Can startups help India’s poorest escape loan sharks?


The Delta variant of the Covid-19 virus has left a trail of human tragedy and economic destruction in India. As cases steadily decline and unemployment rates slowly recover, India still faces a series of structural economic challenges. As more of India’s poorest people gain access to employment, they face the reality of poverty premium, the fact that the poorest often pay the most for essential services such as electricity and access to credit.


India is among the five fastest growing economies in the world. As a result, many Indians have benefited from employment growth. However, even those who have a job often still have financial difficulties. The need to finance personal emergencies, life events or education leads many Indians into the hands of loan sharks, payday loans and microcredits which can become very expensive in a short time.

Especially during the pandemic, loan sharks flourished, providing desperate Indians with access to credit with excessive fees and interest. Earlier this year, Google banned fraudulent instant loan apps from its Play Store after a series of suicides and police investigations. However, these apps are just a small subset of predatory loan products offered to India’s poorest people.

Europe has seen a mix of increased regulation and innovation to tackle this problem. While payday loans still exist, one of the largest payday loan providers, Wonga, went bankrupt. There is also a range of alternative financial products for low-wage workers who need access to finance.

Earnings access solutions such as Wagestream, To win, Looking forward & Financing of salaries launched a new instant payroll model, allowing employees to be paid after each shift rather than their monthly pay.

Startups typically use a line of credit to fund early payroll withdrawal and charge employees or their employers a fee to fund the cost of credit. As the salary has already been earned, but not yet paid, the cost of credit is generally much lower than what would be offered directly to the employee.

The value proposition for employers is increased financial well-being of their employees and leads to increased retention, making the company more attractive as an employer.

India has seen little innovation in this space so far. However, the market for access to earned wages is now expanding to India. Refyne is currently the only solution available in the Indian market and has seen massive growth in a short period of time.

The startups recently raised $ 20.1 in investment from DST Global (which has already funded the neobank Revolution) and RTP Global. It is also supported by the backers of Wagestream QED Investors as well as Jigsaw VC & XYZ Capital.


Refyne has only been running for a year but has managed to become an important platform. So far, the company has acquired 100 client companies with more than 300,000 employees.

Chitresh Sharma, Founder and CEO of Refyne is a seasoned entrepreneur, previously Head of UK-based Fintech. Swipii.

Explaining why he left the UK to launch Refyne in India, Sharma said: “India is in a unique situation. It has a large population, with many of them having no credit rating. This prevents them from accessing traditional bank loan products and leaves them to loan sharks and payday lenders. To access these loans, people have to pay interest rates ranging from 300-400%.


Refyne says they surveyed 1,000 Indian employees with the striking results: 86% of those who had ever used payday loans to close a financial gap would not have taken out their loan if they had had access to their earned salary.

“It’s the 21st century: we can order taxis and food at the push of a button, but we’re still waiting for our pay for 30 or even 45 days. So there is a huge opportunity to solve this problem, especially in India, ”says Sharma.

At the same time, India has a large number of underbanked people. Sharma argues that alternative financial products can bridge this gap: “Confidence in banks is actually lower than in employers, which is why the model of access to wages earned through employers is very well suited. at the Indian market.


However, Sharma is convinced that there is an even bigger problem to solve, beyond access to pay. “Financial education is not taught in schools. It leads people to make bad financial decisions. We need to educate people on the importance of personal budgeting. Indians are spending increasing amounts on consumption, but wages are not rising as quickly.

Refyne plans to gradually expand its product offering, including financial education and user access to a range of financial services.


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