Digital Lending Rails, Part 2: How Lenders Can Adapt Where India-Like Digital Lending Rails Do Not Yet Exist

Not every market enjoys India’s digital infrastructure. Across Asia, Africa, and parts of Latin America, lenders face thin credit bureaus, fragmented data, and weak secured-transaction laws. Yet progress is still possible.

The key is adaptation—finding pragmatic, risk-controlled workarounds while laying the foundation for long-term reform. This is where Factfin’s Build–Run–Scale methodology helps lenders move forward responsibly, even in policy-constrained environments.

1. Building Credit Visibility Without Bureaus

When traditional credit bureaus are underdeveloped, alternative data becomes the foundation of risk assessment. Lenders can construct proprietary credit engines using a mix of transactional, behavioral, and financial data that reflect real business activity.

Factfin’s experience shows that these data sources can provide as much predictive value as formal bureau histories when combined intelligently. They include:

• Bank-statement and transaction data: Often the most reliable indicator of MSME performance, capturing cash inflows, repayment behavior, and seasonality. Many banks already hold this data internally but underutilize it. Open-banking or consent-based sharing models can further extend visibility across financial institutions.

• Accounting and ERP platforms (e.g., Xero, QuickBooks, or local equivalents) that show invoice-level sales and expense data.

• E-commerce and POS systems that provide daily turnover patterns and buyer diversification.

• Mobile-money and telco records revealing cashflow consistency, payment frequency, and geographic reach.

These data streams allow lenders to build proxy credit scores and cashflow-based lending models even where formal registries do not exist.

Factfin has used such datasets in prototype designs with commercial banks and fintechs, demonstrating that creditworthiness can be quantified through real economic activity—not just collateral or legacy bureau scores.

2. Replicating Collateral Functionality Without Registries

In markets lacking a centralized collateral registry, lenders can still establish control through contractual or technological means:

• Escrow and tri-party agreements that manage receivables payments directly through trusted intermediaries.

• Digital asset-tracking and GPS tagging for movable assets such as vehicles or equipment.

• Platform-based receivables financing, where buyer payment confirmation substitutes for legal perfection.

These private mechanisms create “functional security interests” even before legal reforms are enacted.

3. Embedding Governance in Market Platforms

Where regulators have not yet defined detailed conduct rules, platforms themselves can act as governance layers. Marketplaces, aggregators, or supplier networks can implement verification, dispute resolution, and payment-release protocols.

Factfin has observed this in practice: when platforms enforce delivery verification or escrowed settlements, lenders gain greater assurance of loan performance—reducing reliance on external regulation.

4. Designing for Transition

Innovation should not get locked into temporary workarounds. Lenders can future-proof their systems by:

• Adopting modular architecture that can integrate new APIs or data registries later.

• Using consent-based data-sharing from the start, anticipating privacy and data-protection reforms.

• Implementing auditable governance frameworks that can be recognized by regulators when formal infrastructure arrives.

Factfin emphasizes this transition-readiness in all prototypes: build for today’s gaps, but ensure alignment with tomorrow’s rules.

5. Mobilizing Collective Solutions

No single lender can overcome infrastructure gaps alone.
DFIs, industry associations, and fintech consortia can play a catalytic role by co-funding shared utilities such as:

• Pilot collateral databases or multi-lender KYC platforms

• Standardized data taxonomies for SME financial statements

• Regulatory sandboxes that allow safe testing of new credit mechanisms

These collective efforts create public-good infrastructure while preserving commercial incentives.

6. Factfin’s Role: Enabling Controlled Innovation

Through structured prototyping, Factfin helps lenders design and test solutions that operate safely even without fully developed infrastructure.

• Build: Prototype new cashflow-based lending models using available data sources.

• Run: Pilot them within strong governance and monitoring frameworks.

• Scale: Transition proven models to regulatory alignment as policies evolve.

Our engagements—from ANZ’s accounting-data lending design to WaveScore’s credit-governance reforms—demonstrate that controlled experimentation works even before full digital rails exist.

7. The Opportunity Ahead

For policymakers, the message is equally important: enabling innovation doesn’t always require waiting for perfect infrastructure. Incremental policy steps—like data-sharing principles or electronic invoicing pilots—can unlock private-sector momentum.

Lenders that engage early, with disciplined risk controls, will be best placed to benefit once national systems mature.

Factfin’s mission is to help them navigate that path—bridging the gap between innovation and regulation, and proving that progress is possible even before the rails are built.

About Factfin

Factfin helps banks, fintechs, and DFIs design and operationalise next-generation credit models through its Build–Run–Scale approach. We enable lenders to prototype, govern, and scale innovation with confidence—even in markets where policy frameworks are still catching up. Learn more about our services www.factfin.com/our-services.