Abhishek Waman Thawkar (FABMC20220101)

B2B Fintech landscape in India, key trends, and opportunities for NAKAD
Supply chain financing is a Short-Term Credit system that optimizes the Working Capital for both
the buyer and the seller in a transaction. It usually involves a set of processes or a technological
solution to link the buyer, the seller, and the financial institution providing the Short-Term Credit.
The three primary parties involved in supply chain finance are: The Vendor/Seller/Supplier, the
Buyer, and Bank/Finance Institution which is the Supply Chain Finance.
For the delivered products, the vendor sends the buyer an invoice. The typical payment deadline
for these invoices is 30 days. However, if the seller needs money right once, he can negotiate a
lower price and sell the invoice to the supply chain financier. The financer takes payment from the
buyer at full price when the invoice is due. The financer stands to gain from the discounted price
paid to the seller.
The rise in the adoption of supply chain finance by MSMEs to improve their cash flow functions
drives the growth of the market. Industry sources peg the value of the addressable supply chain
finance market in India at around Rs 60,000 crore, while the total market value is estimated at Rs
18 lakh crore.
Gaps in the Supply Chain Finance Market
Lack of awareness is the main issue this system is experiencing. The workings of this system and
its benefits are not well understood by channel partners and suppliers, which leads to lesser
adoption. Some additional difficulties are:
➢ In terms of available Capital & Liquidity, banks encounter difficulties. Additionally, they
must adhere to tight regulatory restrictions.
➢ It is challenging for financiers to control the cost of retaining the funds due to low-interest
rates.
➢ There is no platform for collaboration among financiers as a whole.
➢ Lack of awareness has led to concentration in just a few specific industries.
➢ Due to larger geographic areas, onboarding and monitoring of dealers and suppliers is
challenging.
➢ Lending without security is a risk factor.
Scope for NAKAD to capture the opportunities
As per a report by Arthur D Little & CII, India’s supply chain costs account for 14% (vis-à-vis 8%
global). As per another report by ET Magazine Survey, many MSMEs recover more than half their
receivables after more than 90 days. About 17% of MSMEs write off 1/5th of their debt every year.
This highlights the need to create an inclusive financing environment for all firms.
1. Mid-sized corporates and high-growth start-ups that could be loss-making but with strong
balance sheets can be onboarded thus impacting the penetration of the platform,
democratizing it, and thereby entire value chain.
2. E-commerce–In line with the current trend of the Indian Economy moving towards online
sales from offline platforms banks have a huge opportunity to fund different supply chains.
3. Potential Sectors-Focus on less tapped potential Industries i.e., Commodities, Electricals
& Electronics, Consumer Durables, FMCG& Agro based Industries to finance their
Supply chain
4. Templated Innovative products for New Startups
5. Focus on shorter periodic Assessments for flexible credit decisioning