2021 calls for elevating digital awareness amongst MSMEs: Shachindra Nath, Executive Chairman and MD, U GRO Capital

Shachindra Nath

The sudden outbreak of Covid brought several challenges especially for the MSMEs and therefore the promotion of Financial Inclusion became a crucial part of the year. To understand what 2021 have in store for the MSMEs, Elets News Network (ENN) recently interacted with Shachindra Nath, Executive Chairman and Managing Director, U GRO Capital. During the interaction, Nath stated that 2021 calls for elevating awareness amongst MSMEs with regards to the significance of digital transformation and the importance of their ability to provide data required for credit access. He spoke about GRO+, a flagship platform of the company, capable of onboarding of MSME customers completely digitally and provide an in-principle decision within 60 mins.

Excerpts of the interaction:

Q. Amid Covid-19, how is U GRO Capital utilizing digitalization to solve the unsolved credit gap?
Since inception, U GRO Capital has sought to build a strong MSME financing platform based on sectoral understanding supplemented by a fully integrated technology and analytics platform.

Our flagship GRO+ platform is capable of onboarding of MSME customers completely digitally and provide an in-principle decision within 60 mins. It is integrated with more than 25 APIs, has an OCR functionality and a completely automated rule engine GRO Protect. This includes application of an award-winning sector specific scorecard GRO Score and a completely inhouse developed ML based banking segmentation module. During the COVID induced lockdown Video KYC, Video PD and digitally signed agreement modules were deployed which have enhanced customer experience manifolds.

Q. Would you like to tell us about your latest tech deployments and initiatives taken in sync with them?
Technology is one of our most significant pillars, as we have leveraged our capabilities to a great extent to serve the SME customer base. The past few months have seen us take rapid strides in technology integration. During the last few months, we launched our aspirational programs viz. Sanjeevani & Saathi on our GRO+ platform. They bolstered our ability to cover a wide variety of entities across the MSME sector. These programs have meticulously designed algorithms able to analyze the impact of Covid-19 on cash flows of customers and have accordingly customized the eligibility criterion and the offerings. Towards enhancing convenience, we made the documentation simpler by considering only the banking & GST statements, provided by the customers digitally.

Q. What are your views on the impact of the pandemic in the positive transformation among NBFCs and the lending industry?
The lending industry specifically had a major role to play given their willingness to adopt and implement technology in the most agile manner with a keen eye towards positive digital transformation. We witnessed an increase in credit demand, with a shift in the urgency of the requirement, ticket-size and the overall process involved. To meet these requirements, NBFCs needed to respond with swiftness in their bid to improvise the existing operations so that the MSMEs, the end customer could restart their ailing businesses. The result was highly digitalized and streamlined processes. Majority of the financial institutions are now able to offer credit access, via end-to-end digital processes.

Q. What changes in the lending model due to Covid-19 and the significance of Co-lending?
The significance of co-lending has only increased with the outburst of Covid-19. A major brunt of the pandemic induced situation was faced by small businesses. Larger institutions have rigid underwriting norms, and it becomes unviable for them to alter their onboarding gate criteria and to service loans to this heterogeneous segment from a cost perspective. This inherent difficulty is multifold in tier 2,3 regions. Co-lending bridges this gap. In fact, it ticks a lot of boxes, firstly, as 80% of the loan comes from larger institutions, the liability side is taken care of for NBFCs, secondly, as NBFCs source efficiently, the larger financial institutions, especially banks, are only happy to get into a co-lending arrangement, as it helps them fulfill their PSL targets. Lastly and most importantly, this collaborative approach helps provide credit to the unserved and underserved small business customers. Technology applied to such a partnership only augments the output. Effective automation applied by enabling operations flow for multiple parties, in real time, paves the path for quick and convenient approvals and pendency resolution.

Also Read: U GRO Capital launches ‘GRO Micro’, expands its network by 25 branches

Q. In your view, what would be the state of SME / MSME financing in 2020 and the roadmap for 2021?
The year 2020 has been very crucial towards promoting financial inclusion, specifically for MSMEs. The circumstances posed by the pandemic, asked for effective technological integration. The NBFCs leverage their AI/ML capabilities to render the processes digital and in the course make them more convenient. The situation also increased the robustness of underwriting, with the lenders’ ability to assess credit worthiness on profound parameters. Stepping into 2021, these parameters are bound to further evolve and pave the way for enhanced reach, covering the small businesses, which are yet to access adequate credit. Further, 2021 calls for elevating awareness amongst MSMEs with regards to the significance of digital transformation and the importance of their ability to provide data required for credit access. While the year 2020 demonstrated the government’s major impetus on supporting MSMEs, the year 2021 will only witness the surge in the efforts by the government and relevant industry bodies. However, it will be very crucial to observe the nature and direction of these efforts, to impart maximum benefits.

Q. What are the emerging trends in the fintech industry, essential towards promoting financial inclusion?
The fintech industry is transforming rapidly. A major reflection of the same can be observed in the lending industry and its bid to promote financial inclusion digitally. The effectiveness of the lenders’ ability to leverage technology and analytics is on a meteoric rise. Alternative lending has emerged significantly by utilizing the traditional credit bureau based score cards as well as cash-flow based data and other alternative data points. This, in order to arrive at the optimal credit requirements for varied enterprises and their effective underwriting. We also are witnessing an essential emergence of Account Aggregators (AAs).

AAs play a pivotal role in facilitating easy access to loans for NTC customers, especially small businesses with low or no credit history. They allow the lenders quicker access to consented data of individual customers and small businesses, allowing them to assess a potential borrower’s credit risks and process more loan applications faster, without compromising due diligence and safety. It can also reduce the rate of dropouts by customers in the loan application process by reducing the need for physical paperwork and creating a more hassle-free customer experience.

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