The latest product for fintechs is LAMF, enabled by the fully digital nature of securities in India. Companies are using in-house technology stacks to facilitate such transactions in real time, which only a few years ago would have taken weeks.
Users can pledge their mutual funds as collateral to get instant credit while continuing to stay invested through systematic investment plans (SIPs).
“The technology innovation that happened in the last one year has allowed these products to operate in real time. From origination to disbursement, it doesn’t take more than a minute, compared to the couple of weeks it took five years ago,” said Akshay Mehrotra, co-founder and chief executive officer (CEO) of digital lending firm Fibe.
He added that such transactions, being secured, come at a lower cost of capital.
Fintech major PhonePe rolled out the product in partnership with DSP Finance, a non-banking financial company (NBFC) backed by DSP Group, earlier this month.
Other major fintech firms such as Paytm, BharatPe, and Cred had previously launched the product for their customers.
Unlike traditional lending products such as gold or home loans, which require physical inspection of the asset, LAMF is fully digital, allowing lenders to underwrite online and customers to receive disbursements quickly.
“While other secured options can take days to process, LAMF is a fully digital and instant experience. Furthermore, it operates like a flexible credit line rather than a traditional loan. There are no mandatory monthly principal repayments or EMIs; customers only pay interest on the amount they withdraw,” said Hemant Gala, CEO of PhonePe Lending.
Mehrotra added that, at present, the average ticket size for such loans is Rs 30,000–40,000 from a fintech perspective, compared to a Rs 20 lakh average ticket size in the overall market.
However, executives noted that the product is still in its early stages. They expect it to gain traction in the coming quarters through more partnerships between fintechs and lenders.
“The next way would be to introduce it to more partnerships. Such products start with pilots on our platforms to test stability, underwriting, compliance, and operations. Once that is stable, we release the software development kits (SDKs) to partners,” Mehrotra said.
Instead of liquidating their mutual funds, the LAMF model allows investors to leverage their portfolio to access credit and meet short-term funding needs.
“Industry reports indicate that more than 5.5 crore unique investors are now engaged in mutual funds, allocating a significant portion of their personal wealth towards long-term objectives. LAMF addresses a critical need that arises from this: accessing short-term liquidity without disrupting that long-term vision,” Gala explained.
 "Instead of liquidating their mutual funds, the LAMF model allows investors to leverage their portfolio to access credit and meet short-term funding needs.")