Fintech: Revitalising MSME Financing via Quick Access to Funds

MSMEs in India pitch in about 45% to the country’s manufacturing output and nearly 40% to its exports. Despite being a key player in the Indian economy, MSMEs face enormous challenges in securing timely financing. So, in response, these small, albeit crucial, enterprises are now turning to financial technology or fintech companies as a means to fulfil financial requirements.

Read on to know how fintech companies in India are revitalising financing for MSMEs by offering quick access to funds.

The Role Of Fintech In Transforming MSME Financing

Regardless of good tidings, the MSME sector experiences numerous financial challenges, which obstruct it from reaching its full potential. The traditional financial system in India reaches a mere 16% of the MSMEs, thereby creating a massive credit gap in this sector. Moreover, this shortfall often leaves several small-time entrepreneurs struggling to clear debt and striving to meet working capital requirements. 

Here are some financing challenges that Indian MSMEs typically face:

• Lack Of Liquidity

MSMEs routinely operate under high inventory costs, with no guarantees on minimum order. As a result, these enterprises can be compelled to divert all available finances towards their day-to-day operations, leaving them cash-strapped.

Moreover, they have no resources for business expansion by way of long-term investments. So naturally, the sector is on the lookout for simpler and quick funding sources, wherein fintech lends a hand. 

• Lack Of Trust On Traditional Banks

When it comes to financing for MSMEs, traditional financial providers tend to be apprehensive. In fact, they often view these enterprises as less suitable customers as the businesses require smaller loan disbursal amounts. 

In addition, banks may doubt the repayment capabilities of small-scale businesses, most of which have a low, or worse, no credit rating. Therefore, banks consider MSMEs as a high-risk sector, the outcome of which is a severe lack of funds for these firms.

As a result, small entrepreneurs are met with stricter regulations by banks. A further deterrent here is that the returns earned by businesses often fail to be proportionate to high transaction costs. 

• Availability Of Limited Options 

Indian MSMEs usually prefer loans via traditional banking channels. Therefore, they are left at the mercy of time-consuming and outdated risk assessment procedures, which may rob them of the chance to capitalise on numerous real-time opportunities. 

In this regard, fintech companies in India ease financing for MSMEs by offering quick funds through digital processes. Accordingly, it prevents businesses from spending time and resources towards meeting an array of eligibility criteria and filling out long paper trails. 

• Outdated Practices And Technologies 

For decades, there have been several regulatory practices that often work against MSMEs. These include complicated procedures such as conducting tax assessments, acquiring business licenses, certificates, and insurance. Furthermore, such issues persist, especially in rural regions, despite the introduction of various government schemes. 


Additionally, MSMEs fail to present convincing cases required to source financing as many of them still rely on outdated technologies while lacking skilled labour. And as long as these inequalities and inefficiencies exist in the system, regulation reforms will not reach their intended targets.


On the bright side, fintech in 2021 has grown by leaps and bounds. Besides, it has become increasingly simpler so that the masses can adapt to them seamlessly. As a result, a plethora of businesses is now comfortable with integrating the tech into their operations. Moreover, fintech has offered many online platforms that are virtually one click away when it comes to MSME financing. 


Take KredX, for example. One of the leading fintech companies in India, KredX streamlines the entire process of borrowing, thus minimising hassles and saving time. With this independent technology platform, businesses can avail of the following:

• Online and quick process of availing funds
• Fast processing time of 0-30 minutes
• Easy to use 
• Single-click eSigns, invoice uploads, and more
• No collateral requirements
• High security through end-to-end monitoring of loans

Impact Of Fintech On Indian MSMEs

After crossing several hurdles during the demonetisation phase, MSMEs have opened up to fintech advancements and become conscious of the tech. As a result, they are now leveraging fintech developments, including accounting software, data analytics, artificial intelligence, SaaS, and the Internet of Things, alongside digital wallets and mobile point of sale machines. 

An inclination towards fintech has, therefore, presented Indian MSMEs with a gamut of opportunities. In fact, this is well reflected in the fact that in 2021, the Goods and Services Tax Network (GSTN) recorded a base of over 9.2 million MSMEs monthly returns filing. 

In addition, the impact of financial technology has paved the way for operational improvements, which range from increased profitability and efficiency to higher customer engagement. Moreover, the adoption of this tech hints at the rising demand for its services, which are only expected to enhance and grow in the foreseeable future. 

Bottom Line

Advancements in financial technology, coupled with the prowess of fintech companies in India, present-day MSMEs are being served in an inclusive, speedy, and cost-effective manner. Additionally, with fintech solutions like KredX, acquiring funds becomes all the more seamless and hassle-free. Moreover, buoyed by further enhancements in fintech and its large-scale adoption, India’s MSME sector is likely to realise greater financial inclusion in the years to come.