Finezza LMS to solve India’s INR 40 trillion Unaddressed Credit Gap

In a move set to transform the line of credit — the single most important loan product for MSMEs — and ease the credit crunch in the sector, Finezza has introduced its latest offering in its state-of-the-art lending lifecycle management system (LLM). Via the new product, a Non-Banking Financial Company (NBFC) will be able to manage credit limits and partners internally on a single dashboard.

To put it simply, a line of credit (LOC) is the major type of loan given to MSMEs. MSMEs need credit to keep business operations smooth and cash flow running, since their work capital is stuck with clients who often take longer to clear the invoices. Therefore, they need short-term working capital loans.

The new feature by Finezza will allow NBFCs to create limits at the anchor, lender, and borrower levels thereby making operations very simple and give a clear view of business at any point in time. Notably, in the MSME sector, the credit gap — the difference between the addressable credit demand and the actual credit given — is nearly INR 40 trillion.

“The operational challenges in managing a line of credit product come from different types of LOC products like invoice discounting, B2B BNPL, fixed date repayment and fixed short tenure repayment. In the case of working with multiple anchors, they need to set an overall limit at the anchor level i.e total loans given to MSMEs associated with an anchor should not exceed a certain amount.

“There is also the challenge of managing and reconciling payments with multiple anchors and/or lenders if you are an NBFC or a fintech, as the case may be. Finezza’s unique proposition is being appreciated and adopted in the market, and is forcing existing players to rework their technology,” explains Krishnan Iyer, CEO, Finezza.

He adds that limit management is the core of the issue faced by fintechs and fintech-NBFCs where they manage each drawdown within a limit as a loan in the loan management system while managing the limit and its utilization outside. Further, setting up and managing the anchors and lenders is also done separately. Finezza’s new product offering will help MSMEs efficiently manage their line of credit within the LMS itself

Moreover, with co-lending emerging as a model, the operational complexity for an NBFC is set to increase. Finezza’s LMS being co-lending-ready also comes in handy for new-age fintechs and NBFCs. The process of co-lending solves the problem of access to funds for the NBFCs, increases reach in the priority sectors for the banks and makes credit available at affordable terms to borrowers.