Facebook has partnered with an Indian online lending firm Indifi to help provide loans to small domestic businesses, as part of a push to bring more businesses to advertise on its platform.
The social conglomerate said its new program, called Small Business Loans Initiative, addresses some of the biggest pain points small businesses face when securing loans.
Indifi alone will decide the eligibility criteria like the creditworthiness of the borrowers and bear the risk of loan defaults.
The company, which last year announced a $4.3m grant for small businesses in India, said the new program will allow its lending partners to grant small ticket loans — ranging between $6,720 to $67,200 — at a predefined interest rate of 17%-20% per annum and won’t require the businesses to provide any collateral or joining fee.
Facebook said it’s working at “arm’s length” with its lending partners, but those partners will be handling all the risks of loan payments and determining the eligibility criteria. On Facebook’s website, the company says a business must have advertised on the Facebook family of apps for at least 180 days at the time of application as one of the factors for eligibility. Furthermore, the companies should have a presence in 82 Indian cities.
Facebook India’s managing director Ajit Mohan said that the internet firm doesn’t plan to monetise through its fresh initiative. There is no revenue share for Facebook in the programme, and SMEs will have no obligation to spend the loan proceeds on Facebook. In days to come, Facebook plans to partner with Non-Banking Financial Corporations (NBFCs) and other lenders to help expand the initiative. Facebook has rolled out the programme in 100 cities and will soon expand the initiative to 100 more cities across India.
Facebook, on its part, is making businesses aware of the lending program and has worked to improve the underlying lending framework such as boundaries for interest rate, engagement responsiveness between the lending partner and businesses (there will be an on-call support system within one day of applying) and ticket size of the credit amount. Facebook also hopes to work with more insurance providers in future for such initiatives.
Mohan said a “significant” number of the approximately 200 million businesses using Facebook, WhatsApp and Instagram across the world come from India. He added that 15 million businesses use the recently launched WhatsApp Business platform today.
In the last one year, Facebook has taken numerous steps to support the economic recovery of small businesses. Some of these include offering grants to small businesses and expanding the company’s industry-leading skilling initiatives to support the offline to online journeys of small businesses. With the Small Business Loans Initiative, Facebook hopes to further catalyse the growth of micro, small, and medium enterprises in India.
As part of its $100m global grant, Facebook deployed more than $4m in India for more than 3,000 small businesses across the five cities that it operates in.
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