The Role of a Loan Agent in Financial Inclusion

India has had the fastest fintech growth among any other country, with its ongoing tech upgrades and robust internet connectivity. While that is a milestone to be celebrated, there is a lot more to be done. For every 87% of Indians that are moving ahead and taking charge of their finances, around 190 million Indians are still unbanked, with no access to traditional banking services.

Typically, due to a lack of education, credit scores, collateral, identification documents, and resources, these people are excluded from formal financial systems. This exclusion often proves to be severely detrimental and makes it difficult for them to access credit, save money, or improve their financial circumstances. Loan agents can bridge this gap and help the lower strata of society avail themselves of financial services.

Who are Loan Agents?

Loan agents are mediators who work at the intersection between lending firms and customers. They help facilitate credit access for individuals and business owners. They also help borrowers with their loan applications, documentation, and disbursement. DSA agents also analyze their financial situation and suggest the best products to help them achieve their financial goals. In many cases, loan partners help people with poor credit scores apply for loans, thereby making them access credit.

Challenges Faced by the Unbanked

• Lack of credit history: One of the hardest-to-overcome challenges faced by the lower class when accessing credit is the lack of financial history. Without a credit history, lenders may not be willing to offer them loans. Alternative credit assessments like looking at a borrower’s payment history with utilities, phone bills, or rent can help these people obtain loans without a traditional credit history.

• Lack of collateral: Most lending firms require loan applicants to submit collateral to access a larger loan amount. Usually, people without access to traditional financial firms cannot provide good collateral. Loan agents can help overcome this challenge by using innovative collateral substitutes. For example, in some cases, loan agents may accept livestock, jewelry, or other valuable items as collateral. These collateral substitutes can help these people access credit, even if they do not have traditional collateral.

• Without proper documentation: Documentation is another barrier that the unbanked have to overcome to secure funds. Most lending firms require an Aadhar card, PAN card, passport, or driving license to access loans or obtain credit cards, but they may not have these documents in order. In such cases, loan partners may use a borrower’s biometric data, such as fingerprints or facial recognition, to identify them. By using alternative identification methods, loan agents can help the lower class access credit despite not having proper identification documents.

How can Loan Agents Help the Unbanked?

Loan partners have to overcome two major hurdles: establishing trust between the lower strata of society and financial institutions, which may have failed them in the past, and helping them secure alternative documentation and collateral to be eligible to access credit.

• Provide financial information: Many people in the unbanked section of society may be unfamiliar with concepts like credit cards, interest rates, and so on. It is the primary responsibility of loan agents to educate people on best financial practices and ensure that they understand what loan they are signing up for. Loan agents can use social media and blogging to create informative static carousels and short-form video content to pass on important information nuggets to them.

• Help them access microfinance loans: Microfinance loans are a type of loan that offers funds to lower-income individuals or small businesses, who otherwise do not have financial resources. Microfinance loans can be used to start or grow a small business, pay for medical expenses or emergencies, or invest in education. By providing access to microfinance loans and helping individuals avail of funds, DSA agents can help the unbanked achieve their financial goals.

• Offer personalized advice: Loan agents are in demand because they analyze their clients’ financial well-being and offer them customized advice. They work closely with borrowers to understand their needs and ensure that they receive the best financial product to alleviate their circumstances. DSA agents also remain in touch with their clients throughout the loan application process to help them manage their loan payments and provide guidance on financial planning and budgeting.

• Help them build trust in formal financial institutions: The lower-income households may have skeptical notions regarding financial institutions and may not have trust in the process due to past experiences or cultural barriers. Loan DSAs must be patient and provide fair services and reasonable loan products. By attempting to build trust between lending firms and customers, they can help the lower class become more comfortable using formal financial systems, potentially leading to increased financial inclusion in the long term.

• Reach remote areas: Loan agents also have another advantage. Through digital marketing channels, they can reach a wider audience, even in the most remote areas, bringing financial services to those who could not otherwise access them. With this, loan partners can attempt to bridge the gap and include the unbanked in traditional financial practices.

Loan agents must always operate ethically to truly benefit the community. They have to be transparent and must never withhold details or spread misinformation regarding their products. Otherwise, they may end up perpetuating the same exclusionary practices that have prevented the lower class of society from accessing financial services.

Loan agents can play a vital role in helping the lower-income households people access credit. By using credit assessment methods, alternative identification documents, and innovative collateral substitutes, they can help the lower-income households overcome significant barriers.

To ensure that you can offer the best financial products to the unbanked population, choose a reputed lending firm like Andromeda Loans. They have a wide range of products, many of them suitable for low-income or financially-disadvantaged families, built with cutting-edge technology. As an Andromeda Loan agent, you can also build an excellent social network, enjoy flexible working conditions, and avail yourself of better compensation for your services.