Being the latest entrant in the P2P lending sector, CRED revealed that it looks to mitigate the risk factor by implementing a minimum credit score for users who want to borrow. CRED, a fintech start-up founded by Kunal Shah, will now be lending credit to its users from a pool of capital made up of their own contributions, according to a TechCrunch report. CRED Mint will offer returns of up to nine percent to CRED’s 7.5 million user base. The move marks CRED’s entry into the peer-to-peer (P2P) lending space which has been witnessing an influx of fintech players ever since 2017. It is the platform’s first community-driven investment product allowing members to back their peers by giving loans and accrue returns that are more than the rate of inflation. CRED members have an average of Rs. 2,00,000 in their savings accounts according to data provided by CRED. The start-up claims that the scheme will make better use of its members' idle money and recognise responsible financial behaviour by offering returns with minimal risk. How will CRED mitigate risk associated with P2P lending? As per an Indian Express report, non-repayment of loans is a looming risk in P2P lending. The report said that the risk is the result of it being an unsecured loan that is not backed by any guarantees and that the lender cannot redeem anything in case there is a default. Traditional P2P lending platforms invite scrutiny because they attract borrowers with poor credit history and low incomes. However,…
