Xtracap Fintech
Supply Chain Finance
The Challenge
Financing is a crucial factor for the growth and development of MSMEs in India. However, the challenges faced by MSMEs in securing financing have hindered their growth potential. Lack of credit history, inadequate collateral, lack of awareness about government schemes, and high-interest rates are some of the significant challenges faced by MSMEs in securing financing
Factors affecting Supply Chain Finance in India :
- Acceptability and Awareness about the product among stakeholders such as Channel partners and suppliers
- Concentration mostly on organized industries.
- On boarding & monitoring of dealers/suppliers due to geographical spread
- Unsecured nature of lending
- Diversion of funds for other purposes
- Prominent Lenders still use Traditional sourcing and Assessment Techniques
- Lack of availability of a common platform for financiers
Market
India supply chain finance market size is expected at a CAGR of 8.42% during the forecast period between 2023 and 2029. Major growth drivers for India supply chain finance market include the increasing demand for working capital financing and growing adoption of digital technologies
The World Bank Group estimates the finance gap among formal micro, small, and medium-sized enterprises in developing economies to be 18% of gross domestic product (GDP). The global trade finance gap in 2019 was USD 1.5 Tn, 40% of which originates in Asia and the Pacific
The MSME sector contributes about 30 per cent to India’s GDP, 45 per cent to India’s exports and is also the second largest employer of workforce after agriculture, as per data shared by the Micro, Small, and Medium Enterprises Ministry
The Solution
Supply chain finance targets access to suitable instruments to manage working capital requirements, which is the key to tackling the finance gap among MSMEs. Supply chain finance benefits both buyers and sellers in the supply chain by incorporating the history of performance and interdependence of relationships within a supply chain
The Mechanics of Supply Chain Finance
IIFL’s Impact
"SCF requires a large funding line, and IIFL Finance's substantial size enables us to offer a large program size in SCF, which, as a start-up fintech, would not have been possible for us. The ability of IIFL Finance's systems to accommodate different fintech players is impressive, and we have been fortunate to receive support from the IIFL group for both debt and equity funding."
