After checking credit-worthiness, once a student is deemed eligible for a loan, a partner financial institution disburses the money directly to the payee instead of the borrower. Tracing their journey, Shekhar says, “We were looking at ways in which technology can improve this issue. The personal loan space in India seemed a great space to start. We realised that with low credit penetration, it was very difficult for a middle-class family to arrange funds for their child’s education and assorted expenses, such as tablets and laptops. We started with a platform that essentially functions as a modem between lenders and borrowers. We not only provide basic education and gadget loans for the students, but also provide loans for preparing for competitive exams such the GRE. Parents can go to our website or download the app, and enter their details, the student’s details, their financial needs, and course fees. It incorporates an algorithm that computes their credit worth. We forward the loan requests to our non-banking financial company partners. Once approved, the loan amount is transferred directly to the college.”
He adds, “We are also tying up with colleges and test prep companies to make the process easier for students.” In the case of loans for mobiles, tablets or laptops, the loan is given in the name of the student and a background check is run on them before the loan is disbursed. The founders say, “Our engine checks students’ credibility by looking at their past exam scores. We also look at their activity on social media, their level of interactions, before deciding on the loan. Our algorithms ensure that we do not have many defaults on the loans. We generate revenue with the processing fee and interest rate charged to customers. We plan to take this model to more cities across the country and ensure that more students and colleges are covered. Loans are given for a one-year period.”
Preventing fraud is vital and the system has in-built checks in place to flag this at every level. “Using data points, we have discovered group frauds, such as five people buying the same phone. Mobile data and contacts are very important. For instance, if you chat with a defaulter for 10 minutes in the afternoon and apply for the loan, it is normal. But if you do that at 1 in the morning and talk for an hour, our engine would immediately flag it.”
Are more such avenues opening up for students? “Not much. We can disburse loans up to ₹2 lakh without any collateral, which bigger financial companies are often not able to. That is the reason we are able to offer a solution for youngsters.”
[“Source-CNBC”]
