M1xchange expects financing of trade receivables of micro, small and medium enterprises (MSMEs) on its digital marketplace to more than double to Rs 25,000 crore-Rs 30,000 crore in FY23.

The industry and banks have become comfortable adopting the digital marketplace (Trade Receivables Discounting System (TReDS) platform), which was introduced by the Reserve Bank of India in 2017 to facilitate financial inclusion of MSMEs, according to Sundeep Mohindru, CEO, M1xchange.

“In April 2017, when we launched the TReDs platform, the total value of discountingfor MSMEs in that financial year (FY18) was Rs 300 crore and Rs 12,000 crore in FY22. In FY23, we will be doing Rs 25,000-30,000 crore,” he said.

Mohindru observed that earlier, the challenge was that banks used to find financing trade receivables of MSMEs risky .

“Now, without meeting a customer face-to-face, a banker sitting in his office is discounting the invoice, and payment is going to the customer’s account through the exchange,” he said.

Mohindru said trade receivables of MSMEs, amounting to Rs 100 crore a day, are being financed/ discounted on M1xchange, as against Rs 300 crore in the first year of its operations.

“So, that is how the adoption is...The bank is taking a risk on the SME, giving funding to it (on TReDS platform). But actually it is taking a risk on the corporate, which is its customer with ‘AA’, ‘A’ or ‘BBB’ rating.

“...So, the SME gets financing at the same rate of interest as a large corporate. So, the average rate of interest for an SME ranges from 5 per cent to 9 per cent per annum, which otherwise these enterprises would have never got,” explained the M1xchange chief.

Since the SME’s cost of business has come down, it is passing on the benefit to its customers.

“So, SMEs get their payment on time and can service the supply chain better. Therefore, it is a win-win for the corporate, SME and bank. There is zero delinquency for banks on TReDS,” emphasised Mohindru.

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