Credit changes hands as Digital Lending takes shape

Rajath Kumar

A wave of change is sweeping across the nation, transforming accessibility of credit at an individual and institutional level. As stated by the World Bank in 2014, nearly 47% of Indian adults are disconnected from formalized financial systems, increasing their dependency on informal credit channels. The nature of these informal channels and the environment fostering their sustenance make these modes of funding exorbitantly expensive. These channels typically provide immediate funding but debilitate the borrower’s sustainability and competitiveness in the long-term. Usurious rates of interest, loans terms disconnected from business fundamentals and delayed-decision making shackle entrepreneurs armed with ambition.

The apprehensions involving credit-access notwithstanding, SMEs find themselves lucratively placed in the timeline of the Indian economy, wherein Governmental and capitalistic forces are aligning in order to further SME progression in the country. Centre-led initiatives and evolutionary processes set up by tactful corporates are becoming building blocks to facilitate economic development through SMEs.

SMEs central to India’s economic development

The Government of India has identified the significant role SMEs play in shaping and developing the economy. The ‘Make in India’ initiative was launched last year to attract foreign and local investment to the country’s manufacturing sector. SMEs are required to participate actively in making this initiative a success. The pro-manufacturing stance of the Government provides these businesses with the opportunity to scale and grow at an accelerated pace.

India destined to become an e-commerce superpower

Similarly, e-commerce companies in India are in the golden phase of technological advancement. According to Goldman Sachs, India’s e-commerce market will cross the $100 billion mark by FY20[1]. A study by PWC indicated that the e-commerce industry is expected to grow from $16.4 billion in 2014 to $21.3 billion in 2015[2]. Alibaba.com, the B2B division of the world’s largest e-retailer Alibaba Group recently announced that India is the second most important market for the company globally [3]. A whopping majority of the e-commerce space presently comprises of e-tailing and e-travel companies. Alibaba is likely to provide B2B companies the much-needed platform to establish their presence.

Credit now just a click away

Several factors could hinder SMEs from expanding at a geometric rate. Possibly the most critical of these is credit. Companies are queuing to alter the perception and approach to credit, with many organisations attempting to transform finance from a function to a service.

A recent article on YourStory mentioned that over 500 financial technology start-ups in India have received $1.4 billion in funding since 2012[4]. These are not merely in the credit services sector but also include companies in the mobile payment services sector. With 90% mobile phone penetration in the country and smartphone sales expected to reach 500 million units in the next five years, digital engagement with consumers will be higher than ever before.

Pioneer with purpose

Capital Float, the pioneer in digital lending for SMEs in India, is spearheading this digital revolution. We understand the crippling effects collateral-based loans have on business progression and the inherent anxiety they cause. Our expertise in big data, decision sciences proficiency and technological prowess gives us the edge to provide specially tailored financial services to small and medium businesses across the country. Competitive interest rates make us relevant and digital platforms increase our reach. Gone are the days when SMEs toiled to acquire credit. Digitized processes have bridged the gap between the borrower and capital, the two now being separated by a few clicks of the mouse.

Digital Lending will gradually replace conventional credit channels. In response to the altering financial landscape, traditional organisations are revisiting their work-flows and are attempting to revitalize processes to become felicitous options.

SMEs are evolving at a rapid rate and it’s not surprising that access to finance too is changing simultaneously.

Author – Rajath Kumar, Marketing Manager, Capital Float.

[1]http://economictimes.indiatimes.com/industry/services/retail/indias-ecommerce-market-to-breach-100-billion-mark-by-fy20-goldman-sachs/articleshow/49532128.cms
[2]http://www.pwc.in/assets/pdfs/publications/2015/ecommerce-in-india-accelerating-growth.pdf
[3]http://articles.economictimes.indiatimes.com/2015-12-08/news/68865727_1_indian-smes-alibaba-com-indian-sellers
[4]http://yourstory.com/2015/10/digital-finance-revolution/