The road to an Atmanirbhar Bharat: How rise in digital lending across tier-3 and tier-4 regions is accelerating financial inclusion?

The pandemic has forced a number of global financial institutions on their back foot. The changed business circumstances have necessitated a shift towards digitization of financial services. At the same time, the pandemic has created a substantial demand for fast-paced small-ticket loans in India. These loans are being utilized by millions for meeting medical emergencies and different needs in the volatile post-pandemic scenario. In other words, the fintech ecosystem is seeing a period of pivotal transition with the growth in consumer loans shifting from metropolitan and tier- 1 cities to tier-2, 3, and 4 regions.

Over 70 percent of the total loan disbursals are currently taking place in small cities and regions that lie beyond the tier-1 zone. This shift in demand is slated to rise further with various online trends indicating that smaller cities and towns are witnessing a 2.5X growth as compared to metros. A study undertaken by Transunion Cibil and Google has shown that internet searches for loans were found highest in tier-3 cities at 47 percent, followed by tier-2 at 32 percent and tier-4 at 28 percent. The credit goes to the comprehensive penetration of smartphone and 4G internet services, digital lending is skyrocketing at an advanced pace.

This is enabling the new and emerging India comprising of various blue and grey collared workers, micro-entrepreneurs and small business owners residing in small towns, hamlets and villages to access a number of financial products and credit services that traditionally remained out of reach till date. To that end, a number of emerging startups are fast disrupting the financial vista by leveraging a number of new-age innovations like Artificial Intelligence, Machine Language, and Data Sciences.