The analysis looks to identify drivers for the emergence of alternative lending in India and map the key stakeholders - investors and startups. The analysis also briefly talks about the different business models among alternative lenders in India

1. 1. Market Overview
a) What is the activity in the sector
b) What are the key drivers
2. Ecosystem stakeholders
3. Channels and Business Models
Alternative Lending in India: An Overview
Agenda

2. Ecosystem Stakeholders
A new breed of alternative lenders is emerging, which aims to leverage technology
to serve a massive untapped market of small business finance needs
Market Overview
Page | 1
Channels & Business Models
Notes: (a) The funding data is till July 2016, and it includes debt also; (b) Neha Punater, KPMG India and Economic Times
Sources: 1) Tracxn Alternative Lending India Startup Landscape Report, July 2016; 2) Meet the alternative lending startups, Economic Times, 13 Aug 2016; 3) Bending Lending Credit Line, Press Reader, 7
Oct 2016
What is happening in the sector?
(a)
$1.0 $3.0 $0.1 $6.0
$0.1 $4.0
$18.0
$103.0
$36.0
1 1 1 2 1
3
6
22
21
0
5
10
15
20
25
$-
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
2008 2009 2010 2011 2012 2013 2014 2015 2016
Rounds
Fundingamount(inMillions)
Deals and Funding to Alternative Lenders, 2008-16
Funding Amount Number of Rounds
A new ecosystem comprising Alternative Lending start-ups has
emerged, whose rise has been backed by investor confidence
• Highest number of companies were founded in 2014 (28) and 2015 (70),
years which were accompanied by peak funding activity
• Majority of activity was at the seed and early stage
Fundamental demand for credit and high growth potential, are helping
give validation to the space
• “Demand for lending is very high. Along with payments, lending will be the
largest pool of revenue and profit” – Principal, SAIF Partners
• “The VC money invested in the space so far is just 1% - a lot of money will
pour into alternative forms of lending” – Partner, Prime Ventures
Is this change sustainable? What is driving it?
Small business
needs are vastly
under-served by
existing lenders
SMEs don’t
have collateral,
hence don’t get
loans
Awareness of
financial products
is low, still
dependence on
high-cost money
lenders
The shift is driven
through younger
users, who are
comfortable
using technology
“90% of small businesses in India do not
have access to any form of formal finance.
There is an unmet need of $200-$400bn”(b)
Ticket sizes often below
INR15 lakh, unviable for
larger banks to serve
due to high costs
"None of the existing banks are
leveraging technology for SME lending,"
- Founder, Alternative Lender firm

3. Channels & Business ModelsMarket Overview
Page | 2
Ecosystem Stakeholders
The start-ups range from product comparison & credit scoring platforms to loan
providers – both commercial & consumer – and are backed by a clutch of investors
Investor(a) Rounds of Deals(a)
Platforms(b) Commercial(b) Consumer(b)
7
5
3
3
Notes: (a) Indicative list based on data till mid 2016; (b) Figures in circles indicate funding raised till date and rounded to decimal, most cases have more than 1 investor
Sources: 1) Tracxn Alternative Lending India Startup Landscape Report, July 2016; 2) Company websites; 3) Crunchbase funding data
3
Few other key investors Few other key players
$80m $17m
$44m $44m
$10m
$6m$10m $5m$2m $42m

4. Channels & Business ModelsMarket Overview
Page | 3
Ecosystem Stakeholders
The lenders are leveraging online presence and channel partners to rapidly scale up,
and a diversity of business models have emerged
Online distribution: Firms are expanding presence rapidly as they
capitalize on the proliferation of internet usage across India
Scale: 9mn visitors to platform (by Mar 2016)(a)
Plans: Achieve 50mn visitors in next two years
Conversion: 1.5-2% visitors become paying users
“There is a massive opportunity to build digital platforms for both consumers
and businesses to earn viable credit." – Principal, SAIF Partners
Business case study
Note: (a) Total visitors to the site
Sources: 1) Meet the alternative lending startups, Economic Times, 13 Aug 2016; 2) Lendingkart expects to disburse Rs 1600 cr by 2017, Economic Times, 18 Dec 2016; 3) Tracxn Alternative Lending India
Startup Landscape Report, July 2016
Offline distribution: Firms are expanding presence offline through
collaborations with re-sellers and channel partners
Scale: Disbursed INR225cr across 135 cities (Aug 2016),
reaching 3,000 businesses
Plans: Expand reach to 800-900 (by 2017 end) with
over 100 channel partners
Business case study
“The endeavor is to reach out to 10,000 businesses in the SME space in next
6 months” – CEO, Lendingkart Finance, Dec 2016
Different business models have emerged among these start-ups,
ranging from direct lenders to marketplaces
Direct Lenders
B2C
Marketplaces
Peer to Peer
Marketplaces
B2B
Marketplaces
1
2
3
4
SMB lending
Invoice
discounting
Personal Loans
Financial Products
&Services
Credit Rating
Online lending to
SMEs & MSMEs