As emerging markets foster emerging middle classes, and untapped markets yield new revenue opportunities for SMEs, technology becomes a key instrument in determining the creditworthiness of people who have had limited, or no, access to credit in the past.
One prime example of this lies in India, where small and midsized enterprises may have huge potential, if only they had access to credit and specifically to the working capital they need to actually stay in business.
One company making the leap into financial inclusion is Lendingkart, which is a startup based in Ahmedabad, and which has linked with Lenddo, based in Singapore. The partnership is geared toward exploring and expanding the use of social media to help boost lending and credit evaluation in India.
In an interview with PYMNTS, a Lendingkart spokeswoman noted that within India, “information asymmetry is pervasive … It’s often cumbersome for people to prove their identity and access financial services … we want to resolve this major business challenge that often inhibits the country’s growth. By using nontraditional data, we’ll be able to provide credit access to thousands of creditworthy unbanked SMEs.”
That financial inclusion and alternative credit scoring comes through the exploration of patterns across social networks such as LinkedIn, Google, Yahoo and Twitter to see patterns across data usage, said the spokeswoman, and locations, and even machine fingerprints.
All of this speaks to the use of analytics and big data – that is, a deluge of information that can be winnowed down to key patterns that can ultimately speed access to working capital — a challenge that is faced by SMEs as they need “cash flow management, and the ability to improve productivity, and embrace innovation.”
Yet despite this, she continued, in India, only 44 percent of funding needs are met by traditional lenders, which indeed speaks to a vacuum that may be well-filled by alternative platforms. And, added the spokeswoman, the model is scalable enough to be expanded into Asian countries from Singapore and beyond.
With the advent of social media as a new conduit toward determining creditworthiness, within India there’s a bit of a knotty problem: reaching businesses that are in fact offline. “The primary difference between online and offline SMEs is the presence of a brick-and-mortar establishment to run the business – and access to data sources that can be used,” such as those across social media.
One key toward moving those SME owners who are offline, online, rests with hardware in the form of smartphones. “We have recently launched our mobile website and application to tackle desktop hardware unavailability. Broadband and 1G and 2G penetration is available in towns and cities in India, and with the right data compression technologies, tapping into underserved markets across towns and cities will be a reality,” she said.