Why Logistics Players should focus on the Digitization of Micro Loans

By Logistics Tech Outlook | Monday, November 11, 2019

The logistics industry is expanding and the players are focusing on the digitization of the lending process of microloans generating more income.

Fremont, CA: Logistics management is vital for the efficient operation of the supply chain, and the logistics industry is going to proliferate in the future due to the boom in the e-commerce and the retail market. Thus, to encourage logistics players, start-ups such as LoanZen, Porter, LetsTransport, and BlackBuck are either lending or planning to lend to fleet operators, driver owners, and even first-time borrowers to finance vehicles and also to fund the purchase of spare parts. The start-ups will formalize the logistics loan lending process by leveraging data and technology. Uttam Kumar Garodia, the head of financial services at Blackbuck, said, “We are processing microloans such as replacing parts like tires, fuel at designated fuel stations in partnership with other lenders, but we are planning to apply for a license shortly.”

The trucking industry is approximately $100 billion in size, and the organized sector finances only 30 to 40 percent of the market. Experts say that used truck owners make up roughly 85 percent of the trucking industry; however, the organized sectors finance new trucks. These start-ups are targeting the truck owners looking for finance to buy used trucks. The demand to purchase used vehicles is enormous and these start-ups are intending to position themselves in this market.  The truck owners that apply for loans own one to five trucks on an average and fall short of money. These logistics loans aim to keep vehicles in running condition and generate more income from the EMIs.

Bengaluru based logistics company; Porter is planning to skulk in this market space next year. The company intends to offer personal loans to its driver-partners in emergencies such as family, wedding, accident costs, and more. Experts believe that if the company can help the driver-partners in their financing needs, then the company will generate more business. Porter has a network of 40,000 trucks and caters to retail, e-commerce, FMCG, and logistics companies. The company has run a pilot with few lending partners and plans to take the product like soon.

Industry executives believe that digitization is an essential aspect of the landscape, but the need for physical verifications and checks is significant. Even though the evaluation process is going digital, the presence of a robust physical network is still crucial. The interest rates are high, but the demand remains strong, and the tech-enabled money lenders have substantial business opportunities. 

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