Why Fintech Startups Need To Take A Localised Lending Approach For SMEs


The government of India is merely focusing on building India as the professional hub globally through projects like Digital India, Start-up India, and Make in India. Introducing GST has already given tremendous growth to many industries; the economic growth in India has garnered so much support as compared from the last few decades.Entrepreneurship is equated to digital companies or technology, the majority of India’s entrepreneurs runs and own Small and Medium enterprises or it can be SMEs. On an average, they constitute over 58 Mn business, thus making 45% industrial production and providing 60 Mn Indians; it has emerged as the backbone of the Indian economy. Although, the SME sector is still struggling with the process of funding because of the high cost of loans and poor credit availability. Nowadays, Fintech startups are trying their level best to solve these problems. To solve these issues, we need to focus on the main aim of human emotions ‘TRUST’.

Do Trust Matters to SMEs?

Financial and banking interactions are some of the human exchanges that involve serious deliberations with the borrower that is deeply involved with the decision. Many borrowers opt for traditional financial institutions and money lenders and get their doubts and queries cleared easily.  The majority of cases depict that the representatives of these institutions are respected within the fraternity for their knowledge of market and business and are consequently able to put borrowers easily by conversing in the local language.

Whilst one may argue that the process of obtaining loans by visiting bank branches and money lenders can be time-consuming and no one guarantee that you will get funds or not what it does effectively is create something deeper – a relationship with the person that is based on trust and mutual respect. If you analyze this aspect, it can be easily spotted in the brand communication and taglines of any bank. Each of them promises of being their customers’ trusted advisor.

While digital lending platforms capitalize on technology to create immediate solutions that simplify and reduce credit disbursement and risk evaluation for potential borrowers, it is important that the experience is built in a manner that endeavors the critical aspect of trust in the entire loan application process.

The Trust Issue for SMEs – How Fintech Startups can Address?

Typically there are four layers of emotions every borrower goes during the process of finalizing a loan.


  • They feel resource-less as they do not have access to all the funds.
  • They are concerned to know if they would qualify for a loan or not.
  • They oblige for bandwidth to hustle to secure funds and more.
  • There is a sense of urgency as they want funds ASAP to begin or continue their business operations.

Hence, a typical onboarding experience for borrowers on a digital lending platform should be able to re-create a perception of trustworthiness by addressing these four emotions.

Let us take an example – the “terms and conditions” of a loan process leads to the uneasiness for the borrower. One of the reasons is the language itself which is non-colloquial and in the English language, thus, making it more difficult for these SMEs to relate.

Presently, there are a few things one can do here, like presenting the Terms & Conditions in the local language. Another way can be offering an alternative rendition of the legal document, which could either be in a colloquial language or in a summarized version or maybe both.

Eventually, an SME has somewhere around 15-16 questions about the loan process and product. It’s a globalized fact that human beings crave for affection and interaction. The trick is to solve for these, without, any human intervention.

Using AI and Chatbots

Artificial intelligence and Chatbots have gained significant traction in creating personalized and meaningful conversations which can help in addressing the concerns of ‘borrowers’, thus enabling a seamless experience. This, in turn, can be critical towards building future trust.

The majority of small and medium entrepreneurs are well versed with Facebook, Whatsapp and online companies are leveraging these for an instant connect.

As the CEO of Google, Sundar Pichai has said –

“Looking carefully to the future, the next big step will be for the very concept of the “device” to fade away. Over time, the computer itself – whatever its form factor – will be an intelligent assistant helping you throughout the day. We will move from mobile first to an AI first.”

The main focus is the product design of digital lending platforms and all the Fintech startups, therefore, it’s important to shift towards interaction rather than being transactional in nature.

There is another phrase, ‘the understanding of which paves the way for solving for anxiety’. Whilst borrower at the day end worries about the money in the bank, although assurance that they would get the loan is as important. To achieve the same, one needs to build up the entire onboarding experience in such a way that it makes SMEs more furnish which can be used on the fly to predict their likelihood to get a loan as well as terms and conditions. This will help them in being more engaged and eventually, solves for any kind of anxiety.

Innovative technological solutions have the potential to transform the way a country ‘borrows’ and ‘lends’. It can remarkably bridge the funding gap between sectors such as SMEs struggle with today. The opportunities are tremendous and factors like personalization and localization are the keys to create value. To create trust, Fintech startups must prove that they care for the future and well-being of their customers. Doing this well will keep loyalty and trust for the lifelong thus, driving repeat businesses.

To Conclude; we hope it’s cleared by the above mentioned saying and information that why Fintech startups need to take a localized lending approaches for SMEs. Transparency and loyalty are the two main elements which will help to gain the trust from the customers.

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