New Delhi: For Gaurang Sanghvi , 30, who had just moved back to India from Belgium, the refusal of a small personal loan by a local bank was the spark that resulted in an entrepreneurial venture: InstaKash .

Companies such as InstaKash reflect a growing trend in India-an increase in the number of start-ups in the alternative lending category, aimed at individuals and small enterprises.

Start-up research firm Tracxn estimates that around 30 such companies have sprung up over the past 18 months and that around $27 million of investments have been made in them in this period.

The private bank declined Sanghvi a loan simply because he had no credit score (he didn’t have a credit card and had never taken a loan in his life). Most traditional credit-rating agencies, including the Credit Information Bureau (India) Ltd (Cibil), give such people a zero score.

The list includes firms such as Lendingkart, NeoGrowth Credit Pvt

“There is a huge gap. Barely 200 million people in a country of over 1.2 billion citizens have a valid Cibil score and thus scope to get a loan from any bank in the country, » said Sanghvi.

His start-up, which is licensed as a non-banking financial company (NBFC), offers loans and also creates credit scores of its own by tracking a user’s online activities, such as payment of utility bills, e-commerce purchases, and even social-media behaviour.

It charges 2% interest a month on loans it disburses

Most of the online alternative financing companies are either marketplaces for NBFCs or are NBFCs themselves. Ltd and Capital Float. And analysts say multiple business models are emerging in the space.

InstaKash is simply in the loans space. Sanghvi has, thus far, a few months into the company’s existence, loaned money to around 13 people (out of the 110 who applied). Continue reading « Can’t get a loan? Alternative lending start-ups here to help »