil Pinapala, founder and CEO of Vivifi India Finance, said he has even watched millennials turn to fintech for financial worries and small loans.
âIndeed, fintech companies have been at the forefront of making financial services more accessible with instant approvals and immediate disbursements as part of a fully digital onboarding process. Most tech-backed fintech companies have gamified the entire borrowing experience where lenders reward borrowers for positive repayment behavior. They solved the fundamental problem of meaningful access to institutional credit. While fintech is expected to grow exponentially over the next 5 years, Millennials and Gen Z will be the foundation upon which this growth will occur, âsaid Pinapala.
First publication: STI