Srinivas Porika tried for months to get a loan of 250,000 rupees ($4,000) to pay for his sister’s wedding, but every bank he tried turned him down. The problem: Porika’s employer, a tech start-up company, was not on the banks’ lists of pre-approved companies.
“They were ready to give me a credit card, but were not ready to give me a loan,” said the 28-year-old from Hyderabad, who met several bank managers and officials to plead his case.
The wedding went ahead in 2012, but only after Porika dipped into his savings and borrowed from friends. With an insufficient bonus at work and pressure mounting to pay off his debts this year, Porika turned to a peer-to-peer (P2P) lending website.
Entrepreneurs in India are now experimenting with the P2P business model, helping people like Porika, with websites such as i-lend.in and faircent.com providing a meeting ground for borrowers and lenders.
Such portals charge an upfront fee from both groups and get the borrower’s documents and employment details verified by a third party. A contract with terms and conditions is signed within a week, with a recovery process in place for those who default on payments.