[Elizabeth Simpson]

Fintech can be a game changer for MSMEs lending and finance, as it can facilitate risk assessment and the measuring of the creditworthiness of MSMEs. Currently, the risk assessment framework is over-dependent on asset ownership, CIBIL scores, documentation, etc. Fintech can provide a cash-based lending model that assesses creditworthiness of an MSME based on its cash flows leveraging the power of digital payments. Neobanks have entered the financial system with the tag of ‘challenger banks’ because they challenge the complex infrastructure and client onboarding process of traditional banks. Account aggregators (AAs) are a game-changing move in the fintech arena, enabling the sharing of financial information in a real-time and data-blind manner between regulated entities (banks and NBFCs). This helps banks reduce transaction costs and offer lower ticket-size loans, and more tailored products and services to their customers.
Co-lending partnerships between banks and fintech-led NBFCs can help MSMEs get loans as both traditional and digital lenders analyze structured and unstructured data to assess risk. As innovation and technology progress, fintech will bring in multiple more models and players in the credit arena, reducing the risk and cost of lending, and making the system more inclusive and accessible for the MSME sector.