23-year-old Riteshwari from Ghaziabad wanted to start a beauty salon. She hit a roadblock when she tried to raise funds from her bank. Even though she had a savings bank account with the bank and her income tax returns in place, the bank asked her to open a current account. The cumbersome process made her lose all hope of getting funded. Then she came across a P2P lending platform on the internet.
“I was just surfing through the net for easy loans and saw an ad regarding P2P loans. I got Rs 1 lakh-loan for 12 months within a few days and even got my last EMI waived off. Finally, I could get a loan to modify my salon without heavy paperwork like banks. That too, at a low processing fee,” reminisces Riteshwari.
There are many similar stories of women from smaller towns opting for P2P platforms to secure easy loans.
“Banks deny loans if the applicant is from a small town. They think we won’t repay on time,” says Jyoti Sharma from Bulandshahr, a small city in Uttar Pradesh, part of Delhi NCR.
Jyoti was denied a bank loan due to low CIBIL score of 500. She got Rs 2 lakh-loan for 36 months from one of the P2P platforms, though the rate of interest was on the higher side.
Are women better borrowers?
“In terms of borrower profiling, we have observed that women borrowers make more timely repayments as compared to their male counterparts. As per last year’s data, loans to single working women as a category have delivered net returns upwards of 20 per cent pa,” says Rajat Gandhi, CEO, Faircent.com.
Based on the historical data available with the platform, Faircent.com launched a special loan product ‘Aspiring Women’ aimed at female borrowers. This allowed lenders to offer loans exclusively to women borrowers.
“Research suggests that women borrowers are financially more disciplined. They make a lucrative asset class for lenders to invest in. Currently, 10-20 per cent of borrowers funded on our platform are women,” says Gandhi.
Some P2P players even believe that default rate for women borrowers is lower by around 50 per cent.
“While male default percentage stands at 3.5 per cent, it’s around 1.85 per cent among females. Even in those cases, it was the husband who had defaulted,” says Raghavendra Pratap Singh, Co-Founder, i2ifunding.
In some cases, women apply for a loan because her husband may have had a bad CIBIL score.
“There are genuine women borrowers who are actually entrepreneurs. But after few cases of default, we now consider father or husband’s credit score before giving the loan,” Singh adds.
Female P2P borrowers likely to grow
In a recent interview with ET.com, RupeeCircle’s Founder & CEO, Ajit Kumar had said that 33 per cent of the investors on its platform are women. This number is likely to go up across P2P lending.
“The number of female borrowers is likely to grow to 30-35 per cent in next 3 years from the current 20 per cent on our platform,” says Singh of i2ifunding.
Non-metro cities have emerged as the biggest market for unsecured personal loans. Average personal loan ticket size here has increased from Rs 55,000 to Rs 75,000 with an average tenure of 16 months, says LenDenClub.
“There has been a significant rise in the number of women applicants for unsecured credit in the past 6 months. At LenDenClub, we get women applicants ranging from 21 to 45 years. These women applicants work in small and medium enterprises to multi-national companies,” says Bhavin Patel, Founder and CEO, LenDenClub.
Women are investing too
P2P players are also expecting an increase in women investors on the platform. “In the next 3 years, the number of female investors may go up to 50 per cent with genuine investors increasing to 15-20 per cent from 5 per cent in 2019,” predicts Singh of i2ifunding.
“At Finzy, around 15% of our borrowers are women and around 25% of lenders are women,” says Amit More, Founder and CEO, Finzy.
“Once convinced with an opportunity, women tend to be more committed and disciplined in their investments. Average investment of women tends to be 30 per cent more than their male counterparts,” adds More.