Experian India’s latest whitepaper, titled “Small is BIG: How Fintechs are Revolutionising Lending,” underscores the transformative role fintech companies are playing in India’s financial landscape. The report highlights how these digital platforms have significantly increased their market share and impact, particularly in providing small-ticket loans to previously underserved segments of the population.

According to the whitepaper, fintech firms have disbursed over INR 2,48,006 crores in personal loans and INR 28,607 crores in business loans as of March 2024. These loans, frequently under INR 50,000, have been instrumental in reaching the New-to-Credit (NTC) population—individuals with thin credit files and sub-prime borrowers who have traditionally been excluded from the formal financial system.

Market Penetration and Financial Inclusion

The data reveals that fintech companies now hold a 52% share of the personal loan market in India. This significant penetration has led to notable increases in loan disbursal across various states. In Bihar, personal loan disbursal grew by 24%, while Tamil Nadu and Uttar Pradesh saw increases of 21% and 20%, respectively, in FY24 compared to FY23.

In the business loan sector, fintechs have demonstrated even more impressive growth. Karnataka experienced a 133% increase, Uttar Pradesh saw a 118% rise, and Bihar’s business loan disbursal grew by 67% during the same period. These statistics highlight the sector’s substantial contribution to enhancing financial inclusion in the country.

Challenges and Risk Management

Despite these achievements, the whitepaper acknowledges the challenges fintech companies face, particularly in managing asset quality. The Non-Performing Asset (NPA) ratio for fintech-originated loans is reported to be higher than the industry average, underscoring the need for improved risk management frameworks. To address these issues, the report recommends the adoption of advanced data analytics and more sophisticated credit scoring models.

Manish Jain, Country Managing Director at Experian India, commented on the findings, stating, “The fintech revolution in India is just beginning, and there’s enormous potential for growth. Fintech companies have already made a significant impact by providing credit to those who need it most, but there’s still more to be done. The insights in this white paper highlight both the opportunities and challenges ahead.”

Sector Innovations and Future Outlook

The whitepaper also notes that fintechs are leading advancements in areas such as green finance, supporting sustainable and environmentally friendly projects. Additionally, fintech companies have made significant strides in the agri-finance sector, providing critical support to small farmers.

As fintech companies continue to innovate and expand their reach, their role in shaping India’s financial future remains pivotal. The whitepaper provides a comprehensive overview of the sector’s progress and ongoing challenges, offering valuable insights for stakeholders and policymakers.