ZipLoan is a fintech focused on providing working capital solutions for the 8 million MSMEs in India. Currently, ZipLoan has 11,000 customers across five key markets with an asset base of USD 18,792 million.
StrideOne is building a digital banking suite for startups and their ecosystem. This partnership will double down on the synergies that exist between ZipLoan and StrideOne and is expected to accelerate StrideOne’s foray into the MSME ecosystem of startups.
MSMEs remain credit starved and struggle with access to working capital. Aligned with the larger goal of fueling India’s entrepreneurial ambitions, the partnership between ZipLoan and StrideOne is a strategic step towards improving financial inclusivity for MSMEs.
Through its customised underwriting algorithm – ZipScore, digital sourcing and operations – ZipLoan has been able to underwrite credit worthy yet underserved MSMEs and enable affordable, formal credit solutions for this segment. Currently, their product suite includes line of credit, equipment finance, and term loan for manufacturers and distributors.
MSME businesses are usually overlooked by traditional finance institutions due to various underwriting challenges including lack of collaterals, business vintage, documenting know-how, and more.
As the sector is expected to shoulder a substantial portion of the country’s vision to turn into a USD 5 trillion economy, there still remain some challenges. For examples, there is a growing need to digitalisation. Doing this could help in improving the efficiency and reliability, cutting costs, and keeping up with the industry trends.
Moreover, many MSMEs may not have all the financial documentation in place or enough access to digitalisation in order to take advantage of the government schemes. There is also a challenge with collateral as the perceived risk of funding MSMEs is higher. Cash flow and working capital issues are challenging, especially in instances where payments are delayed.
Therefore, even as protections exist under the MSMED Act, the fear of losing long-term business means that these protections are rarely invoked.
StrideOne has already launched supply chain finance solutions for startups. Through their anchor-led approach to lending StrideOne brings in an understanding for the startup and MSME ecosystem needed to create smartly designed tailored credit structures that align to the diverse capital needs of Indian MSMEs. It has disbursed USD 81,464 million in the last 8 months.
Besides, numerous startups and technology firms focused on providing new-age technology solutions are now helping MSMEs harness the full potential of tech deployment in their operations. More than 50% MSMEs in India are in rural areas and it is imperative for tech solutions to meet their existing requirements despite challenges such as limited internet reach, and lack of adequate capital, technology, and innovation.
MSME is one of the most crucial sectors in the Indian economy, accounting for 48% annual exports, contributing 30% to the GDP and being a major employer. Therefore, tech-based solutions have to use their potential to enrich MSME businesses.
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