AI-based systems to help more SMEs get access to credit: Nandan Nilekani

Nandan Nilekani added that credit decisions by artificial intelligence (AI)-driven systems will be based on business flows rather than being asset-based.

4th Feb 2020
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Aadhaar architect Nandan Nilekani on Tuesday batted for artificial intelligence-based credit disbursal systems, stating it would make access to funds easier, especially for small and medium enterprises.


"We shouldn't get distracted by the current challenges. Obviously, we have an issue with bank non-performing assets (NPAs), non-banking financial company NPAs, but out of this will emerge the next generation of credit which is going to be entirely tech and data-based," Nilekani said at an event in Bengaluru.


AI



He added that credit decisions by artificial intelligence (AI)-driven systems will be based on business flows rather than being asset-based.


"It is good for newcomers because they may not have assets," he said.


A recent Reserve Bank of India report had said non-bank lenders witnessed stress in their asset quality in the first half of the current fiscal, with gross NPA ratio increasing to 6.3 percent in September 2019 from 6.1 percent in March.


Nilekani explained that AI can be used to figure out good and bad credit risk, and rates at which loans are given can be tweaked based on such assessment.


"Today, big guys get cheap credit, small people get expensive credit through money lenders and all. All that will go away," he added.


Asked about his message for entrepreneurs, the Infosys Co-founder said they should focus on "getting to the path of profitability fast".


He added that internet businesses globally had turned profitable after a few years of losses, and therefore, getting to that path should be kept in mind.


A recent research by Dun & Bradstreet India (D&B’s) reveals that access to finance and mindset issues are the major areas of concern.“This is rightly so because, in India, only 4 percent of MSMEs have access to a formal source of finance, whereas the number in a country like Vietnam is 37 percent,” Manish Sinha, Managing Director of D&B’s says.

(Edited by Suman Singh)


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