Japanese financial services company Credit Saison has decided to create a loan book of $1 Bn in India over the next few years with a special focus on micro, small and medium enterprises (MSME) sector. Flagging off the initiative, Credit Saison announced a partnership with an India non-banking financial company (NBFC) Capital Float.
“Our alliance with Capital Float – Credit Saison’s first SME-focused partnership in India – will be a formidable enabler for both entities to deploy a large portion of this capital towards the sector. We have also integrated closely at a technology stack and API level, enabling a seamless experience for the end-borrower,” said Kosuke Mori, managing director of Credit Saison Asia Pacific.
Under the partnership, the duo will financially support the MSME sector in the form of loans. Irrespective of their locations, the enterprises can apply for these loans online. By leveraging Capital Float’s technology and Credit Saison’s credit underwriting system, the duo has assured that the loan application will be approved as quickly as possible. The capital will be provided by both Credit Saison and Capital Float.
Launched in 2013 by Gaurav Hinduja and Sashank Rishyasringa, Capital Float is a lending startup that especially focuses on SMEs and helps them scale up. Capital Float works with ecommerce merchants, small-scale manufacturers and early-stage B2B service providers to provide flexible, short-term loans.
Till now, the company has partnered with firms like Paytm, Shopclues, eBay, Snapdeal, Myntra, Flipkart and Amazon to provide loans to sellers on ecommerce marketplaces and other initiatives.
In the press release, Capital Float also highlighted that it has already digitally lent INR 8,500 Cr ($1.1 Bn) and plans to lend an additional INR 1,500 Cr ($210 Mn) to MSME till 2021. So far, the company has disbursed loans to over 5 Lakh customers in over 300 cities, across SME and consumer segments.
Capital Float said that with Credit Saison in the picture, it will “continue to double-down on MSME segments where credit demand is severely underserved, with a particular focus on Tier 2 & 3 cities.”
The MSME sector has emerged as a highly lucrative sector for credit startups. As per a report by ICRA, credit to MSMEs is expected to grow at 12-14% over the next five years.
According to DataLabs by Inc42, the total gross value added (GVA) of the Indian MSME sector by FY20 is estimated to be $866 Bn, noting a compound annual growth rate (CAGR) of 11.12%.
Access to credit is crucial for MSMEs and currently relies mostly on informal entities such as money lenders. Nearly 40% of credit allotment to MSMEs in India is through informal channels. The market potential of digital lending is estimated to be between $80 to $100 Bn by 2023.