There’s a Buzz Around Hy­brid Lend­ing Model at Fin Star­tups

Firms now look to dis­burse loans both on their own as well as through fi­nan­cial part­ners

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Ben­galuru: Sev­eral dig­i­tal lend­ing com­pa­nies are mov­ing to­wards a hy­brid model that will have them dis­burs­ing loans both on their own as well as through fi­nan­cial part­ners such as banks.

Lend­ingkart, which has been lend­ing through its own books as a non­bank­ing fi­nan­cial com­pany, is set to start co-lend­ing with banks and other fi­nan­cial firms through a mar­ket­place plat­form in six-nine months, chief ex­ec­u­tive Harsh­vard­han Lu­nia said.

On the other hand, KredX, an in­voice dis­count­ing mar­ket­place plat­form for small and medium en­ter­prises, has ap­plied for an NBFC li­cence. Con­sumer lend­ing com­pany ZestMoney is also seek­ing to be­come a non-bank­ing fi­nan­cial com­pany.

“A hy­brid model fur­ther en­hances sta­bil­ity, di­ver­si­fies the port­fo­lio, and re­duces de­fault risk on the deals,” said Anurag Jain, co­founder of KredX. TC Meenakshisun­daram, man­ag­ing direc­tor of IDG Ven­tures In­dia, calls this tran­si­tion­ing a nat­u­ral evo­lu­tion.

“While lend­ing com­pa­nies should ini­tially fo­cus on build­ing cred­i­bil­ity in one as­pect and prove that the model works, they should even­tu­ally move up in the value chain through a hy­brid struc­ture,” he said. While a mar­ket­place of­fers a risk-shar­ing and re­ward-shar­ing model, lend­ing through your own books shows that the com­pany has skin in the game, he added.

Com­pa­nies are drawn to the hy­brid model chiefly seek­ing im­proved growth prospects. For Lend­ingkart, Lu­nia said, the mar­ket­place model will open up more av­enues for funds.

Ahy­brid model is vi­able typ­i­cally af­ter a 12-18 month cy­cle, ZestMoney CEO Lizzie Chap­man said.

Cap­i­tal Float, which started its mar­ket­place model last year and cur­rently colends with five fi­nan­cial in­sti­tu­tions, is set to scale up loans dis­bursed through its part­ners to 50% of its to­tal dis­bur­sals by the end of this fis­cal year. Cur­rently, that’s at 40%.

For each loan dis­bursed through the mar­ket­place, too, Cap­i­tal Float con­trib­utes 30% of the amount. It also man­ages the en­tire loan process from orig­i­na­tions to ser­vic­ing and col­lec­tions.

“The fact that we are a reg­u­lated NBFC and have skin in the game gives our part­ner in­sti­tu­tions a great deal of com­fort in the strength of our un­der­writ­ing pro­cesses, as well as com­pli­ance with key norms such as KYC (know-your-cus­tomer),” co­founder Sashank Rishyas­ringa said.

How­ever, there are some chal­lenges in hy­brid lend­ing mod­els, es­pe­cially be­cause of a num­ber of mov­ing parts and as it can get tough to man­age dif­fer­ent plat­forms, ac­cord­ing to Jain of KredX.


Some dig­i­tal lend­ing com­pa­nies such as BankBazaar, which runs a mar­ket­place, and LoanTap, which lends on its books, do not see the need for a hy­brid model.

“Our vi­sion is to part­ner with banks to be­come the world’s largest dig­i­tal mar­ket­place to offer pa­per­less fi­nan­cial ser­vices. Hence, we do not have plans to be­come an NBFC,” BankBazaar CEO Ad­hil Shetty said. As for LoanTap, CEO Satyam Kumar had this to say: “We have been able to lever­age eq­uity and long-term debt, so we are not con­sid­er­ing (a hy­brid) model. We do not see value there as long as we are able to raise debt within per­mit­ted norms.”


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