Many ongoing industry efforts to bring cash flow lending to life for MSMEs are now on hiatus
COVID19 strikes cash flow lending too
At iSPIRT, with our long-cherished dream of democratising credit in this country, we advocated for and built public infrastructure to enable market players to offer cash flow based lending solutions to small businesses.
Pre-COVID: We argued that small businesses needed this new breed of products because they were unable to access formal credit otherwise.
During-COVID: As we process, accept and adapt to our new reality as a country, we realise small businesses need something much more urgently than cash flow based solutions from the market – they need rescue and stimulus packages from the government to survive the health and economic distress brought on by COVID19.
Post-COVID: When the lending cycle picks up again in the market (and we will watch it diligently!) we will revive our efforts to bring cash flow based lending products to the market. For now, we are putting these efforts on a hiatus. This is because we think there’s a while for “Post-COVID” to come and many uncertainties are unfolding every day. So for now, we want to wear a “During-COVID” hat for the foreseeable future.
This is disappointing for many parallel efforts that were underway in the market
Since July last year, after the U.K. Sinha chaired expert committee on MSMEs submitted its report to the RBI, many parallel efforts including Sahay, revamping of TReDS, PSB59, etc. by different market players were underway to bring cash flow lending ideas in this report to life. iSPIRT engaged with market players to design a digital public infrastructure first approach encapsulated in Sahay. The government was supportive of all of these, highlighting the importance of MSMEs within the economy.
Cash Flow Lending – The idea whose time will come
This slow down in the momentum is obviously disheartening for many iSPIRT volunteers and to all the market players we were working with. Months of hard work may not come to life in the next quarter or two. But these same months of hard work were possible only because we saw ourselves as architects with a 10-20 year horizon to solve India’s hard problems.
Cash Flow lending is a powerful idea to democratise credit in our country. It’s time will come, and come soon. Right now, we need to pace ourselves to our new realities and revive the energy again when lending picks up in this country.
About the Author: Meghana is a core volunteer and orchestrating our efforts in Democraticising credit at iSPIRT. She can be reached at [email protected]