Facebook is launching a new program in India to help small and medium-sized businesses secure loans in the South Asian market as the company makes further push to expand its presence among merchants.
The social conglomerate said its new program, called Small Business Loans Initiative, addresses some of the biggest pain points small businesses face when securing loans.
The company, which last year announced a $4.3 million grant for small businesses in India, said the program will allow its lending partners to grant small ticket loans — between 500,000 Indian rupees ($6,720) to 50,00,000 ($67,200) — at a predefined interest rate of 17%-20% per annum and won’t require the businesses to provide any collateral during the time of application.
At the time of launch, company’s pilot lending partner is Gurgaon-headquartered Indifi, which will disburse the loan amount within five working days of the borrower completing all documentation formalities after acceptance of the offer by Indifi.
In a call with reporters on Friday, Facebook India head Ajit Mohan said the small businesses in 200 Indian cities can apply for the loan.
Businesses wholly or partially run by women will be able to secure the loan at a special 0.2% reduction rates per annum.
This is the first time Facebook has launched a program of this kind in any market, the company told TechCrunch.
According to a survey conducted by Facebook in collaboration with OECD and the World Bank last year, almost a third of operational small and medium-sized businesses on Facebook in 2020 said that they expected cash flow to be one of their primary challenges.
The company is not monetizing this program. “We believe it is in our self-interest for there to be massive growth in the small business ecosystem in India because as a company we are playing this for the long term. We will disproportionately benefit because a lot of these small business activity happens on our apps as they grow,” said Mohan.
“We are not looking to make money from this program. We don’t have any revenue sharing agreement. We are not putting any constraint on how this money is spent,” he said. “Frankly, we are also hoping that on the back of a program like this other companies will also create programs so that there is more access to credit in the market. That will be good for us all. There is no transactional objective here.”
This is a developing story. More to follow…