The concept of peer-to-peer (P2P) lending has a surprisingly long history, dating back to the 18th century when individuals would lend money directly to one another. However, the rise of established financial giants relegated P2P lending to the sidelines for a significant period. The recent technological revolution, however, has breathed new life into this age-old practice, particularly in the ever-evolving Indian market.

The Indian P2P lending landscape is currently experiencing a period of rapid growth, fueled by a potent combination of factors. Increased digital penetration, that has led to informed investors now seeking alternative investment options, and a dynamic fintech ecosystem are all contributing to this surge.

Per Annum is one P2P platform where they have focused on building a low-risk product since Day 1 and that’s why Per Annum has been able to deliver expected returns 100% of the time so far.

 But what makes Per Annum’s P2P Product Low-Risk?

Before you invest in any P2P platform you need to know what type of borrowers would get access to your capital. For P2P companies, it’s eventually the quality of the overall loan book which decides how safe your money is and the longevity around the proposition of stable returns. 

 Types of Borrowers in P2P Landscape  

As an investor venturing into the world of P2P lending, understanding the risk profile of the borrowers you’re entrusting your capital with is paramount. Broadly speaking, borrowers can be classified into two distinct categories: high-risk and low-risk.

 High-Risk Borrowers

Borrowers who are considered high-risk typically have low credit scores or limited credit history, making it more likely for them to default on their loan repayments. In an attempt to get higher returns, some companies take on these high-risk borrowers, offering returns ranging from 17-18%. However, this approach can lead to a significant increase in Non-Performing Assets (NPAs) for the P2P platform, which ultimately has a negative impact on investor returns. It’s important for investors to be aware of the risks involved and to do their due diligence before investing in P2P lending platforms.

 Low-Risk Borrowers

Low-risk borrowers are individuals who can pay debts on time.

With this approach Per Annum’s sister entity Lendbox makes smart lending decisions by using AI-based Credit assessment checks to evaluate how trustworthy borrowers are. To assess the creditworthiness of borrowers, we look at various data points, including bureau analysis, transaction data, FOIR (Fixed Obligation to Income Ratio), bank statement analysis, physical address verification, and average monthly income etc. Using this approach, we can make informed lending decisions and provide fair and safe practices to our borrowers.

Per Annum’s sister entity, Lendbox, which is India’s one of the first NBFC-P2P has been able to reach an overall disbursal of more than 8500 crores, thanks to their strategic partnerships with some of India’s leading fintech players such as Khatabook, NAVI, and Snapmint, SaveIn etc. These partnerships helped them create a well-diversified loan portfolio.

In addition to the substantial numbers on the borrower’s side, Per Annum significantly expanded its investor base as well, boasting an active investor count of more than 5 Lakh investors and achieving a total AUM of ₹3000 Crores in May 2024.

 Diversification

Even with a focus on low-risk borrowers, diversification remains an essential element in managing risk effectively. Per Annum goes beyond simply connecting you with a single borrower; instead, they distribute your investment across multiple borrowers. This approach acts as a safeguard. Suppose you invest ₹1 lakh on the Per Annum platform. This amount won’t get distributed to a single borrower but rather distributed amongst borrowers from different categories. This ensures that even if a percentage of borrowers default, the impact on your overall return is minimized, mitigating potential losses. Following this approach your maximum exposure per borrower is as low as Rs.100-1000. Generally, in the case of P2P lending Gross NPAs of 5% are considered healthy and you still get the expected returns. However, in the case of Per Annum, the gross NPAs are currently less than 1% due to their robust lending mechanisms and risk mitigation approaches.  

 Per Annum’s AUM Growth: A Testament to Success

 Per Annum has achieved remarkable growth in AUM over the years, so far by May 2024, the company achieved remarkable growth with an AUM of close to ₹3000 crores and over 5 lakh active investors, which is a testament to the trust and faith investors have placed in Per Annum.

 Maintained Gross NPAs of less than 1%

 Per Annum’s commitment to quality lending is evident given their impressive gross NPAs which is less than 1% with a 100% success rate for investors. Sister entity Lendbox achieves this by analyzing various factors such as Bureau analysis (CIBIL Score above 720), Bank Statement Analysis, FOIR (Fixed Obligation to Income Ratio), credit card limits & repayment behaviour, transaction data from partner platforms, average monthly income, address verification, etc. to assess creditworthiness. Our comprehensive approach minimizes the chances of default and ensures a rigorous evaluation of the borrower’s repayment ability, which in turn ensures a high credit quality.

 Per Annum’s Unique Selling Proposition (USP)  

Per Annum’s unique selling proposition lies in its focus on low-risk approaches. The platform is committed to building trust with investors by providing them with a transparent and secure platform to invest. By leveraging data-driven assessment techniques, Per Annum ensures that investors are connected with low-risk borrowers who have a proven track record of responsible loan repayment.

Per Annum’s commitment to diversification is another key aspect of its USP. By distributing the investor’s capital across multiple borrowers, Per Annum minimizes the risk of high NPAs, even in the case of some of the borrowers defaulting.

 Dedicated Wealth Managers  

The wealth management team plays a crucial role in providing valuable services to the investors. A dedicated wealth manager helps investors manage their investments and guides them with a suitable plan. Having a wealth manager can help investors save time and effort in managing their investments. Overall, the benefits of having a wealth manager can include personalized service, access to a wealth of financial knowledge, and peace of mind knowing that a team of professionals is managing your investments.

In the end, Per Annum’s low-risk approach to P2P lending is directed towards focusing on sustainable returns. By prioritizing on India’s top credit seekers, diversification, and transparency, Per Annum has been able to gain a 40% market share for itself in the P2P lending market. Its success is a testament to the growing demand for alternative investment options in India.

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