Facebook launches ‘small business loans’ initiative in India

Facebook has launched a new program that aims to make it easier for small and medium businesses (SMBs) in India to access credit from lenders.

The social networking company has onboarded Indian loan provider Indifi as its first lending partner for the “small business loans” initiative. Facebook plans to add more lenders to the program in the near future.

SMBs from across 200 towns and cities in India can join the program starting today.

Photo credit: 123rf

Facebook said that the new initiative was aimed at helping SMBs trying to recover from the disruptions due to the Covid-19 pandemic. The social media giant highlighted the fact that steady cash flow and access to timely credit were some of the major challenges faced by SMBs, especially those that are relatively young and may not have a long credit history.

The California-headquartered firm also underlined high and floating rates as a major deterrent for many SMBs in need of loans. The Facebook initiative addresses this through a predefined interest rate of between 17% and 20% per annum. Indifi will hand out loans of between 500,000 rupees (US$6,718) and 5 million rupees (US$67,189) to businesses. Under the program, companies that are wholly or partly owned by women will be eligible for a 0.2% reduction in interest per annum.

The program also allows SMBs to apply for loans without the need for collateral. There will be no processing fee attached to the loans, the Mark Zuckerberg-headed firm said.

Facebook said that the businesses would receive loans from Indifi within five working days of completing the documentation and accepting an offer. The tech titan said there would also be a support mechanism to help borrowers track the status of their loan applications.

During a virtual press briefing, Facebook India vice president and managing director Ajit Mohan said that the US-based social media company would not take a cut in any of the loans disbursed. He also added that Facebook would keep an “arm’s length distance” from Indifi’s operations as the latter is solely responsible for loan approvals and risk management, among other things.

According to the Facebook executive, SMBs applying for the loan through the initiative do not necessarily need to be on its social networking platforms. Businesses are also not obliged to advertise on Facebook apps.

He clarified that Facebook’s role in the initiative involved designing the program, which includes the size of loans, interest rates, and swift disbursements.

Currency converted from Indian rupee to US dollar: US$1 = 74.37 rupees