MSMEs provide employment opportunities to more than 100 million people, and moreover contributes 28.77% of the GDP
Micro, small and medium sized enterprises are contributing a great towards the progress of the Indian economy. MSMEs provide employment opportunities to more 100 million people, and moreover contributes to 28.77% to the GDP, it has nearly 40% contribution towards the exports, and close to 45% in industrial inputs. So, there is a need to provide financial aid and motivate the MSME sector by granting them the affordable policies and regulations. This is where the role of Fintech industry comes into picture to ease up the process for the MSMEs. Fintech has been at the forefront of revolutionising financial transactions through the extensive usage of technology. With the advent of technology and greater participation of private financial organisations to cover the gap created by the absence of large scale government financing, there has been an enormous leap in advantages.
With the inclusion of fintech, there has been a rapid transformation of the financial sector. There are a lot of advantages that fintech provides to MSMEs to achieve financial parity and assistance. Let us see through this article how fintech boosts the progress of the MSME sector.
Other than the basic banking and financial activities, there are quite a few functions that are provided by fintech companies:
Enablement of transfer of funds from a multitude of sources and for various reasons. Technology has made the process smooth, streamlined and secure. This allows for a hassle-free experience.
Helping the MSME in finding the requisite sources of investment. It is an important function since most MSMEs are unaware of all the steps that are required to attain an investment. Investors are on the lookout for investment opportunities but are unable to locate the business that may require investment. Fintechs with their intuitive tools and predictive algorithms help them fulfil the demand.
Artificial Intelligence or AI has been able to create virtual financial advisors that help the MSMEs on a variety of subjects. From MSME loan to MSME Registration as well as CGTMSE or Udyog Adhaar application, these functions help the applicants. There is also technology available that is governed by the investment strategy. They offer a variety of financial services depending on the demand and the need. These AI-enabled services may also help on the simplest of queries like MSME full form. The primary function of fintech is to simplify the entire process of fact-finding.
It is not just limited to MSME loans. Fintech companies help MSME owners in filing their tax returns and filing them too. There is also the specialised skill set required for financial planning. The algorithm of these tools is powerful enough to create financial plans for those who seek.
Fintech services also provide credit ratings. We do understand the importance of credit scores. A good credit score is necessary to avail of a loan. Many applicants fail to qualify for MSME loans because of unsatisfactory credit score. There are fintech services which provide accurate credit score and also advise the incumbent on ways to improve them.
Risk assessment and risk evaluation is another area where fintech has been able to make a mark. Risk analysis is pertinent for any business house, especially those in the business of providing loans to MSMEs. Banks and financial institutions employ fintechs to create a risk profile of consumers. Based on this risk profile would they be able to provide loans. Risk profiles are also responsible for drawing up the credit profile of an individual. With powerful mathematical models and systems that work at break-neck speed, fintech can provide an accurate risk profile of consumers in the shortest possible time.
A new area where fintech has been able to successfully venture is crowdfunding. The concept of crowdfunding is a new one in the country. MSMEs benefit a lot from crowdfunding.
With the rise of online payments and e-commerce, the usage of wallets to have seen a steady rise. Fintechs not only provide this facility to MSMEs but are also creators of these wallets. Digital currency is the way forward and with fintech at the helm, MSMEs must become tech-intensive and savvy in the times to come.