PhoneLoan Offers Instant Digital Loans Up to NPR 5 Lakhs

Kathmandu. How carefully do you look at the information displayed in your bank's mobile banking application? If you don't pay much attention, take a look now. You might see an icon named 'BankLoan' or something similar. This could be very beneficial for you.

This is a system that can give you an instant loan. For this, you don't have to go to any bank branch, nor do you have to pledge any collateral. Without spending a single piece of paper, you can get a loan within one or two minutes through your mobile.

Various banks and financial institutions are minutely analyzing the behavior of their customers to determine whether that person is eligible for a loan without collateral and, if so, how much loan they are eligible for. 'PhoneLoan' is assisting in this in-depth analysis.

What is PhoneLoan and how much can be obtained?

PhoneLoan is a digital loan program operated under the 'Credit Infrastructure as a Service' platform of PhoneLoan Private Limited. In simple terms, it is a loan directly available through a mobile app from the banking system without any paperwork.

This service is being provided under the digital lending guideline issued by Nepal Rastra Bank. According to Uddhav Sigdel, Head of Risk and Partnership Department at PhoneLoan, under this, a customer can get a personal loan of up to a maximum of 5 lakh rupees.

'This is a completely paper and collateral-free facility. This is 100 percent digital lending,' Sigdel says. 'No customer has to go to a bank branch, submit documents, sign, or show collateral. Customers can get a loan of up to 5 lakh rupees with a tenure of 1 month to 3 years.'

Facility in 11 Commercial Banks, 17 Billion Loans Disbursed

This facility from PhoneLoan is currently being provided by major commercial banks in Nepal. According to department head Sigdel, 11 commercial banks have been onboarded to the PhoneLoan system so far, and the service is fully live in 10 banks.

According to him, this facility is available in Nepal Investment Mega Bank, Nabil Bank, Kumari Bank, Laxmi Sunrise Bank, NIC Asia Bank, Agriculture Development Bank, Prabhu Bank, Rastriya Banijya Bank, and Citizens Bank. Additionally, loans are also being disbursed through the digital wallet eSewa using this platform.

Looking at the data from the initial days to the present, a significant amount of loans has been disbursed through PhoneLoan. So far, loans have been disbursed more than 5.5 lakh times through this platform. In terms of amount, PhoneLoan has stated that more than 17 billion rupees have been invested through PhoneLoan so far.

Who gets this facility? How is eligibility measured?

PhoneLoan is not a facility that everyone can get just by wishing for it. For this, the customer must have a good banking transaction track record. Natural individuals with regular income visible in their bank accounts are the main target group.

Especially, banks and financial institutions prioritize customers with payroll accounts or other sources of regular income like house rent. Sigdel states that PhoneLoan performs data analysis based on the priority criteria set by the banks.

'The main basis for identifying a customer's source of income is their bank account transactions,' Sigdel says. 'Our Decision Analytics Engine minutely analyzes the customer's transactions for the last 12 months. Our artificial intelligence system easily detects whether the money coming into the account is actual salary or transferred from somewhere else.'

The system determines the final limit for the loan amount only after analyzing several parameters such as the customer's income, nature of expenses, account balance, and transaction trends.

Currently, when combining the data from all banks, more than approximately 5 lakh customers are pre-approved, meaning they are eligible for a loan, and they can get an instant loan by opening their mobile banking app anytime if they wish, PhoneLoan has stated.

Application in Minutes, Money in Account Instantly

Customers do not need to apply anywhere to get a PhoneLoan. If a customer is eligible for PhoneLoan and their bank provides the PhoneLoan facility, a notification or icon saying 'PhoneLoan Ready' will appear on their mobile banking application, says Sigdel.

'If you see the PhoneLoan icon in your mobile banking, you should understand that you are eligible. If you are taking a loan for the first time, you need to register by providing your email ID. Then, by clicking on 'Apply Now', you need to select the amount and tenure you need within your approved limit.'

After this, the system will automatically display the applicable interest rate, processing fee, and monthly installment on the screen. Once all terms are agreed upon and you click 'I Agree' and enter your mobile banking transaction PIN or OTP, the loan amount will be credited to the customer's account within seconds.

Interest Only on the Amount Used

Recently, PhoneLoan has also introduced a new feature called 'Multi Disbursement' keeping customer convenience in mind. He says that customers have really liked this feature. The company has stated that this feature allows for multiple disbursements within the credit limit.

