Micro, Small, and Medium Enterprises (MSMEs) are the backbone of India’s economy, contributing over 26.83% to the GDP. Despite their critical role in local development and job creation, many MSMEs face challenges in accessing financial services, particularly credit. Traditional institutions often struggle to serve them due to remote locations and perceived lack of creditworthiness. A joint report by TransUnion CIBIL and SIDBI revealed that out of India’s 630 lakh MSMEs, only 250 lakh had obtained credit from formal sources.
Open Network Platforms: Transforming Financial Inclusion Open network platforms offer a transformative solution to this credit gap. They empower MSMEs to aggregate and manage their financial data efficiently, constructing a robust digital financial record. By securely sharing this data with lenders, MSMEs provide a comprehensive financial view, facilitating more informed credit assessments. These platforms bridge the gap between MSMEs and formal financial institutions, enabling access to once-distant credit and financial services. Initiatives like the Account Aggregator (AA) framework, Open Network for Digital Commerce (ONDC), and Open Credit Enablement Network (OCEN) drive the expansion of digital public infrastructure platforms in India.
Account Aggregators (AAs): Streamlining Credit Assessment Account Aggregators (AAs) play a pivotal role in empowering MSMEs to efficiently manage their financial data. They seamlessly combine data from various financial sources, expediting credit assessments and offering personalised financial solutions based on precise insights. AAs enable MSMEs to showcase their creditworthiness through consolidated transaction records, facilitating astute financial decisions.
Open Credit Enablement Network (OCEN): Democratizing Credit Access OCEN, introduced in June 2021, aims to democratize credit access and enhance financial inclusion. It reduces friction in financial processes, providing customised credit offerings and simplifying loans, ultimately accelerating MSME growth and economic expansion.
Open Network for Digital Commerce (ONDC): Revolutionizing Credit Access ONDC focuses on streamlining credit transactions for MSMEs, offering an integrated platform that simplifies credit-seeking processes through comprehensive creditworthiness assessment. It empowers MSMEs with seamless access to funds, enhancing service provision without requiring additional working capital.
Conclusion: Open network platforms are revolutionizing the financial landscape for MSMEs in India. They enable MSMEs to access credit and financial services with ease, ultimately driving economic growth, promoting financial inclusion, and empowering the last mile of economic development. These platforms are instrumental in unlocking the full potential of MSMEs and fostering inclusive economic success as India strives to reach a $5 trillion economy.