From smartphones to scorecards: How EMIs are dialing up access to loans

Mumbai: Buying a mobile phone on EMI is doing more than just putting smartphones in hands—it’s giving individuals in the informal sector a ticket to the formal credit system. While schemes like Jan Dhan Yojana ensured widespread bank accounts, phone EMIs are now helping people build credit histories, unlocking access to bigger loans, reported TOI.

“The key channels for the entry of new-to-credit (NTC) borrowers are consumption-led loans such as mobile phone purchases and two-wheelers. Mobile purchases dominate because everyone needs a phone. This trend is fueled by tie-ups between manufacturers who have access to the device,” TOI quoted Bhavesh Jain, MD & CEO of TransUnion Cibil, as saying. However, there has been a slowdown in adding new-to-credit customers this year.

Digital lending has made it seamless to get credit at the point of sale. Lenders like Bajaj Finance, HDB Financial Services, and private banks offer EMI loans where payments are processed through a simple debit card swipe. Sometimes, original equipment manufacturers (OEMs) sweeten the deal with interest subvention, resulting in no-cost EMIs—a driving factor behind the majority of smartphone sales on credit. In some cases, lenders share a portion of the subvention with customers, offering competitive rates.


Even a small loan builds a credit score, making future borrowing easier. This score reflects various factors like credit exposure, utilization, inquiries, payment behavior, delinquencies, and account status. While lenders don’t rely solely on Cibil scores, most consider them an important part of loan eligibility assessments.

Jain highlights that introducing first-time borrowers to credit benefits lenders, too. “Our data shows over 40% of first-time borrowers return to the same creditor for a second loan,” he said. Besides expanding the market, it builds customer loyalty—a win-win for lenders and borrowers alike.

(With inputs from TOI)