How Fintech NBFCs are Revolutionising Lending and Access to Formal Credit in India

June 4, 2024
Updated on

What is Fintech NBFCs?

Fintechs are short for financial technology and refer to any form of digital software or technology that works to automate or streamline financial services. Fintech NBFCs represent a sector of non-banking financial companies that use new financial technology to conduct financial services.

Formal credit is still difficult to obtain for smaller businesses that are based in more rural areas as there are fewer physical banks and lengthy loan processes. To combat this issue, fintech NBFCs have begun focusing on supporting micro, small, and medium enterprises (MSME) to gain easier access to loans.

Lack of Access to Formal Credit

Micro, small and medium enterprises or MSMEs make up 40% of the total exports in India, yet only 16% of these enterprises have access to formal credit. India’s population that resides in semi-urban or more rural communities is underserved with banking and financial services, therefore, over 80% of MSMEs are credit-starved despite financial inclusivity of this sector being crucial to the growth of India’s economy. Even for the MSMEs that can apply for loans, the process is lengthy and can take weeks to process since these enterprises often lack credit history or are looking for a loan option that the bank they are working with doesn’t provide. 

In order to receive funding, a large number of these enterprises turn to informal credit sources increasing the risk of credit fraud. To respond to this lack of options, NBFCs and fintechs have been able to revolutionise financial lending processes which has increased access to business loans across India.

What Role Do Fintech NBFCs Play in Financial Inclusion in India?

NBFCs are shaking up the traditional financial landscape. They are rewriting the rulebook for financial inclusion in India. They are embarking on a groundbreaking mission fueled by a relentless commitment to propelling women forward financially. NBFCs are paving the way for a more equitable tomorrow, having empowered women entrepreneurs through their innovative, entirely digital credit assessment process.

Spotting women as key drivers of social progress, NBFCs are rethinking their services to cater to their unique financial needs. By equipping women with the financial tools they need, these organisations aren’t just unlocking economic freedom for women, they’re also cultivating a spirit of self-made success and entrepreneurial drive.

Fintech NBFCs’ digital credit assessment is a complete overhaul of how financial services are delivered and accessed. These organisations are ditching the traditional loan approval process, riddled with collaterals, paperwork, and potential bias, and embracing cutting-edge tools like machine learning algorithms, data analysis, and AI.

The result? A faster, sharper system of handing collateral-free business loans removes the usual roadblocks women face when trying to get funding – like mountains of paperwork and prejudiced loan officers. This digital revolution lets women apply for loans from the comfort of their homes, freeing up their time to focus on building their businesses and personal goals.

By helping women become financially independent, NBFCs are significantly contributing to fostering financial inclusion and building a stronger and more successful future for everyone.

Grow your MSME with collateral-free business loans

How Fintech NBFCs Are Revolutionising MSME Lending?

Fintech NBFCs make loan distribution a much smoother process. As smartphone access in India continues to grow, many consumers have preferred the ease that the fast-tracked online banking provides that eliminates the hassle of the paperwork-heavy process that requires physical transport to the local bank. Digital loan distribution also allows for a multitude of benefits like simple comprehension of application material, remote accessibility to rural regions, and a speedy turnaround time that provide a simple yet secure online loan application and loan disbursement method. The turnaround time for loans for digital applications is usually about a day, but can get as low as a couple of minutes. 

Another method fintech NBFCs have used to revolutionise the financial lending process is through the use of alternative data sources to understand the financial background of the customer. Traditionally, banking services have opted for the use of tested metrics like the credit score which has made it difficult for MSMEs that don’t have a formal credit history to obtain a loan. Fintechs however have developed artificial intelligence and machine learning algorithms that can determine loan amounts and viability through alternative sources like e-commerce payment history, employment history, telecom bill payments, social media activities, and other spending patterns to determine the creditworthiness of borrowers, bringing more people into the formal credit system. These alternative data options also make the process more customised to understand the metrics by a case-to-case basis, and allow for the most practical yet ideal loan to be offered to the customer. 

