India’s focus on digital transformation in the last few
years coupled with other path-breaking
efforts such as the Jan Dhan Yojana and the Direct Benefit Transfer scheme by
the government has opened up vast space in the business of lending more
specifically in the business lending space. The digital push by the government
and Corporate India have made sourcing of funds relatively easy today, small-time entrepreneurs can now hope to secure
funds to develop their businesses.
All lenders have adopted online technologies to pass on the
benefit to the borrowers exponentially. Borrowers today can look up to quick
processing of loan applications, quick due diligence and quick disbursal.
The lending to business borrowers is gaining momentum
because of several trends. We list the following 8 trends that will transform
the business lending space.
1.
Governments’ push towards the inclusion
of all strata of society in building India’s economy
The governments at the centre
and states have launched various schemes such as Skill India, Make in India,
Startup India and Standup India. These schemes encourage aspiring entrepreneurs
to start their own businesses. Lenders have a captive audience to cater to.
2.
Social, Mobile, Analytics and Cloud (SMAC) Technologies will Drive SME
businesses
Lenders are adopting various cutting edge technologies such
as Internet of Things, blockchain, machine learning and artificial
intelligence to harness their power to fine tune their loan offerings to
borrowers. These are also available to borrowers who can leverage these
technologies to improve their businesses in terms of both top line and bottom
line numbers.
3.
Many Unconventional Financial Technology Companies are Sprouting
The financial industry is seeing the emergence of new forms
of financial institutions using technology as a base known as financial
technology companies (Fintech). Fintech companies use technology to collect
data from businesses to analyze rapidly and transparently to enable business
owners to avail funds quickly. Fintech companies take away the burden of cash
flows from the business owners allowing them to focus on improving their
businesses. Such type of funding is also known as alternate funding.
4.
E-commerce is Helping Businesses to Grow
The traditional brick and mortar store is beginning to adopt
the E-commerce route and by one estimate
about half of the businesses are already embracing Ecommerce. The growth of E-commerce and the availability of professional
logistics have increased the reach of small businesses to encompass the whole
of India and in some cases globally.
5.
Regulatory Framework to Streamline Fintech Companies
Fintech companies will need to comply with regulatory
mechanisms created by statutory authorities. The exposure to KYC system and
Aadhaar authentication will hasten the smooth transition to a transparent
system reducing the scope for frauds and
misuse.
7.
GST Implementation Allows Pan India Market
Prior to GST, businesses had to face hurdles of incidence of
a variety of statutory levies when they
wanted to sell products and services to other states. The statutory levies
included VAT, service tax, excise, cess, luxury tax, entry tax and Octroi
besides central sales tax. Each state had its own rates and conducting
businesses out of state was acutely cumbersome telling on the operational
efficiency of the businesses as they had to store and maintain huge amount of records. With GST, all the
statutory levies get subsumed into CGST, SGST and IGST calling for lesser number of records. The GSTN network took
care of the storage and maintenance of records once the businesses entered the
basic transactions on to the system. With this, businesses can become more
competitive as there is a level playing field. The earlier reticence in
conducting business out of state is no longer there. Businesses would want to
expand into the all India market thus leading to business expansion.
8.
Robust Digital Infrastructure with India Stack
The creation of a set of APIs under the India Stack
initiative allowing various stakeholders including businesses, developers,
startups and governments to provide services that are cashless and paperless is
driving the Fintech companies in a big way.
Financial institutions such as banks and NBFCs such as Tata Capital are at the forefront of lending to a vast spectrum of borrowers who need funds for acquiring a home, an automobile, pursuing higher education or starting or expanding a business. To help medium and small businesses, Tata Capital has tied up with Fintech companies such as Capital Float to offer working capital loans to business owners and Biz2Credit to offer finance to small businesses. These are online resources that provide services in an effortless manner.
10 January 2020
4 mins read
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