Though 17 million of India’s 75 million SMBs are digitally influenced, they are not yet fully engaged and enabled to use the Internet to its full potential. This is the white space that fintechs should tap.
India is home to over 75 million SMBs, who contribute up to 30% to the country’s GDP. This finding from an Endurance-Zinnov study highlighted that this is the opening balance of their contribution in 2019 without the full impact of digitalization.
Of these 75 million SMBs, the study found that about 17 million are digitally influenced. However, they are not yet fully engaged and enabled to use the Internet to its full potential. Digitalization of SMBs can, thus, increase their contribution to GDP by up to 10% points.
This underlines the captive audience that fintechs can target for the next wave of digital opportunity. According to Manish Dalal, SVP and GM of Endurance International APAC, while India presents the second largest base of SMBs globally, their growth will depend on their ability to rapidly adopt technology and transform into digital entities.
“Most Indian SMBs are small family-run ventures that have been in existence for years. They have not actively adopted technology including the internet. This is the primary reason most of their businesses do not have a digital presence,” he noted.
This does not mean they are unsuccessful; instead, they are largely ignorant about the advantages digitalization can add to their business. For instance, not many know that fintechs like CredAble offer on-demand working capital as well as supply chain funding.
Similarly, Aye Finance uses its digital platform to fill the lending gap to SMBs and MSMEs with small ticket loans. In six years, it has disbursed loans to over 2 lakh MSMEs worth INR 2900 crore in over 5,500 pin codes. Its MD and Founder, Sanjay Sharma, said, “India’s MSME landscape is growing rapidly, which means that their need for credit is also increasing. Aye was incepted with a vision to solve the credit woes of this sector. Our expansion to an additional 2,000 pin codes will further support the growth of this critical sector.”
Indifi Technologies is another online SMB loan enabler that helps businesses to get loans without any collaterals. Instead, it evaluates the borrower’s creditability basis their past business transactions.
Alok Mittal, Co-Founder and CEO of Indifi Technologies, believes that the emergence of alternative lending platforms is permitting SMBs with no financial records or credit history get much-deserved access to credit. “The use of new-age technologies and digital tools such as AI, machine learning, and data analytics is helping fintech companies extend customised working capital solutions to the sector, which currently faces a credit deficit of around INR 16 lakh crore,” he added.As awareness about how digitization can help SMBs to operate optimally and efficiently, more will gravitate towards fintechs that can meet their fiscal needs. This is the ideal time for fintech companies to engage with them and make them comfortable about conducting business online and increase their confidence in shifting their presence to more digital platforms.