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Democratizing Debt

By Rajat Gandhi, Faircent.com. Presented at Crowdsourcing Week Global 2015. Learn more and join us at our next event: www.crowdsourcingweek.com

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Democratizing Debt

  1. 1. Democratizing Debt in India Through P2P Lending Marketplace
  2. 2. The Debt Trap
  3. 3. No affect on Banks Margins Top 10 Banks • Average profits : 30% • CAGR last 10 year’s : 20% • Interest Margins : 9.5%
  4. 4. What ails? Cost and Access an Issue
  5. 5. Large under-banked sectors
  6. 6. Access Control Funds Information
  7. 7. Opaque & Arbitrary
  8. 8. Depositor get the raw deal
  9. 9. Easy Access High Interest Rates Things are changing - India Difficult Access Low Interest Rates
  10. 10. Power of Sharing economy
  11. 11. Data is King
  12. 12. Changing the information Paradigm Traditional Parameters 1. Demographics 2. Credit Bureau Data 3. Transactions Data 4. Existing Obligations Psychometrics 1. Assessing Intention 2. Credit Assessment for Thin File Customers Big Data Analysis 1. Criminal History 2. Online Footprint 3. Location Data 4. Device Data 5. Interaction Patterns Social Media Data 1. Peer Influence – Social web behavior 2. Scope of online activity 3. Social Graph 4. Technology Usage 5. Interaction patterns Final Score
  13. 13. Undertaking Credit Appraisal through technology enabled process Credit scoring using credit reports from CIBIL and transaction level financial data from Yodlee.com Scoring Credit verification / validation done through: • Mobile App (geo-location based) • Yodlee.com • Physical verification / Aadhar • Lenddo Validation / Verification Regular credit monitoring to ensure risk management using: • Social Data • Lenddo • In-house analytics team Risk mitigation / management Credit Score (Out of 400)
  14. 14. Lenders Tenure (months ) Rate of Interest Loan Funded EMI Payable Total Payable Total interest Paid Processing Fee @ 2% Total Payout Mr. Sadanand Mishra 24 18% 30,000 1498 35952 5952 600 6552 Mrs. Malini Purushothaman 24 18% 10,000 499 11976 1976 200 2176 SAMARTH FINANCIAL -Pvt. Ltd 24 18% 20,000 998 23952 3952 400 4352 Mr. Soumitra-Das 24 18% 30,000 1498 35952 5952 600 6552 Mr. Piyush Ranjan-Mishra 24 18% 10,000 499 11976 1976 200 2176 Total 1,00,000 4992 119808 19808 2000 21808 Use Case: Borrower: Mr. Prashant Nayak Amount Borrowed : Rs. 100,000 Bank Rate of interest Loan EMI Payable Total Payable Total Interest Processing Fee @ 2% Total Payout XYZ Bank 21% 100000 5139 123336 23336 2000 25336 Savings with Faircent Rs.3528
  15. 15. Borrowers Tenure (month) Rate of Interest Loan Funded EMI receivable Total Payback Total interest Paid Reinvest of the principle amount on Faircent (At Bank FD rates of 8.75%) Total Payout Processing Fee @ 2% Net Payout Mr. Mehender Singh 18 18% 14,000 893 16074 2,074 969 3,043 280 2,763 Mr. Prashant Nayak 24 18% 30,000 1498 35952 5952 2727 8,679 600 8,079 Mr. Mohan Rao 24 18% 30,000 1498 35952 5952 2727 8,679 600 8,079 Total 74,000 3889 87978 13,978 6423 20,401 1480 18,921 Use Case: Lender: Mr. Soumitra Das Amount Lent: Rs. 74,000 Bank Tenure (Month) Rate of interest FD Amount Interest received (Type: Re- investment) Total Payout Interest Earned HDFC Bank FD 18 8.75% 14000 1937 15937 1937 HDFC Bank FD 24 8.75% 30000 5672 35672 5672 HDFC Bank FD 24 8.75% 30000 5672 35672 5672 Total 74000 13281 87281 13281 Incremental Earnings with Faircent Rs. 5,640

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