Steps Taken to Enhance the Experience of MSMEs While Borrowing
The Micro, small and medium-sized enterprises have been recognized as the backbone of the Indian economy. Flourishing in the oppressive conditions in the hinterlands of India, away from the urbanization and digitalization, the MSMEs have found a way to survive and contribute 45 percent to the country’s manufacturing output and eight percent to India’s GDP.In addition, the MSMEs play a vital role of creating job opportunities in the rural segments of the city, providing the non-urban youth with ample opportunities to earn money and acquire new skills, without having to migrate from their roots. However, irrespective of the MSMEs industrializing and developing the non-metropolitan portions of India, the segment has, for long, been snubbed by the banks and formal financial institutions.
Challenges Faced by the MSMEs in India
Despite their contributions in strengthening the Indian economy, the MSMEs lack an easy access to fast business loans. Traditionally, only the large sized, well established organizations have found it easy to access business lending. While these organizations have all the documents in place, and the backing of a guarantor or enough collateral to provide, if required, the small and medium sized businesses haven’t been that fortunate.
Lacking the required documentation or resources to endure lengthy and tedious banking procedures, MSMEs often find them helpless and at the mercy of unregulated, unofficial, local loan sharks. These local money lenders charge exorbitant interest rates, hence, challenging the longevity of the small scale business ventures.
Lack of access to business loans is perhaps one of the many worries of small scale entrepreneurs. In addition, the micro, small and medium sized business also suffer from inefficient supply chain, ever changing market scenarios, sub optimal scale of operations, obsolete technology and ever increasing competition from overseas and locally.
In order to survive the competitive scenarios of today, MSMEs need to deploy innovative, digitalized and flexible approaches, in order to augment their daily operations. While the same is essential for these ventures to become profitable at scale and contribute more towards the economy, there is only so much that the MSMEs can muster, given the lack of business financing.
However, the advent of new-age financial companies has been gradually re writing the
story of MSME lending. Realizing the importance of the segment, along with innovative approaches and improved risk appetite, the new age financial companies are bringing MSMEs under the spectrum of financial inclusion.
New Age Financial Companies Improving MSME Lending
Given the bad financial record, lack of collaterals of guarantors, and loopholes in documentation, MSMEs are often hard-pressed while securing business loans. However, the fast growing FinTech firms are resolving the funding challenges faced by the MSMEs. Here’s how these platforms are improving the experiences of MSMEs while accessing business credit:
Quicker Delivery of Credit Solutions: In the past decade or half, lending platforms such as FinTech players and NBFCs have proved their commitment towards disrupting the status quo in the delivery of loans and championing the cause of financial inclusion to the masses. By deploying the latest technology and innovative approaches, these lending platforms are able to expedite the borrowing process, reduce the turnaround time and yet, offer the best, most plausible solution to the MSMEs.
Reduced Costs: The FinTech firms are improving the MSMEs' access to financing solutions by digitalizing the processes and improving their last mile connectivity. By digitalizing operations, new-age lending platforms are able to reduce the costs and hence, optimize the credit delivery to small scale businesses.
No Multiple Visits & Access to a Large Network: Being available round the clock and simplifying the process, these platforms don’t warrant repeated visits from the MSMEs. While approaching a lending marketplace, MSMEs are also not required to knock at the doors of multiple money lenders. In fact, digital marketplaces have large networks with multiple money lenders, and by correctly assessing the needs of the MSMEs, they provide the perfect match; all of this is done without frequent visits that could possibly take a toll on the health of small scale ventures.
Restructuring the Loan Books: Along with infusing the businesses with funds, some of the lending platforms also assist MSMEs by restructuring the loan books. Restructuring can be achieved either by refinancing the current loan or improving the terms. Owing to a disciplined and structured approach followed by new-age financial companies for restructuring, MSMEs can optimize their current loan books and enjoy lower rates.
Debt Consolidation: A form of restructuring, with debt consolidation lending platforms improve the credibility of MSMEs. Under Debt Consolidation, different loans, facilities or borrowings by a particular lender are clubbed together into a single entity. This reduces the administrative costs in borrowing and also, increases the headroom.
Improving the Last-mile Connect: Several NBFCs and FinTech Companies of today are in the process of improving their last-mile connectivity by opening branches in the tier-II, III, and IV segments. This helps resolve a lot of challenges MSMEs face, by making the lending platforms easily accessible. As a consequence, deprived of financial solutions, MSMEs are able to better trust the organizations and the new-age financial companies are able to provide better services.
With the lending platforms taking small yet steady steps towards transforming the MSME lending space, these young, remote ventures have new and improved facilities for growth. As India aims to emerge as one of the leading economies in the world, together, we would need to level the playing field for the MSMEs and provide equal opportunities and facilities for this segment.
New Age Financial Companies Improving MSME Lending
Given the bad financial record, lack of collaterals of guarantors, and loopholes in documentation, MSMEs are often hard-pressed while securing business loans. However, the fast growing FinTech firms are resolving the funding challenges faced by the MSMEs. Here’s how these platforms are improving the experiences of MSMEs while accessing business credit:
As India emerges as one of the leading economies in the world, we need to level the playing field for the MSMEs and provide equal opportunities & facilities for them
Quicker Delivery of Credit Solutions: In the past decade or half, lending platforms such as FinTech players and NBFCs have proved their commitment towards disrupting the status quo in the delivery of loans and championing the cause of financial inclusion to the masses. By deploying the latest technology and innovative approaches, these lending platforms are able to expedite the borrowing process, reduce the turnaround time and yet, offer the best, most plausible solution to the MSMEs.
Reduced Costs: The FinTech firms are improving the MSMEs' access to financing solutions by digitalizing the processes and improving their last mile connectivity. By digitalizing operations, new-age lending platforms are able to reduce the costs and hence, optimize the credit delivery to small scale businesses.
No Multiple Visits & Access to a Large Network: Being available round the clock and simplifying the process, these platforms don’t warrant repeated visits from the MSMEs. While approaching a lending marketplace, MSMEs are also not required to knock at the doors of multiple money lenders. In fact, digital marketplaces have large networks with multiple money lenders, and by correctly assessing the needs of the MSMEs, they provide the perfect match; all of this is done without frequent visits that could possibly take a toll on the health of small scale ventures.
Restructuring the Loan Books: Along with infusing the businesses with funds, some of the lending platforms also assist MSMEs by restructuring the loan books. Restructuring can be achieved either by refinancing the current loan or improving the terms. Owing to a disciplined and structured approach followed by new-age financial companies for restructuring, MSMEs can optimize their current loan books and enjoy lower rates.
Debt Consolidation: A form of restructuring, with debt consolidation lending platforms improve the credibility of MSMEs. Under Debt Consolidation, different loans, facilities or borrowings by a particular lender are clubbed together into a single entity. This reduces the administrative costs in borrowing and also, increases the headroom.
Improving the Last-mile Connect: Several NBFCs and FinTech Companies of today are in the process of improving their last-mile connectivity by opening branches in the tier-II, III, and IV segments. This helps resolve a lot of challenges MSMEs face, by making the lending platforms easily accessible. As a consequence, deprived of financial solutions, MSMEs are able to better trust the organizations and the new-age financial companies are able to provide better services.
With the lending platforms taking small yet steady steps towards transforming the MSME lending space, these young, remote ventures have new and improved facilities for growth. As India aims to emerge as one of the leading economies in the world, together, we would need to level the playing field for the MSMEs and provide equal opportunities and facilities for this segment.
