fin tech opportunities revolutionizing smes

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FinTech Opportunities Revolutionizing SMEs Loan Frame was launched in mid-2016 with the objective of redefining the experience of borrowing by SMEs in India. The Company is India’s first lending marketplace fully dedicated to SMEs. Loan Frame caters to the varied loan requirements of SMEs up to Rs. 50 crores. #DigitalErra Thought Corner Perhaps no sector has more to gain from innovations in financial technology than small- and medium-sized enterprise (SME) finance. FinTech can particularly leverage the rapid growth of India’s e-commerce and regional trade, trends that complement SME development. wwww.digitalerra.com

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Page 1: Fin tech opportunities revolutionizing SMEs

FinTech Opportunities Revolutionizing SMEs

Loan Frame was launched in mid-2016 with the objective of redefining the experience of borrowing by SMEs in India. The Company is India’s first lending marketplace fully dedicated to SMEs. Loan Frame caters to the varied loan requirements of SMEs up to Rs. 50 crores.

#DigitalErra Thought Corner

Perhaps no sector has more to gain from innovations in financial technology than small- and medium-sized enterprise (SME) finance. FinTech can particularly leverage the rapid growth of India’s e-commerce and regional trade, trends that complement SME development.

wwww.digitalerra.com

Page 2: Fin tech opportunities revolutionizing SMEs

FinTech Lending Hand To SMEs

Companies like ApplePie Capital, Indifi herald a new way for businesses to be ‘understood’ by would be lenders. Instead of being put through a rudimentary matching wizard online (like many online brokers are guilty of doing), these FinTech firms can use the right data to make the right lending decision, delivering insights about complex business models to lenders and reducing the risk all round.

Indifi for instance, by partnering with supply chain businesses in the travel, ecommerce and hospitality sector, it allows SMEs affiliated with those chains to apply for working capital loans of between 1 lakh rupees and 50 lakh rupees. To assess the business, Indifi accesses proprietary SME data from supply chain platforms, which it then uses to assess and match the business to one of its partner lenders. Many a times existing lenders are constantly limited by their own costs of capital and a marketplace such as Loan Frame might be able to provide the product and right lender at the most competitive pricing vs. one’s own bank. High sophisticated platforms of FinTech firms help assess SME’s lending needs across a large number of banks and NBFCs.

Learnings from other Asian Countries

Lenders could use data on a prospective borrower’s sales and payment activity from e-commerce firms like China’s Alibaba or Japan’s Rakuten to assess the borrower’s ability to repay a loan. Indeed, Alibaba is directly leveraging payment data from Alipay to support the activities of its Ant Financial affiliate. Lenders are also using data from service providers like utilities and telecommunications companies to confirm if a borrower has a history of paying bills on time. A lender can also corroborate basic

wwww.digitalerra.com

Page 3: Fin tech opportunities revolutionizing SMEs

elements of a loan application more quickly and cheaply, for example verifying a small business’s place of operations through geo-location data obtained from the entrepreneur’s telecommunications company.

Limitations to FinTech Lending

Even with the growing clout of FinTech lending, there are factors limiting lending to the SME sector.  Limited availability of credit ratings of smaller firms, lack of tangible assets for collateral, and the high costs of making small loans for lenders are the main pain points.

Conclusion

FinTech Firms are getting good traction from SMEs in Tier 1 and 2 cities and are increasingly expanding operations to the rest of the country. SME financing space is a creamy space where there is a big demand. FinTech companies would like to change existing perceptions that a bank is the best place to get a loan for SMEs.

wwww.digitalerra.com