March, 29, 2017
Reducing friction in MSME Lending
19 Jan
2017
Posted by S. Meera

Alok Mittal, the entrepreneur-turned-VC-turned-entrepreneur, wants to use big data to reduce friction and inefficiencies in the process of lending to MSMEs. At a macro level, he believes Indify and several companies of its ilk will play a crucial role in reducing the MSME financing gap in the country.

A World Bank Report suggests that about 87 per cent of Indian MSMEs do not have access to finance and were self-financed. Gurgaon-based Indifi, started by former India head of venture capital firm Canaan Partners, Alok Mittal, is a technology firm that enables Indian micro and small enterprises to gain greater access to debt financing.

Says Mittal, “There are two major issues on the lending side – origination and underwriting.” To address these concerns, Indifi has a segment-wise approach to help connect lenders and borrowers, catering to travel, transportation and retail. Indifi partners with large distributors whose supply chain network has at least 1000 MSMEs, thus providing the lenders - banks and NBFCs - on its platform with direct access to their target customers.  The distributors in turn benefit from a stronger relationship. Indifi overcame lenders’ reservations through proof of concept. Apart from the potential client base, it also offers data collection and analysis, on-ground documentation and verification services to ensure the credibility of the borrowers.


There are two major issues on the lending side - origination and underwriting


Scaling Up

The startup, which had raised capital from Accel Partners, Elevar Equity and individuals in 2015, raised $10 million in a Series B round led by Omidyar Network in 2016. With this, the company plans to scale up its operations, on-board more partners and MSMEs and enhance its technology platform. Currently, it serves MSMEs in sectors like e-commerce, travel, hospitality, retail and trading. The key aspect Mittal is looking at is to rope in partners who could help on-board several MSMEs in one go – say, for example, 1000s of online sellers of an e-commerce portal.

For lenders, the the value proposition offered by Indify is its technology platform to enable payment management, loan monitoring, data analysis, marketing & CRM.

Mittal also expects the disruption caused by demonetisation to encourage movement towards not only a cashless society but also encourage more formal credit to flow into the system. This will also improve the trail of data, and thereby improve transparency. Overall, big data is the holy grail of analysing credit worthiness of the end borrower, and helping lenders reduce their overall cost of lending.


Snapshot

Venture: Indifi

Founded by: Alok Mittal, former India head of Cannan Partners

Founded in 2015

Core focus: Enabling MSME finance by aggregating several MSMEs part of the same supply chain

USP: using Big Data to reduce friction and close the lending process within 5 working days

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