The number of banks and its branches has grown tremendously in the last few years. Banks are spreading their roots across the country. But are banks able to fulfil the credit demand of individuals and businesses?   

Traditional lending models such as banks come with their own set of strength and limitations when it comes to lending money. For a small borrower, be it small personal or business loans, taking a loan from a bank can be an expensive as well as a time-consuming matter. These loans come with various charges and the loan disbursement process may take few weeks to months.  

Besides, the rise in aspirations of individuals and growth in small and medium enterprises are likely to widen the credit gap in India.  This is where P2P platforms come into the picture. Although the P2P Lending is still in its early stage, it is expected to grow to a $10 billion industry by 2025.   

Small and medium enterprises are one of the biggest drivers of growth of the economy. With the overall growth in the economy, the contribution from these enterprises will only grow in the years to come. But in order to grow their business, these businesses need credit. With the reluctance of the banks to provide credit to them, many small and medium enterprises are actively seeking out to the newest entrant in the lending business i.e. P2P lending. The demand for credit of these businesses is huge and likely impact of such availability of credit on the growth of economic development of the country along with job creation is humongous.  

According to the World Bank estimates, the credit demand and supply gap in India is $380 billion *.  

P2P lending platforms have started catering to the loan requirements of these Micro Small and Medium (MSME) entrepreneurs, giving hope to these players to look for on-time credit support for their business growth, eventually leading to economic development and job opportunities. Fulfilling the needs of these small businesses will help the P2P industry to grow at an exponential rate. Not just businesses, many individuals are also denied bank loans due to either low CIBIL score or no credit history. P2P platforms provide the right platform for these eligible individuals to borrow loans. One can borrow money from these P2P platforms for various reasons such as education, medical purposes, home renovation, marriage, travel, scaling their business, buying camera equipment, etc. While banks insist for security to disburse the loan, P2P platforms provide the loans without any security, leading to financial inclusions to the masses, who otherwise although eligible for credit, but for willingness of formal channel of lending, lack the financial assistance. 

Another factor that will drive growth in the P2P industry is convenience. People who are currently opting for a bank loan to fulfil their loan requirements, would switch over to P2P lending platforms as the loan application of P2P platforms is very efficient. Unlike bank, a borrower can apply at P2P platform at their convenience from any location, without having to physically visit the lenders. From the documentation process to the funding of loans, the process in the P2P platforms is efficient and fast. The entire process is seamless and totally paper free. The shift from banks to P2P lending platforms have been witnessed across all the countries such as UK and US.   

P2P lending will also grow as an alternative investment avenue to generate higher returns to the lenders (investors) allowing them to choose the borrowers of their choice matching their risk and rewards. The returns from P2P lending are attractive and beat the returns of other investment options currently available. Also, with more checks in place along with attractive returns, P2P Lending will continue to grow as lucrative investment option for individuals.