For example, if the system shows a person is eligible for a loan of 1 lakh rupees, but the customer only needs 20,000 rupees at the moment, they don't have to withdraw the full lakh and pay interest.

Sigdel says, 'Previously, after withdrawing 20,000, there was a compulsion to repay the previous loan to take the remaining 80,000. But after the 'Multi Disbursement' feature arrived, customers can withdraw loans multiple times as needed, such as 10,000 today and 15,000 tomorrow, from their 1 lakh limit. They only have to pay interest on the amount withdrawn.'

What is the risk of lending without collateral?

What is the risk of bank money being lost when lending without collateral? This is the most pressing question. However, PhoneLoan's data shows surprising results. Even with over 17 billion rupees disbursed as loans without collateral, its non-performing loan (NPL) ratio is only 2.12 percent, which is a very satisfactory situation compared to the overall banking industry's NPL in Nepal. The main reason for such low non-performing loans is its credit scoring.

PhoneLoan determines the customer's credit score by analyzing the customer's account transactions and payment behavior from various aspects. Based on that credit score, the customer's loan limit is determined and adjusted over time.

The main reasons behind this are strong technology and continuous monitoring of customer behavior. 'There is no physical collateral here; the customer's behavior is the collateral,' says department head Sigdel. 'We continuously evaluate the customer through the 'PhoneLoan Repayment Index'. The score is determined by looking at the behavior before and after taking the loan. The limit of those who repay installments properly keeps increasing, while the limit of those with bad behavior decreases or is canceled.'

It is very important for the customer to use the loan correctly and make payments on time. Otherwise, the bank can proceed with the necessary procedures for loan recovery according to prevailing rules and banking procedures, says Sigdel.

Moreover, there is no hassle even for loan repayment. On the installment due date, the bank automatically deducts the money from the customer's account. Sigdel says that customers don't have to go and pay themselves; they just need to maintain sufficient balance in their account.

If any customer delays or defaults on even a single installment, the system blacklists them. In such a situation, they are banned from using the PhoneLoan facility from all other 10 banks in the future. This strict policy is also believed to be the reason why bad loans are under control.

How is PhoneLoan different from a Credit Card?

Many might think, isn't this type of loan also available through credit cards? Then how is PhoneLoan different? However, Sigdel states that its concept is more detailed and comprehensive than that of a credit card.

According to him, the purpose and nature of credit cards and PhoneLoan are different. 'Credit cards are mainly used for swiping when purchasing goods at stores or merchants. But PhoneLoan is a facility where cash comes directly into your bank account. Suppose someone suddenly falls ill or needs emergency cash at home; a credit card swipe won't help in such a situation; PhoneLoan provides great relief then.'

In terms of interest rates, PhoneLoan is also cheaper than credit cards. While credit cards typically have an interest rate of up to 2 percent per month (24 percent annually or more), PhoneLoan has set affordable interest rates similar to home loans or auto loans. Currently, such interest rates range from single digits to 14-15 percent based on the bank's base rate.

Since the interest rate varies by bank, if a customer is eligible with more than one bank, they also have the freedom to choose the bank offering the lowest interest rate and take the loan.

PhoneLoan up to 10 Lakhs Coming for Small Businesses

PhoneLoan, which has been providing loans up to 5 lakh rupees to individual consumers so far, is now preparing to expand its scope by targeting small and medium-sized businesses.

Nepal Rastra Bank has recently issued a circular allowing digital lending of up to 10 lakh rupees for small and micro businesses. PhoneLoan is in the final stages of preparing a new product for MSMEs based on this.

'Currently, PhoneLoan is used to fulfill personal needs. Now we are working on a model to provide business loans up to 10 lakh rupees to small businesses. This will provide great relief to small entrepreneurs doing business worth 25-30 lakh rupees,' Sigdel shared his future plans.

Contribution to Expanding Financial Access and Capital Formation

PhoneLoan has not only made people's daily lives easier but has also played a significant role in financial literacy and building credit history, the company claims.

Department head Sigdel says, 'Today, whoever takes a PhoneLoan of 50,000 or 1 lakh and honestly repays the installments on time is building a good credit score in the system. Tomorrow, when they become entrepreneurs or do large-scale business, this record of good behavior will provide them with the biggest basis for taking a loan of 50 lakh or 1 crore at the bank.'