Payday Loans Businesses can be Profitable: Wriju Ray to ET Prime
In this ET Prime in-depth report on Chinese Fintechs setting up shop in India, Wriju Ray, co-founder and CBO at IDfy, explains the unit economics of this business showing how a monthly disbursement of INR 20 Crore payday loans can be profitable.
"It is very difficult to give an INR 10 Lakh loan to a SME or a personal loan, but it is very easy to give a Rs 1000-5000 loan for 15 days and analyze the behavior of the borrower and predict the underwrite better," says Wriju.
He explains that nobody sends an agent to recover such a small amount. The lenders, therefore, factor in a 10-15% default rate. But even if 85% of the borrowers return the money, one can double the loan ticket. Given that the cash moves fast, there isn't a cash flow problem either.
The article shows how Chinese Fintechs are setting up businesses in India using the Singapore route. It highlights challenges they are facing while doing business in India. It also highlights how they are likely to attract regulators' scrutiny.
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