How important is the availability of hassle-free supply chain financing solutions for MSMEs? The last MSME census conducted in 2006-07 shows that more than 92% of MSMEs had no finance or depended on self-finance. Even in September 2019, there was an addressable credit gap of USD 397 billion (INR 25.8 trillion) and a 14% growth in outstanding credit. A total of 46% of MSMEs reported cash shortage, 23% of MSMEs experienced temporary exit, and 12% of MSMEs experienced both — in the aftermath of the COVID19 pandemic. Digital supply chain financing is integral to protecting the lives and livelihoods of 11 crore individuals that the MSME sector employs and 30% of the GDP that the sector contributes.
Supercharging the Credit Disbursal Process With Greater Speed
Credit disbursal delayed is credit disbursal denied. MSMEs are labor-intensive and incur semi-fixed costs on wage bills of blue-collar workers within a typical 30-day working capital cycle. While working with such short timelines, lenders and enterprise buyers can leverage the “one-page view” of invoices enabled by digital financing platforms to respond with greater agility. Once lenders have access to metrics like procurement order value, project milestones, delivery schedules, and the real-time quantum of delivery of goods against the entire order size, they will be in a better position to disburse credit.
Data Analytics to Fund Orders and Not Wait for Invoices
One of the greatest benefits of pivoting towards a digital supply chain financing solution is that it enables a one-page view of all the transactions between an MSME supplier and a large enterprise buyer. It reduces the costs, time, and effort on the due diligence required by large enterprises for scrutinizing invoices and allows lenders to disburse credit on purchase orders. This historical data serves as a key determinant for shaping the strategic relationship between lenders, large enterprise buyers, and MSME suppliers.
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