In an effort to open up financial inclusion opportunities and promote independence for micro, small, and medium enterprises (MSME), ecommerce major Flipkart has decided to revamp its ‘Growth Capital’ seller financing program.
According to a report, the new changes will allow over one lakh sellers on the platform to avail credit at competitive interest rates from non-banking financial companies (NBFC) and banks. The approval time for the whole process will be one day and sellers will be credited with the money within 48 hours.
Government data estimates that there are around 60 Mn MSMEs in India as of 2018, and for many of these, having a financial backing can be a challenging task.
Flipkart’s new ‘Growth Capital’ initiative aims to bridge the gap between financial institutions and MSMEs through technology and the digital economy.
The company’s CEO Kalyan Krishnamurthy said in a statement that small businesses are the backbone of India’s economy and being a homegrown company, Flipkart is committed to helping sellers all across India grow. The company’s knowledge and understanding of the Indian ecosystem allows it to construct frameworks such as the new ‘Growth Capital’, through which sellers can scale their businesses, and create more employment opportunities, and continue to transform commerce in the economy
The application for ‘Growth Capital’ requires minimum documentation and is said to be seamless in nature. The financial partners for the programme include State Bank of India, Bank of Baroda, Axis Bank, Aditya Birla Finance, Tata Capital, Flexiloans, Small Industries Development Bank of India, LendingKart, Indifi and Happy Loans.
Small scale sellers are expected to benefit most out of the ‘Growth Capital’ programme as a majority of the loans are used to meet working capital requirements and deal with demand spikes. The average loan size under this programme is about INR 7 Lakh, but sellers can also avail loans up to INR 3 Cr at interest rates lower than 9.5%. Term loan and credit line tenures are up to 12 months under the ‘Growth Capital’ scheme.
Inc42’s DataLabs had reported that access to credit is an important aspect for any business and so is the case with MSMEs. Lending in this sector has mostly been dominated by informal financial entities such as money lenders. This can be attributed to the fact that 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.