What’s common to Faircent, i-lend, LenDenClub, SimpliLend and LoanCircle? All of them operate as peer-to-peer (P2P) lenders, a global phenomenon that is slowly gaining traction in India. P2P platforms digitally connect borrowers with lenders — the former can be individuals or legal persons, while the latter are individuals — while charging both a commission on the loan amount.
Globally, lending through P2P platforms has increased meteorically from $3 million in 2012 to over $6 billion in 2015. According to start-up research agency Tracxn, there are 38 start-ups operating in this space in India, with total funding of $8.2 million being made available. Around 20 of these platforms — which have lent a collective Rs.18 crore-20 crore so far, industry sources say — opened shop in 2015 alone. Faircent, which has raised $6.75 million from JM Financial and others, claims to have 30,000 borrowers and 6,000 lenders on its platform.
Reportedly, Rs.5 crore worth of loans have been disbursed via the company, with Rs.1.2 crore being disbursed each month presently. i-lend, which has raised $117,000 from Angaros Group, claims to have 3,500 lenders and 4,500 borrowers, with Rs.1.25 crore worth of loans disbursed.P2P platforms register borrowers and lenders after conducting an authentication process using Aadhaar cards, utilities bill payments, bank statements and other KYC norms specified by RBI. Based on these details, a risk profile of each borrower is constructed and an appropriate interest rate — varying between 12-30% — recommended. However, this rate is only used as a reference range and lenders are free to charge independent interest rates acceptable to the borrowers.