13th September 2021

We discussed in the last essay why accessing credit is so painful for small businesses or MSMEs. Let's reiterate why Financial Institutions or FIs (like banks) are unable to lend to these MSMEs easily:

1. Difficulty in the discovery of creditworthy borrowers. Finding people who need credit the most.
2. Lack of trustworthy data of the borrowers. Finding out a legitimate borrower with intentions to repay.
3. Timely collection of cash or repayments. Collecting cash from these borrowers regularly and conveniently.

Why can't FIs lend easily?

OCEN infrastructure will bring the creditworthy MSMEs to the surface by leveraging the existing platforms. Remember Zomato's example?

startups: but why exactly OCEN? why should I consider being an LSP?

Sure, Zomato can build its own set of integrations to use with different lenders - let's say Bajaj Finserv and SBI. But that would be too much maintenance. OCEN provides a common set of rules (APIs) that can be used by any application to enable lending (or become an LSP). Alternatively, LSPs can make money by:

• charging an advisory fee to the borrowers to help them select the right loan
• add some sort of metrics on their apps to improve borrowers' credit scores (since the in-app data can also be used to assess risk)
• even offering their in-app data (as a credit score) of the borrower to a third party for insurance, cross-selling, or anything.

the floor is your entrepreneurs!

you said something about "Sahay" in the last essay?

Yes. Just like how BHIM was a reference app built to explain how UPI works, Sahay is a reference app built over OCEN rails to show Bharat the new way of lending credit. Sahay GST is an "invoice financing" platform built for MSMEs.

Let's say I'm a small business owner who sells rice bags. I sold my products for this quarter but did not receive all the payments. Now I need money to prepare for my new orders. Banks won't provide me with instant money. Hence, I download the Sahay GST app and log in using GSTIN to share the GST invoices* of my buyers with the banks. This will act as proof that I'm a legitimate and creditworthy MSME. Loan offers will be tailored to my needs and will be disbursed in a few seconds!

*with the help of AAs