Ajay Badlani has been a seller on Amazon India's e-commerce platform for more than two years. However, because of working capital strains in the last few months, growing further had become difficult. That's when a new initiative started by Amazon, in association with Bank of Baroda came to his aid.
The e-commerce giant has tied up with the bank, where the state owned lender will offer credit in the range of Rs 1 lakh to Rs 25 lakhs to people like Badlani who are sellers on Amazon's platform at attractive interest rates.
In India, such small unsecured loans have low approval rates and the interest rates charged to the small businesses are in the range of 18 per cent to 30 per cent. Under this new programme, loans will be offered to Amazon sellers at interest rates of 10.45 per cent to 11.50 per cent annually. These loans will also be processed in 3 to 5 days.
For now the scheme is only open through an 'invite only' system, where Amazon will identify sellers based on their track record, customer feedback, tenure of sales on its platform and their sales volumes. These sellers will get pre-approved indicative offers from the bank, outlining the loan amount they are eligible for and the rate of interest applicable.
“The lack of financial resources can hinder growth of small businesses as they scale up, which can impact their expansion, especially ahead of spiked sale events like Diwali. With this association with Bank of Baroda, we aim to help them overcome the barrier of access to capital and enable them to grow their business on Amazon.in,” said Gopal Pillai, Director, seller services at Amazon India.
Amazon is fighting an intense battle with Flipkart for gaining e-commerce supremacy in India. This move is aimed at strengthening its seller base, allowing them to scale up, which in turn will help the e-commerce giant offer more products and more promotions on its platform, during the crucial festival season.
Amazon currently has 225,000 sellers on its platform and Pillai said that over the past few weks, it had been adding close to 2,500 sellers per week. It sells around 160 million products on its platform.
“The e-commerce turnover is expected to rise 5 to 6 times in the next five years. This programme is aimed to help working capital requirements of the small and medium enterprises. We already have 100 customers right now on the programme, which has been launched with a hope to have 15 to 20 per cent of the total sellers on Amazon signed up for the programme in a year,” said P S Jayakumar, MD and CEO of Bank of Baroda.
The line of credit is being offered through an overdraft facility, unlike a loan where the borrower pays equated monthly installments.
