Mukesh - you’ve been a consumer banking veteran with Citibank. What was the vision behind Monexo and how did the journey start ?
My experience across several facets of the retail lending ecosystem ranging across product, sales and operations helped me understand that though banks have significantly diversified their product offering and grown their balance sheets over the last several decades, the fundamentals have really not changed. An over-reliance on outdated credit appraisal methods has resulted in several creditworthy borrowers being excluded from access to loans. The bank fixed deposit investor meanwhile earns almost next to nothing on investment while banks enjoy the yields on their consumer loan book by completely wiping off the interest margin on these loans.
Monexo has been founded with a vision to transform the idea that lending as an activity can be a more efficient process if it happens directly between individuals – completely cutting out the bank. We want to reimagine the idea of lending as a mainstream asset class for investors and change the perception that lending as an investment opportunity has to been reserved only for the bank / NBFC / unorganized private money lender.
At Monexo, we bring 70+ years of banking, technology and data science expertise to provide both retail and HNI investors with an opportunity to invest in a new asset class - personal loans.
Given Peer to Peer lending as an investment avenue is fairly new in India, are there any industry level metrics which validate this model’s success globally ?
Lending has now become an accessible investment for all investors – thanks to the P2P model. RBI’s decision to regulate P2P lending in India is a huge advantage for investors / financial advisors as it brings P2P lending on par with asset classes.
Globally, investors have really taken to P2P lending as it provides diversification, higher returns and regular income compared to traditional debt instruments like bank deposits. P2P platforms like Lending Club (USA) and Zopa (UK) have issued and funded nearly $30 billion in loans. These platforms have laid down global benchmarks for the P2P lending model and at Monexo we are bringing these best practices to India.
An investor’s exposure to lending as an investment is limited – how does Monexo as a platform help the investor make lending decisions ?
Lending has to be hassle free for our investors. Our sound credit policy and due-diligence check on borrowers ensures that investors get access to a screened, verified and graded pool of authentic borrowers with clear indication of risk. Every loan listed on our platform for investment has relevant details of the borrower including the borrower’s credit score and financial track-record. Our Escrow Account ensures investors are able to execute swift, digital funding of loans.
In P2P lending, since investors are investing in loans which are not secured, what is the support provided by Monexo in case borrowers do not make repayments on time ?
Firstly, at Monexo, we have a qualified credit team who provide loan approvals only to salaried borrowers with stable income, employment trackrecord and credit history. This ensures that only genuine, creditworthy borrowers enter our system in the first place. Every month, we have the ability to pull the EMI which is due directly from the borrower’s bank account. In case a borrower is late on making a payment, Monexo pursues a robust collections process on behalf of all the investors. If payment from borrower is not received within the 5th of the month, our in-house collections team immediately begins follow-up. To back this effort, in case, payment delay persists, we have empaneled external collections partners across India to pursue field visits and collect the overdue funds from borrowers.
There are several asset classes today for investors to consider - across debt and equity. What is the unique value proposition which P2P lending offers ?
Every asset class has it’s own value in terms of the risk - reward equation. P2P lending makes a strong case for itself as a simple, high yield debt investment for regular income with a large compounding component. Secondly, because returns in P2P lending are not linked to the stock market or unknown growth drivers, it absorbs volatility and provides much needed stability to the investor’s portfolio. Thirdly, the asset class is unique as it falls into the sweet spot for investors who are looking for short term (2-3 year) investment products which add value to their portfolio.
How do you plan to market P2P lending as an investment option to investors ?
Investor feedback so far has been extremely positive. We have both retail and HNI investors who are actively using our platform to invest in P2P loans.
A critical stakeholder in our expansion plan on the investing side is the financial advisor / distributor. We believe Monexo offers a great avenue for financial advisors to increase and diversify their product offering for clients. We are already working with 100+ financial advisors across India who are really excited about P2P lending.
At Monexo, there is a full fledged support framework to educate financial advisors / distributors about the product and obviously a robust remuneration model as well. We would like to empanel and work with IFA/advisors who are aspirational and want to take their business to the next level.
P2P lending is poised for growth as a simple, rewarding short term investment avenue. By offering this new asset class to investors, Monexo hopes to create a paradigm shift in India’s consumer finance ecosystem.