While several reports have pointed towards a credit gap existing in the MSME sector, none of the strategies adopted have looked at the problem from a holistic lens, until now.
The OCEN framework, launched silently in October 2020 provides a framework to address this untapped demand.
A part of the India Stack, OCEN allows interoperability of apps for smoother credit flow and introduces a special role to empower the borrower- a Loan Agent (LA).
Who is a Loan Agent in the OCEN Framework?
A Loan Agent is defined as an agent of the borrower within the OCEN network. Loan agents help borrowers select the loan offers best suited to their needs and constitute both ‘Borrower Agents’ and ‘Loan Service Providers.’
A Loan Agent could be an application or platform that has several potential borrowers. For example, Amazon.
Amazon as a Loan Agent could integrate its platform with lenders part of the OCEN framework and provide access to customised products designed by lenders to potential borrowers on the platform (for example, sellers registered on the Amazon platform).
In doing so, it would act as a marketplace for loans and charge borrowers a fee for the services it would provide to them.
How is a Loan Agent different from a Direct Selling Agent (DSA) of a Lender?
The primary difference between a Loan Agent and a Direct Selling Agent of a lender is that while the DSA acts as the agent of the lender, a Loan Agent acts as the agent of the borrower.
While earlier the Loan Agent could only act in a limited way, the new OCEN 4.0 framework has introduced a Products Network which is to be managed by Loan Agents where LAs could collaborate with lenders to design credit products that are customised to the borrower’s needs.
This bridges the gap between the stringent requirements of the lenders and the borrowers who may be eligible for a loan, yet unable to get one.
Conclusion
Loan Agents within the OCEN framework play a very important role, with the potential to resolve the problems borrowers face within the traditional credit process.
From altering the way loans are applied for, to customisations of loan products, LAs bring the market to the borrower instead of the borrower going to the market.
Loan Agents, and in general, OCEN provides an impetus to the digital lending sector with the potential to do exactly what the UPI did in the digital payments sector. In fact, UPI is a constituent of the OCEN framework, allowing disbursements and repayment methods for transactions taking place within the framework.
