Small and medium enterprises (SMEs) play a major role in driving India’s economic growth. They make up for 45% of the country’s industrial output. There are about 51 million SMEs in the country contributing one-third of the GDP. However, access to finance has been a significant constraint to growth, productivity, and expansion of SMEs.
There are many options for SME loans in India like banks and Non-Banking Financial Corporations (NBFCs) such as Bajaj Finserv. Recent policy changes and technological advancements such as digitization of SME finance have been a key factor in supporting the growth of SMEs globally.
Digitization has emerged as a win-win scenario for both lenders and the businesses. Initiatives such as ‘Digital India’ and ‘Make in India’ are opening bigger opportunities for these SMEs.
Rising mobile usage, cloud-based services, Big Data, and electronic payments have fuelled up the ease in securing loans for SMEs and repaying it. Apart from services such as secured mobile conferencing and banking apps, businesses can receive automated financial advice to tap their revenue streams and manage finance.
Digital revolution has helped in shortening processing time, mitigating risk and optimizing SME loan interest rates. Here is how digitization of SME loans is stipulating new opportunities for both the businesses and the lenders.
Enhancing Relationships
Digitization has fuelled the customer-centric approach in SME finance just like in other sectors such as hospitality, healthcare, entertainment, and retail. Lenders are willing to nurture relationships by collaborating with SME customers through digital interfaces. Businesses also prefer to use their smart-phone apps, tablets, or PCs to interact with lenders. They can easily manage their banking needs through smart devices.
Reducing Effective Costs
Going digital is a great way of cutting down the operational costs for lenders. It also simplifies and decongests day-to-day operational activities. New apps make financial management, customer management, and supply chain management affordable for firms. It also enables lenders and big banks in portfolio management along with data-driven intelligence.
Boosts Process Efficiency
SMEs need to be adequately financed at each stage for their growth and development. Thanks to digitization, they can easily access and manage their finance from computers or smartphones. Automated systems can save tedious paperwork and lengthy manual processes. They’re also less likely to make errors.
Drives New Business Capabilities
Digitization has meant that SMEs and financial institutions have moved from data storage to meaningful data analysis. With data turned into information, institutions can offer their services in a better and faster way to their SME customers. On the other hand, businesses can use this treasure trove of digital data to compare and choose their alternative source of funding.
As evident, digitizing SME finances holds immense potential both for small businesses and SME lenders. Apart from reducing time and money, it allows for enhancing business support systems and connectivity.
Also Read: Business Funding Opportunities for MSMEs
