Credit and Finance for MSMEs: Clear will leverage its existing base of enterprise customers to enable invoice discounting for MSME suppliers to these customers.
Credit and Finance for MSMEs: Tax and financial services software company Clear has formally announced foray into SME credit and B2B payments business with its new invoice discounting platform that has already processed over 200 million invoices with a gross transaction value of $400 billion, the company said. Supplier payments remain among the critical issues plaguing MSMEs. Lack of access to formal credit through bank loans particularly in cases of delayed payments forces MSMEs to rely on informal credit sources such as moneylenders to avoid the working capital crunch. The invoice discounting model intends to address this problem.
“We are targeting $3 billion worth invoices by FY24 on an annualised basis,” Archit Gupta, Founder and CEO, Clear told TheSpuzz Online.
Clear will leverage its existing base of more than 3,000 enterprise customers to enable invoice discounting for MSME suppliers to these customers. The company said the estimated credit requirement by suppliers on invoices to Indian enterprises is worth more than Rs 15 lakh crores annually.
“In recent times there has been a dire need for a holistic technology platform that is mutually win-win for the enterprise customers, suppliers and financiers. We are launching this platform because as we have to speak to our enterprise customers as we believe there is still a need for a best in class technology platform,” said Gupta.
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Importantly, Clear’s invoice discounting product doesn’t fall under the purview of TReDS, an invoice discounting system governed by the regulatory framework of the Reserve Bank of India (RBI). TReDS was introduced in 2014 as a concept by the central bank to ease the working capital crisis for MSMEs. In 2017, RBI had issued licenses to three platforms including M1xchange promoted by Mynd Solutions, Invoicemart (joint venture of Axis Bank and mjunction services), and RXIL (joint venture between SIDBI and NSE) to operate on TReDS mechanism.
The RBI in its monetary policy review last month had also enhanced the National Automated Clearing House (NACH) mandate limit from Rs 1 crore to Rs 3 crore for settlements related to TReDS. “Keeping in view the requests received from stakeholders and to further enhance the ease of financing the growing liquidity requirements of MSMEs, it is proposed to increase the NACH mandate limit from Rs 1 crore at present to Rs 3 crore for TReDS related settlements,” In RBI Governor Shaktikanta Das had said in a statement.
Moreover, to encourage innovation and competition through increased participation, on-tap authorisation of TReDS operators was introduced by the RBI in October 2019.