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Indian e-commerce platforms help sellers get easy loans to aid growth

These firms use tools to crunch data on trading history of small vendors on the platform and give them a leg up to scale their business

Raghu Krishnan  |  Bengaluru 

Daggers are out as Flipkart turns 8

E-commerce marketplaces such as Snapdeal, Paytm, AskmeBazaar and Flipkart are using transaction data of thousands of vendors on their platforms to help them raise working capital through tie-ups with banks and financial service firms.

The e-marketplaces use tools to crunch data on the trading history of small vendors, the goods return ratio, and customer ratings to profile promising firms. Banks and financial institutions looking to increase lending to stable businesses offer loans to these small and medium enterprises (SME) without collateral.

“The (SME) sector has been mostly neglected by banks. The majority of SMEs borrow from the unorganised sector,” said Kiran Murthi, chief executive of AskmeBazaar. "The market is very fertile (for SME financing)," he added.

Less than 15 per cent of India's SMEs have access to bank credit, says a paper by Ram Jass Yadav, a faculty member of the Indian Institute of Banking and Finance.

Indian e-commerce is expected to touch Rs 78,000 crore by December as more people use smartphones to buy goods and services online. Snapdeal, Flipkart and Amazon, which run marketplaces with thousands of vendors, have around 80 per cent share of the market among them.

Since last year Snapdeal has covered around 1,000 vendors in its plan called Capital Assist, while Flipkart has covered 250 sellers with Rs 50 crore of loans since March. Paytm, the digital wallet turned e-commerce marketplace, has covered 130 merchants with Rs 30 crore of loans. The Amazon India spokesperson did not comment.

“We want to build an ecosystem. The current opportunities for SME finance are very limited,” said Renu Satti, vice-president, business, Paytm. The firm had Rs 150 crore to lend to vendors unable to raise loans from financial institutions, she added.

Vijay Ajmera, senior vice-president, Capital Assist, Snapdeal, said sellers that had scaled up their businesses through the lending programme had been successful. “We have had zero defaults," Ajmera said in an email response. More sellers are now willing to use leverage to grow their businesses,” he added.

Flipkart said it worked with State Bank of India, Axis Bank, Bajaj Finserv and LendingKart for collateral-free loans to vendors. "The Growth Capital Initiative has been a big success this festive season," said Manish Maheshwari, vice-president and head of the seller ecosystem at Flipkart, in an email response.

"The model functions on a revolving short-term facility primarily based on business performance. At the end of every loan cycle, a quick check is done on the health of the business and the evaluation helps us renew the loan or improve the terms," said Gaurav Hinduja, co-founder of Capital Float, an online SME lending firm that works with e-commerce platforms.

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First Published: Thu, December 10 2015. 00:26 IST
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