Credit and finance for MSMEs: Real-time information including revenue, business costs, manpower, past growth, compliance, losses, export-import, and more has become a great surrogate for balance sheets and collaterals.
Credit and finance for MSMEs: Technology and data intertwined to provide formal lenders with necessary insights into the performance of a business is beginning to make an impact in lending to MSMEs. Non-banking financial companies (NBFCs) and particularly banks are gradually coming to terms with the fact that collateral or balance sheet-based lending is turning out to be a flawed model in lending as emerging businesses neither have enough assets to pledge nor they have a strong balance sheet, unlike large businesses who probably have both.
Hence, real-time data around revenue, business costs, manpower, past growth, compliance, losses, export-import, and more is proving to be a great surrogate for balance sheets and collaterals to meet credit needs of the sector that accounts for around 30 per cent of the country’s gross domestic product.
A panel of experts at the second edition of the ScaleUp Summit organised by the Financial Express Digital last month emphasized on how payments or cash flow data is driving this change in the small business lending market that can potentially reach $3 trillion by next fiscal, according to Chief Economic Advisor, V Anantha Nageswaran.