In an unremarkable building off Bangalore’s Cunningham Road, a fintech startup is trying to make the most out of a blind spot of traditional banking: personal loans for the salaried employees of companies in India which are not “credit-approved” by traditional banks in the country.
The banks will offer you a personal loan only if you meet three key criteria, Qbera founder and CEO Aditya Kumar tells me.
1] If you have a prime credit score of 740 and above.
2] If you take home a salary of over INR 50,000 (US$ 769) per month.
3] If you are employed with one of the credit-approved companies listed by the banks. That would be about 50,000 or so, which is about 3.3 percent of the 1.5 million public and private companies operating in India.
If you fail to meet any of the above criteria, it is a swift ‘no’ to your loan request. Qbera is using some tech muscle to screen the salaried folk who don’t fall in the bank’s periphery of vision and offer them quick, short-term loans ranging from INR 50,000 to 500,000 (US$ 769-7,688). The annualized percentage rate of interest (APR) on a loan via Qbera ranges from 14-24 percent.
The average size of its loans is INR 250,000 (US$ 3075) and it normally finances loans for a period of one to three years. The loans are disbursed as quickly as 24 hours, the company claims.
“Of the 50,000 companies in the banks’ list, 8,000-10,000 are graded as A+, A, or B companies. Employees of those are the entire focus of banks when it comes to personal loans. But we have 700,000 employer firms listed with us, cleared for loans. That’s our market,” Aditya says.
Fintech’s the buzzword lately and India is no exception. Within the fintech field, alternative lending is the most active space. Not surprising, given the easier ways to monetize. So there are startups playing three roles:
1] Direct lenders: They lend to small businesses and consumers directly. They are either registered as an NBFC (non-banking financial company) or have partnerships with registered NBFCs.
2] Business-to-consumer (B2C) marketplaces: They connect loan-seekers to lending companies like banks or NBFCs.
3] Peer-to-peer (P2P) marketplaces: They connect loan-seekers to individual investors ready to lend.
Last year alone, 64 alternative lending startups in India – InCred, NeoGrowth, CapitalFloat, IndiaLends, and so on – raised US$ 227 million in funding, according to venture capital intelligence firm Tracxn.
Within this subsector, those working on consumer loans are fewer. IndiaLends, Milaap, Zest Money, Quikklo, and SlicePay, to name a few.
The best-funded among them, IndiaLends – founded in March 2015 – helps individuals as well as small businesses get unsecured loans. It has tied up with a dozen financial institutions to provide loans to those who don’t meet the usual eligibility criteria. It enlarges the credit-worthy pool using proprietary underwriting algorithms to build risk profiles of customers based on their bank transactions, utility payments, and so on.
IndiaLends drew the first fintech investment by American Express’ investment arm. Singapore-based DSG Consumer Partners, Chinese investment firm Cyber Carrier, and AdvantEdge Partners also participated in the US$ 4 million round.
See: IndiaLends formula for fintech disruption: tailored rates, quicker loans using risk analytics
The big chunk of clients for IndiaLends are small-and-medium-sized businesses. When I spoke to its co-founder Gaurav Chopra, he had cited the example of a small furniture shop in Delhi that found it tough to bag a loan from banks and established lenders.
Qbera has chosen to go even more niche. It focuses on just the salaried folk between the ages of 23 and 45 years, earning a monthly income of INR 20,000 (US$ 307) or more.
With two dozen employees, it uses tech to screen applicants on over 30 factors, including credit bureau data, bank account verification, demographic details, and more, to decide on loan-eligibility as well as the interest rates applicable – pricing in other words.
“We believe that the combination of these 30 plus factors helps us make a superior decision and keeps our risk minimal,” Aditya says.
Qbera, founded a year ago, launched just three weeks ago. So far, it has got over 5,000 applications from its homebase, Bangalore. It wants to expand to Delhi and Chennai next. It has a seed funding of around US$ 500,000. Qbera has found a technology partner in LendFoundry, and for loans, it has tied up with RBL Bank, an Indian private bank with branches in 16 states of the country.
Converted from Indian Rupees. Rate: US$ 1 = 65.03 Indian Rupees.