One can sense there’s a crisis in India’s digital lending space from just one data point flowing from MobiKwik’s third-quarter results for the year ending March 2025 (Q3FY25). The company, whose tagline is ‘Driving India’s Fintech Revolution’, saw its small, unsecured personal loan disbursals plunge to Rs 300 crore from Rs 1,000 crore a quarter earlier.

MobiKwik’s revenue from its EMI-based loan product was also down from Rs 700 crore to Rs 400 crore during the same period. Rival PB Fintech, best-known for its flagship policybazaar.com, saw similar headwinds in its unsecured lending business. Multiple times in its earnings call, it acknowledged that it had observed “moderation” and “slowdown” of unsecured lending.

The crisis that these fintech platforms are facing stems from their lending partners playing it safe and pulling back from small-ticket credit disbursements. This has come on the back of strong regulatory action discouraging such loans. For fintechs, whose bread and butter is connecting borrowers with lenders, this is an existential threat. Unsecured lending has long been their cash cow, and a slowdown could mean serious trouble.

So, the likes of MobiKwik and PB Fintech are going beyond just connecting borrowers with lenders to salvage their credit business. Their answer: more skin in the game. They are wooing their lending partners back into the unsecured lending space by agreeing to share the risk of loan default.

Sharing risk

Enter Default Loss Guarantee (DLG)—a risk-sharing arrangement that fintechs are embracing to keep credit flowing. Earlier known as First Loss Default Guarantee (FLDG), DLG isn’t new, but it is gaining fresh momentum in today’s difficult lending climate.