According to the report submitted by The Business Research Company, titled ‘Lending Global Market Report 2022 – Market Size, Trends and Global Forecast 2022-2026, the size of the global lending market is expected to increase from $7,708.08 billion to $7,833.88 billion between the years 2021 and 2022.
How Does the Lending Market Work?
Before delving into an explanation of the Indian Lending Market, it is necessary to consider what exactly is considered a ‘leading market’. Essentially, the global lending market consists of the sales of the lending services such as loans to customers by institutions. These institutions may be organisations, individual people or even partnerships, and they provide secured or unsecured loans to those in question. If one were to seek out a few examples of lending entities, consider financial institutions such as banks providing student loans or home loans or personal credit institutions.
The generation of revenue, in this case, is entirely dependent on the interest that borrowers are charged in exchange for the money that is lent out by these lending organisations. While loans are prominent and particularly significant in the functioning of the lending market, interests charged by banks for the usage of credit cards and other payment cards and mortgages are also part of the lending market.
Trends in the Global Lending Market
One of the trends that have been up-and-coming in the functioning of the global lending market is that of participation lending. As the name suggests, participation lending involves more than just the entity that is lending the capital and the borrower. Here, multiple lenders participate in providing loans to a single borrower. This is a method that is gaining prominence as it reduces the risk of lending out large capital at a time. Here, loans are provided by one financial institution but are processed and administered by another. It will also enable the banks to diversify and seek out other channels of lending. For the borrower, may they be an individual or an organisation, it allows them to seek out further avenues while ensuring that they have enough funding as well as a third party shouldering the risk along with them.
The Indian Lending Market
The size of the total lending market in India is Rs 156.9 Lakh crores, showing a hundred percent from the Financial Years 2017-2021. Of the amount mentioned, retail and commercial lending has contributed about 49%, while microfinance has contributed about 2%.
Major product categories that comprise the Indian lending market:
- Retail Loans: Retail loans are generally provided by a certified financial institution such as a bank or a credit union to purchase an asset, which may be property, vehicles or electronic equipment. Retail loans include personal loans, credit cards, consumer durable loans, two-wheeler loans, home loans, auto loans and business loans.
- Microfinance: Microfinance refers to financial services and loans that are provided to low-income individuals who usually cannot avail regular banking services. The idea here is to offer small credit in the form of working capital loans, or microcredit. It is necessary to note that microfinance is entirely independent of commercial and retail loans.
- Commercial Loans: Commercial Loans are generally open to business owners to address their capital needs while running a business. These could involve increasing working capital, acquiring new machinery, building infrastructure etc.
How Do Loan Agents Attract More Customers?
For loan agents, their primary role is to devise ways to sell loans to their customers. As a customer, however, you need to be aware of what you are being dragged into and what is proposed to you. This is a brief discussion of the type of strategies used by agents that you need to keep in mind:
- Be aware of the elevator pitch. Every loan agent will have one, with prospective attractive qualities of the loan and the benefits you will derive out of it. While most of it is credible, make sure that you do your research before allowing them to talk you into something.
- They will try to make it about you. One of the best marketing strategies is to appeal to human emotions. Make sure you are not being guided by your emotions, but rather rationality.
What needs to be understood is that selling loans is a market as well, one that is self-sustaining and entirely dependent on the customers. There have been several instances where customers have been tricked into loans they did not require in the first place. The key aspect here is to always do your research prior to meeting with an agent. Know exactly what you are getting into, allow yourself to work out the details, what benefits you want, what capital you will be revealing and its interest rates. Essentially, the secret to evading the action of agents is self and market awareness.
