This series has explained the different parts of investing in loans on our platform. We have covered various types of loans and the borrower APR, and in this last post, we will talk about the different purposes of loans and fueling financial inclusion.
There are many different reasons people need credit – unexpected personal expenses, car leases, and business loans. One of the biggest misconceptions around lending in low-income developing countries is that non-bank lenders (Loan Originators) provide funding for nonessential spending at very high prices, but the reality is very different. People mainly borrow from non-bank lenders because a large population cannot open a bank account or access credit products like loans, leases, or even credit cards. Therefore financing unexpected personal expenses like medical treatments or car repairs is nearly impossible without non-bank credit options.
Lack of financial inclusion is an unsolved global problem. More than 1,7 billion people are still underbanked or without access to credit. The credit gap exists between banks and borrowers in emerging and developed markets.
Here are a few examples to better illustrate the need for credit. Currently, small and medium enterprises lack an estimated €400 billion in bank financing in Europe. Only 2% of Indonesians own credit cards, and only 11% of Mexicans use bank credit due to affordability and access issues.
The lack of access to credit products makes many people turn to illegal and dangerous loan sharks when in need. Non-bank credit companies are trying to fix the financial exclusion problem while working together with financial licensing authorities to serve the underserved communities and offer them much-needed credit opportunities.
Funding availability to non-bank lenders drives access to credit and accelerates financial inclusion. Non-bank lenders are in a key position to solve the problem of financial exclusion by providing credit to unbanked populations and businesses globally. They need capital to grow and service the growing demand in the financially excluded population and businesses.
Income is the gateway to financing for non-bank lenders. We co-operate with socially responsible non-bank lenders by providing funding through our platform on competitive terms while striving to achieve cheaper funding costs for the end borrowers.
On Income, investors invest in secured loans originated by Income non-bank credit partners globally. Investors gain access to inflation protection and wealth creation – the non-bank credit companies gain access to cheaper and more flexible funding. They come together on the Income platform to bridge the credit gap and accelerate financial inclusion.
In conclusion, your investments in loans help you and other people across the world.
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