In addition, Fintech NBFC loans are often both flexible and collateral-free loans. Smaller entrepreneurs that have a hard time accepting traditional loans due to more stringent loan security measures, can accept the NBFC options that allow them for a more flexible loan repayment framework. Fintechs can offer these types of loans because the technology has expertise in niche segments and can analyse the data provided to provide the best possible loan for the customer. Additionally, by making loans collateral-free, smaller companies have better access to the types of loans that work for them and are supported throughout the process. 

Why to Choose Kinara Capital?

Kinara Capital is a fast-growing Fintech NBFC in India, a Systemically Important RBI registered company, providing collateral-free business loans to MSMEs. The company uses proprietary AI/ML tech solutions for risk assessment, removing all biases from the lending process. Kinara Capital’s digital first loan app – myKinara enables 1 minute eligibility checks without any uploads. 

Kinara Capital is creating financial inclusion by bridging the lending gap in India and has disbursed over INR 3000 crores across 70,000+ loans to over 45,000 customers in 90+ urban, peri-urban and rural locations in India, leading to an incremental income generation of INR 700 crores for the small business entrepreneurs.

This heightened access to formal credit is driving financial inclusivity throughout India. The digital lending market is said to increase from $100 billion in 2019 to $350 billion in 2023. NBFC partnership with Fintech companies is crafting the online banking future and is, in the process, serving India’s underserved customers and MSMEs. In this way, by offering loans to smaller borrowers they are able to provide for bank-excluded customers with supportive and efficient digital financial services and bolster India’s economy.


1. What are some advantages of borrowing from fintech NBFCs?

Borrowing from Fintech NBFCs offers numerous perks, like they offer competitive rates, don’t require collateral, and can be applied for online with faster approvals. They may also use advanced security measures to protect your information.

2. How are fintech NBFCs revolutionising the lending industry?

Fintech NBFCs revolutionise lending with technology such as AI and machine learning. These tools analyse alternative data like e-commerce transactions, employment records, and social media behaviour to assess loan viability. By streamlining operations and enhancing customer experience, FinTech NBFCs aim to make credit more accessible and inclusive.

3. How do fintech NBFCs assess the creditworthiness of borrowers?

Fintech NBFCs rely on advanced scoring systems and data crunching to assess a borrower’s trustworthiness. While traditional credit scores might be factored in, these lenders often look beyond them, considering alternative data points like your job history, income streams, and even your social media presence.

4. What are some challenges faced by fintech NBFCs in revolutionising lending?

Tech-powered lenders like fintech NBFCs aren’t without their hurdles. Some drawbacks include steeper borrowing costs and an increased risk of scams and digital attacks.

5. What impact do fintech NBFCs have on the overall lending market?

Fintech NBFCs are bridging the funding gap for mid-sized businesses by making access to loans easier, promoting financial inclusion, and leveraging a wider range of data. They’re also shaking things up in India’s lending scene by allowing banks to extend their reach without getting bogged down by extra overhead costs.

6. How do fintech NBFCs contribute to the digitisation of the lending process?

Fintech NBFCs employ advanced technology to digitalise the lending process. This includes underwriting loans with AI and machine learning models, digitising verification for instant loan disbursements, and using predictive modelling to assess MSMEs’ financial performance. They assess creditworthiness in real time, personalise underwriting with AI and machine learning, and leverage online platforms and blockchain to offer competitive interest rates.

7. What are some key regulatory challenges faced by fintech NBFCs in the lending industry?

Fintech NBFCs in India encounter regulatory hurdles, including compliance issues due to evolving regulations and a lack of clear legislation. Data security risks, platform downtimes, and low financial literacy also pose challenges. Additionally, there are disparities in adoption rates among MSMEs despite their significant presence in the Indian economy.

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