CXO BytesSMEs and Startups

How Digital Innovation Can Improve Financial Access for SMEs


Seamless access to bank lending is more difficult for SMEs than for big organizations

Small and medium-sized ventures (SMEs) go through multiple stages: start-up, development, and reestablishment/resurrection or decline-and their financing needs differ upon those stages.

SMEs can be potential key supporters of the country’s economy if backed with high-end analytical technologies. Despite their significant role in the market, SMEs get an excessively little portion of credit from the financial point of view. Due to certain factors like data imbalances, high exchange costs, feeble customary relationship lending, and the lack of monetary abilities of SME proprietors and business people, small sized organizations suffer to a great extent.

However, new fintech businesses act as aggregators and streamline GST-connected information, consequently opening credit supply for the SMEs to appropriate moneylenders. Fintech additionally utilizes huge data through seamless analytics that help lenders to financially back credit-starving businesses.

The need of the hour is to provide possible monetary advantages of fintech in expanding financial services and administrations for the small and medium sized businesses. Such an ecosystem will permit simpler and less expensive cross-line transactions (e.g., settlements). On the contrary, the utilization of fintech stays restricted due to the unawareness of the same.

Fintech companies are logical organizations open just to SMEs with monetary and advanced education and finance functional through dependable data and framework.

Elective money, (for example, value crowdfunding and P2P lending) attract various dangers. On the other hand, financial investors are afraid of losing their contributed reserves. Extortion hazard, data spills, and cyberattacks are extra worries. The majority of these difficulties stretch out to blockchain-based financing (e.g., Initial Coin Offerings and partnered loaning). The plan of administrative systems is basic, yet inadequate and conflicting. Hence, it requires some advanced integrations as follows:


Process computerization

The lending cycle can be enhanced from the utilization of online applications. With a reasonable level of effort and credit adjustments, a consistent financial administration for SMEs can be created. Hence, financial institutions will be able to improve their usefulness and lower their working expenses. The utilization of innovation, (for example, cloud-based bookkeeping, advanced installments, and the robotization of invoicing and settlement processes) could empower SMEs to prove their business activities and become qualified for finance. Blockchains can altogether work on the productivity of exchange finance, which includes broad desk work across numerous records.


Support creative utilization of innovation and information sharing

Information on SMEs could be incorporated, summed up, and divided between financial institutions and different finance players, for example, fintech firms. The precision of credit hazard models will in general increase as the information pool increases. Such information can be used for advance audits and refinements of loan costs. In India, the credit scoring techniques and the improvement of normal data sets are still in the formative stage and its full development will smoothen the financial access to SMEs.


Upgrade credit insurance programs

The public credit facilities are sustainable methods to decrease the supply demand void in SME finance. The larger parts of the Organization for Economic Cooperation and Development (OECD) nations have taken on public guarantee schemes. Then again, public finance guarantee frameworks may be dependent upon moral risk issues, keeping unviable endeavors in business and causing extra losses. To handle these issues, the focus should be on business supportability of SMEs along with an economically balanced credit framework to improve borrower’s (SMEs) situation.



By utilizing instruments like AI (Artificial Intelligence), ML (Machine Learning), and huge information investigation, fintech can understand and analyze credit hazards which allows them to create a foolproof credit backed ecosystem and guarantee portfolios/loan cases that customary banks might reject.

(The author is Mr. Ramit Arora, President & Co-Founder, Biz2Credit and the views expressed in this article are his own)

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