Categories: Interview

Peer-to-peer lending has revolutionized loan disbursal segment

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Faircent is committed to facilitate fast and low-cost credit to individuals, MSMEs and SMEs, whilst providing new investment opportunities to the one with surplus funds. It continuously innovates and provides new product offerings to its lenders and borrowers enabling faster and more efficient transactions.

Here, Rajat Gandhi,  Founder & CEO, Faircent tells us more. Excerpts from an interview: 

DQI Bureau | DATAQUEST

DQ: Give us a brief about Faircent’s journey so far, and its USP.

Rajat Gandhi: Faircent is the outcome of an observation that turned into an idea and that eventually transformed into a one-of-its-kind platform. It goes back to 2011 when a friend of mine wanted a loan for a superbike, but none of the banks were ready to approve that. He wanted the bike, and came up with an interesting way of raising funds. He posted about it on Facebook. As a result, some of his friends loaned the amount of money that they could. The incident stuck with me, and I thought of building something similar. However, it wasn’t possible at that point of time. 

In 2013, we saw the situation changing and started working on building a P2P lending platform and incepted the company. The concept was completely new in India. The rest is history. In the few years of our journey, we have achieved multiple milestones, faced several challenges, and overcame them too. 

Faircent now has three apps – Faircent, Faircent Double, and Pocket Loan. While the Pocket Loan app is for people seeking small token loans, earlier, it was just the Faircent app where lenders and borrowers could open accounts and invest and lend money. 
However, we faced challenges in case of a payment default. In such a scenario, investors would bear the loss, and the concept of monthly returns wasn’t working out. Therefore, we introduced Faircent Double for investors, where they just have to add money to the escrow account and put it into plans suitable for their needs. Now, they can go for a three-month, six-month, or 12-month plan, and receive a principal amount, plus interest, on maturity of the investment.

While the borrowers can get quick and easy loans because of our automated processes, investors on the platform benefit from high investment returns. Collections are managed by Faircent on behalf of lenders.

DQ: How is Faircent’s business performance and growth margin in the last two to three years, as it holds 66% market share in the P2P lending industry?

Rajat Gandhi: As of July 2022, Faircent has 36.59 lakh registered borrowers and 2.5 lakh lenders across 12000 PIN Codes in India. So far, we have disbursed Rs 3,234 crore. We have been EBITDA positive for the last few quarters, and our revenue has grown 100% YoY in the last two years. 

Our digital processes and loan disbursal, even during the lockdown period in 2020, have made us a reliable platform for lenders and borrowers, resulting in unprecedented growth in just a few years. 

DQ: What is the revenue model for Faircent?

Rajat Gandhi: Our lenders and borrowers are sources of revenue for us. We charge a processing fee between 2-5% of the loan amount. Similarly, there is a portfolio management fee for lenders, which is the interest amount beyond 12% on the principal amount.

DQ: What are the dynamics of the peer-to-peer industry, and what opportunities are being derived by the industry?

Rajat Gandhi
: Peer-to-peer lending has revolutionized the loan disbursal segment. Despite being eligible for a loan with their good CRIF score and repayment history, people who are unable to get loans from banks, are benefiting from the peer-to-peer industry. The completely digitized and autonomous processes are an advantage as people now don’t have to spend time in queues at banks to take a loan. 

At the same time, the industry has turned lending into an alternative investment avenue. People can reap the benefits of higher return rates. There is a belief that advanced technology solutions are the most significant opportunity for the industry. Furthermore, the RBI regulations have made P2P lending platforms more reliable and trustworthy, mitigating the risk of fraud. 

A report indicates that the P2P lending market in India will grow at a CAGR of 21.6% between 2021 and 2026 to reach an estimated value of $10.5 billion. 

DQ: Please brief the role of RBI in shaping (the P2P) industry.

Rajat Gandhi: We were the first P2P lending platform in the country. We understood that the sector needs proper regulations for further growth. After setting up Faircent, we spent years encouraging the RBI to introduce regulations for the segment. In 2017, the regulations were announced, and we were the first company to receive a license. It is mandatory for NBFC-P2Ps to acquire a license from RBI and adhere to the regulations and norms listed by the governing body. The regulations brought the minimum and maximum amount that can be borrowed from P2P lending platforms. 

Similarly, there is a limit on lenders. They cannot invest over Rs 10 lakh, but have an option to increase their exposure to Rs 50 lakh if they produce a net worth certificate certifying a minimum net-worth of Rs 50 lakh signed by a practicing Chartered Accountant.. Therefore, the RBI has played a pivotal role by streamlining the processes and making the P2P industry more reliable. 

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