With govt support, digital lending startups look to bridge credit divide

Having been explicitly sounded out in the Union Budget on their crucial role in bridging credit demand in the economy, digital lending startups are looking to work closely with the government to deal with the challenges the sector faces and devise ways to expand their scope of operations.
"Use of fintech in financing space will help the growth of MSMEs. A group in the Ministry of Finance is examining the policy and institutional development measures needed for creating the right environment for fintech companies to grow in India," the finance minister had said in Budget 2018-19.
From bringing in more access to data to finding out ways of introducing blockchain in government services, startup entrepreneurs told ET how the sector stands to benefit from this.
"While the government has promised to set up an expert committee to look into the requirements of our sector, the process has already started through multiple interactions we have had with the finance ministry," said Sashank Rishyasringa, managing director of an online lending platform for small businesses, Capital Float.
Digital lending platforms say the biggest challenge they face is lack of reliable data on small enterprises. If given access to Goods and Services Tax data, it will be easier for them to calculate their creditworthiness and will help them lend to such entities.
Connecting GST Network with TReDS (Trade Receivables Discounting System) is the first step in that direction. TReDS is an online platform promoted by the central bank through which small enterprises can have their invoices paid for against receivables by all major banks of the country.
"We are working closely with the ministry to get access to GST invoices for the SME sector, which will help us lend quicker and take credit calls easily on these industries," said Manish Lunia, co-founder of Flexiloans, a fintech platform for SME loans. "This will also help us expand our offerings to numerous small locations across the country."
The government could also make on-tap licences available for fintech startups who want to set up a TReDS platform, said Anurag Jain of invoice discounting platform KredX.
Further, with the government promising to explore the use of blockchain to drive financial inclusion, lending platforms say it could open up new opportunities for them as well.
"With dematerialisation of property records through the use of blockchain it will be much easier to give out loans against properties which is a major source of finance for small businesses," said Amit Sachdev, co-founder of Cointribe, another Gurgaon-based lending platform for business entities.
With a renewed push on digital lending platforms, industry insiders say the government has powerful tools to extend funds to MSMEs like MUDRA (Micro Units Development and Refinance Agency) and SIDBI (Small Industries Development Bank of India).
If these tools are allowed to refinance loans given out through digital lending startups it would largely solve the problems of access to funds for these entities.