FLDG participation by fintechs – What is powering it?

RBI green-flagged the FLDG framework on June 8th.

For starters, the First Loss Default Guarantee (FLDG) is a lending agreement between Regulated Entities (REs), Lending Service Providers (LSPs), and the borrowers where LSPs take liability in case of credit default. RBI approved the implementation of the FLDG framework as a follow-up to the Digital Lending guidelines released last September.

FLDG framework can create a win-win situation for both the regulated entities and the borrowers who are not eligible for credit. In case the borrower defaults, some fintechs (who are LSPs) can provide cover up to 5%

Why are fintechs taking up this liability?

Many reasons. The primary reason is their access to alternate data sources and their ability to design strong credit underwriting models using that data.

The underwriting and credit decisioning model followed by fintechs enables them to choose the right borrowers. And with the aid of data science, these models are only getting enhanced.

Data Science - Forging strong credit decisions

Data Science as a technology has opened a plethora of opportunities for fintechs since their business decisions revolve around varied and complex data sets. Using efficient and adept Machine Learning (ML) algorithms, data scientists and AI engineers are fueling fintech credit decisions in a number of ways.

Technology has always been in favor of fintechs. From encouraging banks and NBFCs to improving creditworthiness and increasing credit access to borrowers, technology is driving fintechs to greater heights.

With Data Science, we can expect fintechs to grow even more powerful in decision-making.

Our co-founder, Madhusudanan R, moderated an engaging panel discussion with fellow industry leaders at the Chennai Fintech Meetup on 'Fintech Partnerships - Accelerating Growth For All'.

Nayan Ambali, our SVP - Business Development, had a fantastic time participating in a panel discussion at the 3rd edition of the BW Festival of Fintech, organized by BW Businessworld.

M2P was recognized as an emerging unicorn by the 'ASK Private Wealth Hurun India Future Unicorn Index 2023'. This prestigious index highlights India's fast-growing start-up ecosystem, and this recognition fuels our journey to create a global impact within the fintech ecosystem.

We were felicitated in the 'Dun & Bradstreet Start-Up 50 Trailblazers 2023' category in the Leap India Start-Up Summit 2023 conducted by Dun & Bradstreet India & State Bank of India.

Friends of Figma, Chennai, organized 'Figma Config 2023', a designers meetup where Figma enthusiasts network and engage in knowledge-sharing sessions. We were the venue partner, and the event was hosted at our Chennai office.

That's it for now. See you again soon with all the need-to-know fintech updates!

Stay tuned. Stay curious.