Millennials borrow more, mainly to finance their lifestyle, but women are leading the charge. “We have seen more and more women, especially millennials, opting for loans. We have seen a 15-18% increase in the number of women who took out loans over the past two years. We believe that this healthy increase is mainly due to the fact that they become independent when it comes to doing financial decisions“said Ketan Patel, CEO of CASHe, an online lending company. A study by TransUnion CIBIL found that there was a 48% growth in credit applications among female borrowers between 2015 and 2018.
Surveys also show that when women borrow, they take out larger loans than their male counterparts. A survey by ZestMoney, an EMI finance company, found that the average loan size for female borrowers is 35% higher than for men.
But what is it that drives women to take larger and larger loans?
Part of the reason for the borrowing boom may be related to the new generation of borrowers and their needs. This is especially evident in the digital lending space.
“Millennials, regardless of their gender, have a wish list they want to tick off, without waiting 5-10 years. Millennials pay the main expenses of their lives, so they benefit from marriage loans, as well as credit card overdrafts and redemptions, in addition to regular loans, ”said Satyam Kumar, CEO and co-founder of LoanTap, a digital lending platform.
Patel said their purchasing power increased as they opted for better job profiles with higher wages. “This gave them the confidence to opt for various types of loan products to improve their lifestyles and handle emergencies,” Patel said.
Some experts have said that more and more women are becoming financially independent and contributing to household finances. According to a survey of female borrowers, #WorkingStree, conducted by IndiaLends, an online lending platform, just over 76% of women make their own investment decisions, and an impressive 88% contribute to household income. .
However, the borrower ratio is biased in favor of employed women. “About 46% of employed women found it easier to obtain a Personal loan compared to 32% of the self-employed, but the demand for business loans was higher among the latter, ”said Gaurav Chopra, founder and CEO of IndiaLends.
There has been a marked increase in financial awareness among Indian women, however. “We have already seen around 38% of female borrowers regularly monitoring their Cibil score, which means that credit discipline becomes a priority for them. Good credit behavior is also rewarded by lenders who play a critical role in attracting more women into the lending landscape by offering them preferential interest rates, ”said Sujata Ahlawat, vice president and manager, Direct to Consumer Interactive, TransUnion CIBIL.
Although Indian women are relatively new entrants to the formal lending space, several surveys show that they take out loans with larger notes. According to data from 1.6 million loan applications in 2018 on BankBazaar, the average ticket size of a mortgage loan when a woman borrows is significantly higher ( ??27 lakh) than when a man borrows (a little less ??23 lakh).
BankBazaar data reveals that the fastest growth rate for women in credit cards is in the fuels segment. This 89% growth in applications for fuel cards for women overtakes lifestyle cards, which increased by 10.49% and travel cards which increased by 73%. According to the TransUnion CIBIL study, gold loans, business loans and consumer loans are the main categories for women. The ZestMoney report found that, on average, more than 20% of loans taken by women were for education, while it was only 6% for men.
Role of incentives
Some states offer lower stamp duties if the buyer of the property is female, which encourages families to borrow on behalf of women. “Also, if the principal applicant is a woman, you can benefit from better interest rates,” said Adhil Shetty, CEO of Bankbazaar.
Another reason why more women borrow could be that they belong to higher income households. “My assumption is that when the woman is the principal applicant, it is usually a two-earner household. Thus, the average income and, therefore, the average ticket size is higher. When the male is the primary applicant, a greater proportion of households are single income households, ”Shetty said.
Whatever the reason, Indian women are entering the formal lending space and taking control of their finances. Lenders are also taking note of this trend and are ready to embrace this new brand of borrowers.
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