Deep Tier Financing: Bridging the Liquidity Gap for Supply Chain Resilience

Описание: Deep Tier Financing: Bridging the Liquidity Gap for Supply Chain Resilience

Speaker:
Anup Agarwal, Co-Founder & CEO, Mintifi delves into how deep-tier supply chain financing is revolutionizing SME liquidity. With supply chains being the backbone of India’s economy, the session explores how innovative financial solutions can empower MSMEs, enhance trade efficiency, and drive sustainable growth.

Key Takeaways from the Session:
1. Understanding Deep-Tier Supply Chain Financing
Supply chains are interconnected systems that start from raw materials and end at finished goods reaching consumers.
The ecosystem consists of manufacturers, distributors, wholesalers, retailers, and service providers, all of whom need financing to sustain operations.
Deep-tier financing ensures liquidity across all levels of the supply chain, not just large corporations but also SMEs and MSMEs.

2. Breaking Down Supply Chain Financing Models
Supply-Side Financing:
Helps vendors, manufacturers, and suppliers procure raw materials and manage working capital.
Credit is required to bridge cash flow gaps as payments often take 30-60 days.
Demand-Side Financing:
Enables distributors, dealers, and retailers to stock inventory and fulfill customer demand.
Crucial for businesses selling across multiple geographies where trade credit cycles can extend significantly.
Export Financing:
Addresses longer payment cycles (90-120 days) for exporters dealing with international buyers.
Platforms like TReDS and Bharat TradeNet streamline export payments.

3. The Role of MSMEs in India’s Supply Chain Economy
MSMEs contribute 30% of India’s GDP and over 50% of employment.
Despite their economic significance, MSMEs face a severe credit crunch, receiving only 7% of total bank credit.
The supply chain financing gap is estimated at $300-$400 billion, hindering their ability to scale.

4. Challenges in Supply Chain Financing & MSME Credit Access
Delayed Payments & Credit Constraints:
Payables: Large corporates take up to 110 days to pay MSME vendors.
Receivables: MSMEs often wait 45+ days for payments from distributors and retailers.
High Cost of Credit:
Limited access to working capital forces MSMEs to forgo cash discounts, resulting in 24-36% annualized losses.
Fragmented Lending Ecosystem:
Banks hesitate to extend loans to MSMEs due to lack of financial data and high perceived risk.

5. Why Supply Chain Financing is the Future of SME Lending
Ecosystem-Based Lending:
Unlike traditional loans, supply chain finance leverages corporate networks, invoice data, and real-time trade analytics to assess creditworthiness.
Lower Credit Risk & Cost:
Financing is backed by actual trade transactions, reducing risk for lenders.
MSMEs get access to funds at 7-14% interest rates—significantly lower than traditional SME loans.
Frictionless Lending & Digital Integration:
TReDS platforms, AI-driven underwriting, and fintech partnerships make MSME lending seamless.

6. Government & Regulatory Support for MSME Supply Chain Finance
Mandated 45-day payment cycle for corporates dealing with MSMEs.
TReDS Platforms:
Enables SMEs to discount invoices and get paid in 24 hours at 7-8% rates.
₹2 lakh crore worth of invoices financed annually via these exchanges.
Bharat TradeNet (New Export Finance Platform):
Streamlines export financing by integrating logistics, insurance, and banking for SMEs.
MSME Procurement Mandate:
25% of government procurement must come from MSMEs, ensuring stable demand.

7. Technology’s Role in Transforming Supply Chain Finance
Data-Driven Lending:
AI & account aggregation frameworks (AA, GSTN, Aadhaar KYC) help assess SME credit risk.
Embedded Finance & API-Based Solutions:
Fintech platforms offer real-time invoice discounting & inventory financing within supply chain networks.
Automated Reconciliation & Digital Payments:
Ensures seamless tracking of transactions & reduced manual errors.

8. The Road Ahead: Scaling Supply Chain Finance for MSMEs
Supply chain finance can unlock over $400 billion in liquidity for MSMEs.
Greater collaboration between banks, fintechs, and government initiatives is needed.
Adoption of digital financing platforms will further reduce credit barriers and accelerate MSME growth.
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