2023-09-16 12:47:21
A recent study carried out by the Fintech Association for Consumer Empowerment (FACE) and Equifax has revealed that the volumes and value of digital loans have seen significant growth between the financial years 2021-22 and 2022-23. The study found that digital loan volumes grew by 49 percent, while loan values increased by 21 percent.
One of the key findings of the study is that borrowers under the age of 40 now represent the largest customer base for digital loans, accounting for 80 percent of all loans disbursed. Specifically, borrowers in the 31-40 age group make up the majority of the market share, followed by those aged 26-30. Interestingly, there has been a slight increase in the share of very young borrowers (under 25 years of age), who experienced the fastest growth rate, exceeding 50 percent.
The study attributes the growth in digital lending to the introduction of digital lending guidelines, which have allowed the industry to adapt and provide easier access to formal credit for customers. The ease of applying for loans digitally using smartphones and reaching new segments for credit have also played a significant role in driving the growth of digital lending.
In terms of loan disbursements, digital lenders disbursed over Rs 7.1 crore worth Rs 92,267 crore in the financial year 2022-23. Anil Pinapala, founder and CEO of Flexpay by Vivifi, an RBI-certified non-banking finance company, highlights that digital lenders are now offering loans to newer segments, including those who are new to credit or have a relatively credit history. stressed.
Another interesting observation is the increase in the share of short duration loans, with loans of less than six months accounting for 88 per cent of the disbursement volume in the financial year 2022-23. These short-term loans are popular with borrowers who are purchasing consumer electronics or trying to cover monthly expenses at the end of the month. Additionally, short term loans for travel or family vacations have emerged as a new segment for loan borrowers.
The study also reveals that Tier 3 cities are increasingly adopting digital loans, accounting for 40 per cent of the amount disbursed in the financial year 2022-23. On the other hand, the share of Tier 1 cities in digital lending has decreased.
While digital loans offer convenience and accessibility, borrowers are advised to be cautious and carefully consider their financial situation before taking on multiple loans. It is important to access loans from regulated entities after conducting proper due diligence. The principles of sound financial planning suggest that total monthly payments should not exceed 35-40 percent of a person’s take-home pay.
Sources: Fintech Association for Consumer Empowerment (FACE), Equifax
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