Gurgaon, 21st Feb 2024: The Fintech Association for Consumer Empowerment (FACE), an industry body convening digital lenders, has released a new report, Fintech Personal Loans, analysing trends from data of 71 Fintech NBFCs from April 2018 to September 2023. The report measures the progress of fintech personal loans in scale, outreach and borrower segments. Also, it maps the distinct nature of the fintech personal loans by placing them in the broader context of the personal loan market.
Like the overall personal loan market, Fintech personal loans have grown steadily. They have contributed a distinct and vital role in financial inclusion, serving unaddressed market segments by sanctioning over 2 Lakh Cr since April 2018. Fintech loans are drivers of volumes, contributing to a third of overall active personal loans in Sep 2023 and 62% of sanction volumes in H1 FY 23-24.
Commenting on the Report, Sugandh Saxena, CEO of the Fintech Association for Consumer Empowerment (FACE), said, “The report informs us that fintechs, while small in value, are playing a mighty role in furthering financial inclusion. As the digital economy shapes up, the fintechs will expand in tandem, playing a pivotal role in customers’ access to formal credit – important for their financial health and resilience. Evolving digital public infra, adaptive regulation, customer preference, fintech’s will, and ability to serve unmet credit needs create a conducive landscape for financial inclusion. The growing economy and digitalisation bring huge opportunities and obligations to the fintechs. Mapping the collective journey excites us and prepares us for what lies ahead”.
Fintech Loans: Key findings from the report:
- Fintech loans consistently increased their share in the personal loan market over the years, doubling their share in sanctions since FY18-19.
- In loans outstanding, the share of Fintech NBFCs is just 5% of the total personal loans outstanding as of Sep 2023 but accounts for over a third of active loan volumes. In H1 FY 23-24, fintech loans accounted for 10% of the sanction value but 62% of the sanction volume, catering to sizeable, underserved segments with small-value loans.
- Initial low base and post-pandemic recovery means spikes in growth rates during this period. In the last few quarters, growth is normalising.
- H1 FY18-19 recorded a total fintech sanction volume of 0.11 Cr worth Rs 5,907 Cr. In H1 FY 23-24, the sanction reached 4.16 Cr, totalling 40,845.
- The top 10 states account for over three-fourths of the outstanding value, and the top 5 states for over half. Borrowers belong to 721 districts representing 35 States/Union Territories. However, 108 districts with outstanding value > Rs 100 Cr account for over two-thirds of the total outstanding portfolio.
- In H1 FY 23-24 more than a third of sanction value went to borrowers belonging to Tier III and beyond. For every 10 loans in H1FY23-24, 4 are to borrowers from Tier-III cities and beyond. Tier III cities & beyond witness a three-fold increase in overall share in sanction value from FY 18-19.
- Fintech loans are climbing in ticket sizes, bureau vintage and risk chain, with nearly half of the sanction value coming from borrowers with ticket sizes > Rs 50k, bureau vintage 5 years+ and mid-low credit risk.
- With time, the share of mature (higher vintage on bureau) borrower base is rising in fintech lending. In H1 FY 23-24, more than two-thirds of sanction value came from the borrowers with a bureau vintage of over 3 years and half having a vintage of over 5 years.
- Fintech loans are moving up in the risk chain. Distribution of sanctioned value across credit scores shows that the share of mid-low risk borrowers is increasing, from 36% in FY 18-19 to 59% in H1 FY 23-24.
- Fintech loan borrowers are younger, with two-thirds coming from the age bracket < 35 years. Fintech lending’s ability to seize the opportunities offered by a growing segment for their current and future needs holds enormous promise to grow responsibly and sustainably for many years.
- While the average ticket size is slightly under Rs 10,000, there is much diversity. Ticket size is higher for borrowing in metro urban areas and increases with age, longer vintage, and better credit scores, as expected.
- Portfolio quality is consistently improving, and dpd 90+ on outstanding value stands at 3.6% on Sep 2023.
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