Social media giant Facebook has joined hands with online lending firm Indifi to help provide loans to small businesses in India. With the move, thousands of advertisers who use the platform will have access to loans at 17-20% rate.
Indifi will bear the risk of the loans and decide the eligibility criteria while Facebook will point its advertisers towards the programme, which allows them to apply for a loan between Rs. 5 lakh to Rs. 50 lakh. Businesses partly or wholly owned by women will get an additional 0.2% reduction in applied loan interest rate.
Facebook’s India Head, Ajit Mohan said that 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. Facebook owns WhatsApp and Instagram and allows businesses to use products built across these apps.
Mohan noted that Facebook will remain “at arm’s length” from the actual loans and lending process. The company won’t be involved in determining who is eligible for the loans, or their recovery. Indifi will be evaluating the business and will bear the risk of lending.
“While the rationale for the SMB grant was rooted in the financial crisis that occurred as a result of the pandemic, we are deeply aware that there are other structural challenges that have been around for a long time — particularly related to credit and funding,” Mohan said. “Multiple studies have indicated that the estimated debt requirement for the MSME sector in India is anything between $200-400 million,” he added. The company also spoke to small businesses in the country, a third of whom said they were struggling to keep cash flow intact.
The new Small Business Loans Initiative was announced at an industry event organised by the Federation of Indian Chambers of Commerce and Industry (FICCI), today. Amitabh Kant, chief executive officer of government think-tank Niti Aayog, called the initiative a “step in the right direction” while delivering the keynote for the event.