Mobile payments and ecommerce company, Paytm, has announced that it will now provide collateral-free working capital loans for small merchants and service providers.
The company has tied up with various financial institutions like Capital Float, Aditya Birla Finance and Capital First to facilitate the loan for small merchants and service providers like kirana store owners and auto drivers. These small loans are said to range from INR 10,000 to INR 1 lakh.
Paytm said that it will pass on the credit profile, which is based on transaction history of the merchants on its platform, to third-party financial institutions. These financial institutions will be responsible for the eligibility screening. The loan amount can also be increased based on the eligibility criteria and the working capital needs of merchants.
Paytm claims that 4 lakh offline merchants already accept Paytm. The number is expected to cross 1 Mn by December 2016.
Kiran Vasireddy, senior vice-president at Paytm, said, “Financial inclusion is our main agenda. Availability of unsecured loans at low interest rates has been a challenge for small merchants till now, forcing them to borrow through high-cost methods like chit funds. By accepting payments through Paytm consistently, merchants can now get a digital footprint at zero cost, courtesy which they will get access to low-interest loans. We truly believe that such easy and low-cost funding will give merchants much-needed support to take their business to new heights. Further, availability of credit will also encourage merchants to move towards more digital transactions and a less-cash ecosystem.”
With the collateral loans, Paytm will achieve its objective of tapping the under-banked and unbanked segments of the population and bringing the small retailers into the fold of organised credit.
Paytm recently entered into strategic alliances with leading retail chains, wherein users can now pay with Paytm at Spencer’s Retail, More, WH Smith, Kendriya Bhandar, Heritage Fresh, V2 Retail, Vivek’s Store, Value Plus & various other large retail stores.
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