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Fintech or Alternative Lending models that leverage technology to utilize alternative data such as GST (Goods and Services Tax) that allows an insight into business parameters such as inputs, value, place of business, amount of taxes levied to derive information about business book size, assess financial risk appetites and gauge capacity to service further debt obligations. Utility bills, bank account statements are some other data points that are used.
Fintech lenders offering invoice financing as a short-term working capital facility based on unpaid invoices of MSME clients/customers to help in solving liquidity related challenges in the short term.
Peer to Peer (P2P) lending model that is a digital marketplace connecting borrowers with lenders allowing quick access to low cost loans.
Cluster financing model approach to lending is intended to provide a full-service approach to cater to the diverse needs of MSME business units operating in a particular region and within a distinct, well defined business cluster such as leather making or food processing. Financial service providers have been using this approach to identify clusters and organize them by similar data points that allows for predictability around businesses’ capacity to service debt, risk profiles and product needs.
Traditional microfinance business models implemented by NBFC (Non Banking Fianncial Companies) MFIs (Microfinance Institutions), Small Finance Banks using Joint Liability Group (JLG) model, to provide collateral free loans to low income segments primarily from the micro and small enterprise categories. The JLG model is also primarily constituted by women members of the households that operate the enterprises seeking credit from financial institutions.
Enhancing productivity and economic resilience of micro and small businesses through access to working capital and debt financing for their business needs.