Facebook launches a new program to assist small and medium-sized Indian businesses in securing loans in South Asia. This is part of its continued push to increase its presence among merchants.
According to the social conglomerate, its new program called Small Business Loans Initiative addresses some of most pressing issues small businesses have when seeking loans.
According to TechCrunch, the company announced last year a $4.3 million grant to small Indian businesses. The new program allows its partners to lend small tickets loans between 500,000 Indian rupees ($6,720), and 50,00,000. These loans will be granted at a predetermined interest rate of 17%-20% per year. Businesses won't need to provide collateral or pay a joining fee.
At the time of launch, companys pilot lending partner is CDC Group-backed Gurgaon-headquartered Indifi, which will disburse the loan amount within five working days of the borrower completing all documentation formalities after acceptance of the offer by Indifi. The company hopes to have more partners join the program.
Facebook stated that it is working with its lending partners in an arms-length relationship. However, those partners will handle all loan payments and determine eligibility criteria. Facebook states that a business must have advertised at least 180 days on its Facebook family of apps in order to be eligible.
Facebook is sharing information about the program with businesses and has improved the lending structure, including the interest rates, engagement responsiveness between lending partners and businesses, and ticket sizes.
Ajit Mohan, Facebook India's head, stated that small businesses can apply for loans in 200 Indian cities starting today.
Additional benefits for women-owned businesses include a 0.2% annual rate reduction.
According to Facebook, this is the first time that such a program has been launched in any market. TechCrunch was informed by the company.
A survey by Facebook, in collaboration with OECD/World Bank, found that almost a third (32%) of small and medium-sized companies on Facebook in 2020 stated they expect cash flow to be their primary challenge.
No monetization
This program is not being monetized by the company. It is in our best interest for India to see a huge growth in small business activity. We are doing this as a long-term strategy. Mohan stated that we will be disproportionately benefited because small business activity is a lot more concentrated on our apps.
This program is not intended to generate any income. There is no revenue sharing agreement. He said that there is no restriction on how the money will be spent. We also hope that other companies will create programs to increase credit availability in the market as a result of a program such as this. It will be good for all of us. This is not a transactional goal.
Facebook's Friday announcement is just the latest effort to reach small and medium-sized South Asian businesses. According to the firm, India is its largest market in terms of users. Last year, it invested $5.7 billion into Indian tech giant Jio Platforms. This was in order to digitize small businesses in the country.
MSMEs will play an important role in India's economic recovery and its goal of becoming more self-reliant. At a virtual conference on Friday, Amitabh Kant (chief executive of Niti Aayog), a government-backed think tank that is highly influential and a catalyst for India's future development story, stated that digital transformation will play a key role in this. Access to finance will also be critical to this transformation.
Facebook's Small Business Loans Initiative is a significant step in this direction. I am happy to report that India is the first country where such an initiative has been launched by the company.
