Mobile Phones: A Gateway to Formal Credit

In Mumbai, purchasing mobile phones on EMI has emerged as a significant avenue for individuals in the informal sector to step into the formal credit system. This trend not only fulfills the universal need for a mobile phone but also establishes a credit history, facilitating access to other loans.

The Role of Digital Lending

Digital lending has revolutionized the way consumers access credit, offering EMIs at the point of sale. This seamless process, supported by lenders like Bajaj Finance and HDB Financial Services, along with various private banks, has made credit more accessible. The introduction of no-cost EMIs, sometimes subsidized by OEMs, has further boosted smartphone sales on credit.

Building a Credit Score

Obtaining a loan, regardless of its size, is a crucial step towards building a credit score. This score, influenced by factors such as credit exposure and payment behavior, plays a significant role in determining loan eligibility. According to Bhavesh Jain of TransUnion Cibil, engaging new-to-credit borrowers not only expands the market but also fosters customer loyalty, with over 40% of first-time borrowers returning for a second loan.