MUMBAI: Despite a massive digitisation of finance, close to 60 per cent of small businesses are still outside the formal finance ecosystem, leaving a whopping Rs 60 trillion credit gap, an NPCI-Bain & Company report said Friday.
Despite digitising and standardising nearly every building block of the business ecosystem individually, gaps in cross-platform connectivity and information flow continue to create inefficiencies and constrain access to capital, further impacting MSME growth and leaving a credit gap of Rs 60 trillion.
"Meanwhile, formal financing channels so far meet only 30-40 per cent of credit demand," the report said.
The report, launched at the ongoing global fintech summit in Mumbai, said, "As much as Rs 8.1 trillion of MSME receivables remain locked in delayed payments. Now, the formal credit flow to small businesses is only Rs 34 trillion and meets only a part of an estimated Rs 92 trillion of debt demand. Also, the smaller enterprises are disproportionately underserved, with formal channels meeting only 30-40 per cent of debt demand, translating to a whopping Rs 60 trillion formal credit gap," the report pointed out.
"Though the country has progressed substantially on digital payment penetration, many B2B workflows spanning business systems, payment providers, banks, financiers and public systems remain largely fragmented. A gap that affects small businesses," said Saurabh Trehan, a partner and head of financial services practice at Bain & Company.
Noopur Chaturvedi, MD & CEO of NPCI Bharat Billpay, said, "The future of B2B commerce will be built on interoperability. As businesses increasingly digitise their operations, the ability to connect invoices, payments, reconciliation and financing through a common digital infrastructure is becoming increasingly critical. A standardised and connected ecosystem can help transform fragmented business processes into trusted digital journeys, creating value for enterprises of all sizes while improving credit access for underserved MSMEs."
Calling for more digitisation, the report said, "Businesses can unlock productivity by streamlining transaction-related processes as finance F teams spend 30-40 per cent of their bandwidth on reconciliation and transaction matching, including invoice processing, payment follow-ups and exception handling, today."
The credit opportunity forms part of broader productivity opportunities for businesses.
The formal business sector is a Rs 130-trillion-engine of economic activity, contributing a steady 45 per cent of the GVA.
Even if it remains well below the level in global economies, it signals the headroom that remains, the report said, calling for a central, interoperable layer connecting all the ecosystem participants and digitising the order-to-cash cycle through standardised APIs, with minimal disruption to existing systems.