DIGITAL SOLUTIONS FOR TRADITIONAL REQUIREMENTS
Tech-driven start-ups are helping traditional small businesses achieve scale and optimise operations by providing low-cost digital solutions
NBFCs or from their own books. Beyond their mainstream digital payment solutions, fintech start-ups are innovating around digital distribution engines and building alternate data sets for underwriting. A host of start-ups including Khatabook, Dukaan, PagarBook, and Hylobiz are primarily focussed on the SME space, offering various solutions and services including digital bookkeeping; digitisation of attendance, payroll and salaries; and end-to-end payment and neo-banking services.
“SMEs across sectors and regions are today familiar with digital payments. Overall, the challenge of using technology has vanished thanks to UPI, QR code and digital payment services. There is enough awareness in the market. Today, when we go to the market, the questions that are being asked are around the possibilities of integrating different tech products they use,” says Vishal Gupta, Co-Founder of Hylobiz. Bengaluru-based Hylobiz helps SMEs in India, Bahrain and the UAE automate and digitise everything from invoice management to inventory management and accounts reconciliation.
Trade finance platform Vayana Network, which recently closed a `397-crore funding round from a slew of investors including IFC and PayU, among others, is gearing up to launch its International Trade Finance Services (ITFS) platform, for which it received a licence from the International Financial Services Centres Authority (IFSCA). The platform, which it plans to launch this fiscal, will enable SMEs to access international trade finance facilities for their export and import businesses.
“Today, 45-50 per cent of exporters are SMEs. What they really need is foreign currency credit, whereas, what they get is rupee credit, which means they take on the exchange risks. ITFS will allow SMEs to get financing in foreign currency at much cheaper rates for their exports and imports,” says Ramaswamy Iyer, Founder and CEO, Vayana Network.
The Union government, too, has been actively supporting equity investment for SMEs with initiatives such as the `50,000-crore fund-offunds announced in May 2020, as part of the Aatmanirbhar Bharat package, to be administered by the NSIC Venture Capital Fund Limited (NVCFL), a wholly owned subsidiary of the National Small Industries Corporation.
While technology is helping traditional small businesses break the physical barriers of brick and mortar walls, they still do not attract venture capital (VC) investments as much as their tech-first counterparts. Lack of long-term private capital is a consistent problem for SMEs.
“There’s a large universe of SMEs that have been able to grow their businesses and use capital efficiently. These are the qualities typical VCs seek in their portfolio. Unfortunately, SMEs are not on the radar of VCs because they may not grow as fast as tech businesses and traditional nontech enterprises may not offer many exit opportunities,” says Mitin Jain, Founder of private equity fund India SME Investments.
“There is some sort of a symbiotic relationship with the SMEs in a way, where start-ups want to ensure successful adoption of their products in India before launching for the world,” Jain adds, summing up the growing opportunity and collaboration between SMEs and start-ups.