Transforming finance for MSME’s in India through digital credit
Tags: India, Women In Business, Credit, Financial Services, Financial Inclusion

Arth is supporting micro-enterprises, with a focus on both credit and livelihood support

Small businesses are the new pillars of the Indian economy, engaging millions of households in rural, urban, and semi-urban locations. However, due to the unfolding of uncertainties’ in the year 2020, these businesses have suffered a major blow. The Micro, Small, and Medium Enterprises (MSMEs) are also a key governing sector of employment and economic development in India.

The MSME sector includes around 63.4* million units across the county, out of which 20% units are based in rural areas. Their approximate contribution to the manufacturing GDP is 6%; 25% of the GDP from services; and around 45% of the overall exports from India. The higher contribution of MSMEs in driving the Indian economy is indicative of its ability to encourage national growth in employment, socio-economic progress, and reducing rural-urban migration by lowering poverty.

However, the COVID-influenced disruption has caused a major setback to the micro-enterprises causing financial limitations to support their entrepreneurial needs. According to the latest update by the Times of India, at least 10% of the micro-enterprises had to permanently shut their shops post the lockdown. To support the remaining 90%, a timely flow of funds can offer significant support in improvising their entrepreneurial health and helping them in keeping their businesses afloat.

Digital Credit for micro-enterprises: ARTH Vridhi

Financing the MSMEs has been a concerning cause for all stakeholders across the industry, e.g., banks, financial institutions, and other organizations. ARTH has been at the forefront of enabling credit support to the micro-enterprises, with a special focus on those led by women. With time, the micro-customers at ARTH have enriched their capabilities in understanding credit and the management of businesses through various capacity building training sessions.

Vridhi in simple terms means ‘growth’. ARTH Vridhi is an individual micro-enterprise credit, focused on improving the health of enterprises, as well as the financial understanding of entrepreneurs by its technology-led offerings, like digital customer-onboarding, e-KYC, credit underwriting through machine-learning, digital repayments, real-time notifications, etc.

A glimpse from the Sakhee Sabha, educating the women micro-entrepreneurs about welfare schemes.

How does ARTH Vridhi benefit the micro-enterprises?

ARTH Vridhi, with its technology-driven approach, is suited to address the key challenges in the MSME sector. The key benefits of this individual credit offering are:

1.Introduction to formal credit: Earlier micro-entrepreneurs (MEs)preferred informal loans from family or friends, or family wealth to cushion their financial needs, falling prey to higher interest rates. ARTH Vridhi introduces the MEs to the formal banking system as well as lower interest rates and other benefits, thus enabling Financial Inclusion (FI) for the underserved.

2.Financial Literacy: A mandatory Financial Literacy session is conducted prior to the Loan disbursement process to ensure that the MEs are well versed with their Loan Journey. This also helps them in understanding the calculation of interest rates, and additionally best practices for business management to help in their micro-businesses.

3.Digital understanding: ARTH Vridhi is a cashless facility, and is 100% processed digitally. Thus, the MEs can have digital repayments only, which makes it important for the ME to first understand the digital processes. ARTH also encourages the use of technology amongst its customers and thus offers initial hand-holding to introduce and educate first-time users.

4.Insurance benefits: The credit facility comes with insurance support since majority of these micro-entrepreneurs do not have any social security benefits. Hospicash thus safeguards the health of the ME owner as well as his/her family and helps them to prepare for any unforeseen emergency.

5.Strengthening households: With a direct impact on the business-income, ARTH Vridhi also supports the households of these MEs through various livelihood-offerings, like ARTH Kalpataru (an initiative on government-scheme linkage), Poshan Vatika (Nutritional kitchen garden), Project Suraksha (alternate income channel to sustain during COVID), etc.

Through its multi-faceted, socio-economic, and customer-first approach, ARTH Vridhi aims at building an enabling environment for the micro-entrepreneurs and their families. ARTH believes that the micro-enterprise sector is the driving force of our nation. Hence, it is crucial to comprehend the thoughts behind the micro-enterprises as well as their livelihoods, and ensure timely communication and connect with the ever-growing underserved lot.

*https://cutt.ly/Rh1tXSO- CII National MSME Council