Social media major Facebook on Friday announced the launch of its small business loans initiative—a programme targeting the country’s small and medium businesses (SMBs) that advertise on Facebook—giving them quick access to loans through independent lending partners. Gurugram-based online lending platform Indifi Technologies is the first lending partner that Facebook has tied-up with, while it plans to bring more partners on board—aiming to bridge the credit gap that exists in the domestic micro, small and medium enterprise (MSME) sector. For Facebook, India is the first country where this programme is rolled out catering to businesses registered across the country’s 200 cities and towns.

Access to credit is particularly challenging for micro and small businesses that have just started out and might not have a long credit history. High and floating interest rates also restrict many small businesses from applying for loans. According to a survey conducted by Facebook in collaboration with OECD and the World Bank last year, almost a third of operational SMBs on Facebook in 2020 said cash flow to be one of their primary challenges.

“Access to timely capital is more important than ever as it can help them jump-start their recovery and drive big growth. The country has made tremendous progress in the last few years in expanding access to credit,” Ajit Mohan, vice president and managing director, Facebook India said while addressing a virtual press conference. “As a company, we are at the spear end of the digital transformation and we believe that the small business loans initiative can provide big impetus to early entrepreneurs to fuel their ideas and their appetite for taking risks,” he added.

Mohan explained that there are over 200 million businesses across the world that use the Facebook, WhatsApp and Instagram apps every month, and a significant number of them are in India. For example, WhatsApp in India has over 15 million businesses, and 90% of consumers follow brands on Instagram.

Through Facebook’s partnership with Indifi, small businesses that advertise with the social media platform can access loans at a predefined interest rate of 17%-20% per annum. The programme will also enable SMBs to apply for loans without collateral through a quick online application. Indifi will also disburse the loan amount within five working days of the borrower completing all documentation formalities. Small businesses applying under this programme will not be charged a processing fee by the lending partner, Facebook said, adding that the ticket size of the loan will vary between ₹5 lakh and ₹50 lakh.

As part of the programme, small businesses that are wholly or partly women-owned can avail a special 0.2% reduction per annum on the applied loan interest rate from Indifi. Facebook pointed out that the initiative is a not-for-profit arrangement with its lending partners, while small businesses are not obligated to spend their loan amount on advertising on Facebook.

In the last one year, Facebook has taken various steps to support small businesses, including offering grants and expanding the company’s skilling initiatives to support the offline to online transition of SMBs.

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