Fintech's impact on small supplier sustainability (around MSMEs getting financed)

6th November 2023


Ever paused to think about it?

Every time I've delved into the financial realm, it's been a maze of complexities. Traditional banking, with its endless paperwork and tedious processes, especially for the small suppliers—the unsung heroes of our economy.

But, you know, the usual finance world.

The daunting eligibility rules, the absence of collateral, or those sky-high interest rates. And even if you do get a nod, the wait can feel like an eternity. It's even tougher for those tucked away in remote corners, widening the economic gap. Add to that the rollercoaster of uneven cash flows, and you've got a pretty challenging landscape.

Except now, there's a twist in the tale. Imagine a scenario where these small suppliers don't just survive but thrive, all without the age-old banking roller coaster.

For instance, as you read this, numerous fintech startups are emerging, offering seamless financial solutions tailored for these suppliers. And the impact? It's monumental.

But how come fintech making such waves? Is it just because it is convenient? The landscape is vast. But fintech seems to be the beacon lighting up the path for these small suppliers. But like all movements, there are hurdles in this too. So, are you intrigued? Well strap in, as we embark on the journey to understand fintechs impact on MSMEs.

Fintech's impact on small supplier sustainability (around MSMEs getting financed)

Small Supplier Financing in India.

You must have tried to untangle your wired earphones at times, right? That's what diving into the world of MSMEs and their financial challenges in India feels like. Traditional financing? It's like a maze with no clear exit.

Traditional banks, with their towering criteria and endless paperwork, often leave MSMEs feeling lost and overwhelmed. And when it comes to collateral? Many of these small suppliers simply don't have the treasure trove that these banks are on the hunt for.

But then there's the buzz around sustainability. It's not just a trendy term—it's the future. Yet, for many MSMEs, it's like a distant star. Myths about high costs, coupled with a lack of tailored financial solutions, make it seem unreachable.

Small Supplier Financing in India

So, where's the silver lining in this clouded scenario?

Enter fintech. As we're about to see, it's the guiding star for these small suppliers in India, illuminating a path through the financial maze.

Fintech: The Game-Changer.

Have you ever thought of the financial hurdles that MSMEs face globally? It's a staggering reality: about 70% struggle for survival with external financing challenges. But here's where the narrative starts to shift.

Fintech companies, with their tech-driven innovations, are stepping in, promising a brighter horizon. Consider peer-to-peer lending platforms: they've already facilitated loans that tally up to an impressive $300 billion worldwide. And that's just the tip of the iceberg.

Invoice financing, another fintech innovation, has seen a meteoric rise of 300% in a mere two years. It's like a lifeline for businesses, freeing up funds ensnared in unpaid invoices. And as for digital payment platforms? By 2025, a projected 700 million individuals are set to embrace this revolution.

So, what's causing this fintech wave, and how is it poised to redefine the financial landscape for small suppliers?

Sustainable Supply Chain Finance: A New Dawn in Financing.

Sustainable Supply Chain Finance (SSCF). It's not just another financial trend; it's a beacon of hope ensuring that suppliers, particularly the smaller ones, aren't left in the lurch.

A startling revelation by Euromoney sheds light on the gravity of the situation: nearly 60% of suppliers have been at the receiving end of payment delays, stunting their operational growth.

Now, where does fintech fit into this puzzle? It's at the very heart of SSCF's evolution. Fintech platforms offer a lifeline: real-time tracking, which is more than just efficiency; it's about fostering trust and transparency in every transaction. And with projections indicating the global supply chain finance market soaring to a mind-boggling $2.27 trillion by 2024, the stakes have never been higher.

Fintech's Green Thumb: Beyond Just Profits.

Fintech is not just digital wallets and online banking but there's another side to fintech, one that's intertwined with the very fabric of our planet: environmental sustainability. And while we're not diving deep into climate debates, the data is painting a rather intriguing picture.

Fintech's Green Thumb: Beyond Just Profits

Here's a tidbit to mull over.

The Global Impact Investing Network (GIIN) dropped a report that's turning heads. Sustainable finance investments? They skyrocketed to a whopping $715 billion globally in 2020. That's a jump of 42%. It's clear as day: businesses are donning their green hats, and fintech's innovative solutions are right at the forefront of this shift.

So, what's the magic formula? Fintech platforms are weaving sustainability into the very essence of finance. They're rolling out the green carpet, offering enticing financing options that are linked to eco-initiatives. Imagine a world where companies, in their quest to slash carbon footprints, get access to funds at rates that make the CFO smile. It's a harmonious dance of profit and planet.

Fintech in Action: Stories outside the boardroom.

You may wonder how fintech's transformative wave looks outside the boardroom? Let's dive into some real-world tales, backed by hard numbers, that bring this revolution to life:

Perfios: Perfios excels in rural onboarding with offline KYC capabilities. Catering to remote areas, it collects documents seamlessly, ensuring financial inclusion. Bridging the urban-rural gap, Perfios showcases fintech's transformative potential.

Paytm: Paytm, a household name, has expanded beyond mobile recharges. With over 350 million users, it's a prime example of fintech's influence in India. They provide services like digital payments, lending, and insurance, making finance more accessible to the masses.

Razorpay: Razorpay, a payment gateway and financial solutions provider, processed payments worth $60 billion by early 2021. It's not just about facilitating payments but also enabling businesses to thrive in the digital age.

Lendingkart: Lendingkart, an AI-powered lending platform, has disbursed loans to over 89,000 small businesses across 1300+ cities in India. This showcases how fintech is addressing the funding challenges of Indian MSMEs.

These narratives aren't just data points on a graph; they're stories of empowerment, growth, and change. Fintech is doing more than crunching numbers; it's reshaping futures and fueling economic engines.

Fintech's Forward March: What's Next?

The future of fintech looks promising and has a lot of potential.

Especially considering emerging economies, where the smaller players, our MSMEs, often find themselves in a financial maze. But there's a beacon of hope: governments are taking note, hinting at a landscape where innovation doesn't just thrive but flourishes under well-balanced regulations.

Dive a bit deeper, and you'll see fintech's toolkit expanding, with AI, blockchain, and data analytics as the new stars. But here's the real kicker: the alliance between fintech and sustainability is growing stronger, with ESG factors no longer on the sidelines but right in the spotlight. So, what's the next act in fintech's narrative?

Buckle up; it's bound to be a riveting ride.

About Perfios: Perfios Software Solutions is India’s largest SaaS-based B2B fintech software company enabling 900+ FIs to take informed decisions in real-time. Headquartered in mumbai, India, Perfios specializes in real-time credit decisioning, analytics, onboarding automation, due diligence, monitoring, litigation automation, and more.

Perfios’ core data platform has been built to aggregate and analyze both structured and unstructured data and provide vertical solutions combining both consented and public data for the BFSI space catering to their stringent Scale Performance, Security, and other SLA requirements.

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