Financing options for micro-small-medium-enterprises (MSMEs) is set to undergo a digital transformation over the coming months. Lenders believe financing options will become cheaper for MSMEs, particularly in supply-chain finance and trade finance, as a result of better access to data and bank-fintech partnerships. In the wake of the pandemic, MSMEs have been adopting various digital platforms and tools to conduct their business, be it for payments, marketing or for banking services. According to a December 2020 survey by CRISIL Ratings of 566 SMEs, 53% of them had adopted digital tools like online aggregators, marketplaces, social media, and mobile marketing as of November compared to 29% prior to the pandemic. For lenders, this has also translated into a sharp rise of new business flowing through the digital channels of banks. "Despite their limitations, micro enterprises are not very far from small enterprises in digital adoption. Also, many more are now saying they will take the digital route soon. This underscores the fact that increasing digitalisation enlarges the footprint of MSEs, helping them tap newer markets and improving their access to credit," says Bhushan Parekh, senior director, CRISIL Ratings. Digitisation of MSME lending What is supply-chain, trade finance: In supply-chain finance, a bank or other lenders provide liquidity to a large manufacturing corporate, for example, when they place an order with vendors. Similarly, in trade finance, a bank or lender provides the financing to international trade, whether for export or import finance. Both products aim to meet the financing gap between buyers…
