UCG TRUST with the support of South Indian Bank opened the fifth UCG lending platform in India providing lending to SMEs.
FinTech firms are trying to change the small business lending market by using technology to streamline the lending process, increase transparency as well as lower the cost of booking loans. Traditionally, banks relied on the CIBIL scores to assess the creditworthiness of potential borrowers. However, in India, for small businesses who do not have a bank account, analyzing their creditworthiness remains an issue.
A huge chunk of businesses depend on the grey market to meet their funding shortage and stay away from banks with firm belief that they are not eligible for any funds. Many businesses in India are asset-light with the country being primarily a services-driven economy. As banks required businesses to have a heavy asset strength for getting a loan, many businessmen could not get the loans for business purposes easily.
The FinTech industry can solve a lot of these problems in a similar fashion with mobile services changing the face of communications in India. Lending platforms are the one-stop destination for borrowers looking for financial solutions that match their specific needs. Hence those, who were denied bank loans, because of a bad credit history, also have an easily available source of lending. At the same time, small business owners consider the FinTech platforms very easy to use. Furthermore, the digital platforms give them 24-hour access to the lending products.
With FinTech firms offering a wide range of services, Indian SMEs are also adopting a new approach to meet their financial needs, capitalizing on the rise of FinTech firms in India. Just like Europe and the U.S., India is also gearing up to for expanding the alternative SME financing.