2023 Budget expectations from Digital lending companies – Artfine, Cashinvoice & FinBox

Union Budget 2023 has been widely acclaimed as a fiscally responsible budget that promises to bring about India’s much-needed economic growth and development. The budget has proposed several measures to reduce the fiscal deficit, increase tax collections and promote investments in Fintech, infrastructure, digitalization, and other sectors. It also provides incentives for small businesses and startups.

New-age Entrepreneurs are hoping for the most from the budget, so let’s look at some of the significant expectations they expect for Budget 2023 from various industry experts.

Mr Arvind TCA, Co-Founder of Artfine, a specialist structuring company that offers end-to-end solutions in supply chain finance, is expecting:

Credit Insurance for MSMEs

The government should impose a priority sector obligation on insurance providers to protect MSMEs. According to data, only one transaction under the IRDA has occurred in the past year, underscoring the lack of intention. Credit insurance has allowed vendors, SMEs, and MSMEs to cover risks and consider expansion plans. In addition to managing non-payment risks that impact the trade finance portfolios of SMEs and MSMEs, it gives banks, suppliers, and NBFCs access to new markets.

Making OCEN accessible to SMEs

The government introduced the Open Credit Enablement Network (OCEN) two years ago. A retail credit programme that uses online marketplaces to connect borrowers and lenders and expand access to microcredit for the hitherto underserved MSME sector. However, the government overlooked a crucial aspect of the OCEN process that prevents 60 million SMEs from using this programme for loan purposes. While account details are available to individuals, they are not available for small and medium companies. The government should therefore encourage the flow of information if it wants to have an impact. Some signature developments in the budget announcement are needed to expedite the process and enable retail banking for SME companies.

Enabling TReDS access to larger MSMEs

To reach more MSMEs and buyers, a larger group of people must be given access to TReDS participation. However, this policy suggestion has been on hold for a while. Alternatively, participation in TReDs should not be restricted to companies with up to 250 crores in annual revenue; instead, a broad approach should be taken, and companies with up to 2000 crores in yearly income should be allowed on TReDS.

Mr Arun Poojari, the CEO and Co-Founder of Cashinvoice, who has over 17 years of experience in the financial services industry, including 12 years at Tata Capital, says,

Utilizing/ Encouraging MSMEs for import substitution as part of the Make in India programme

The government is focusing on import substitution and encouraging Make in India projects as there is a significant potential for increased import substitutions; hence MSMEs should be assisted in improving their cost competitiveness which can be done by creating a framework for SEZs centred on import substitution that can be replicated across the country and providing particular incentives to MSMEs for establishing units in such SEZs.

MSME Facilitation Councils must include Medium Enterprises

Alternatively, Medium Businesses must be included in MSME Facilitation Councils, which currently only serve Micro and Small Enterprises according to the MSME Development Act 2006. Thirty-nine thousand four hundred sixty-seven medium enterprises registered under the Udyam Registration portal as of November 25, 2022. Therefore, it is necessary to include the Medium Industry in the Micro and Small Enterprises Facilitation Councils to settle delayed buyer payments.

Rajat Deshpande, CEO and Co-Founder of FinBox -A B2B digital lending infrastructure provider, says,

“Leveraging digital infrastructure projects such as UPI and Aadhaar to improve last-mile delivery and policies to incentivize digital payment methods will go a long way in boosting access and inclusion.”

The 2022 Budget took a significant step towards increased digitization by announcing the setting up of 75 digital banking units or DBUs across the country, and I’m excited to see a few progress in the digital banking space:

1. Banks and payment providers are looking forward to incentives or a fiscal boost to continue offering digital prices. Coming to MSMEs, the 2022 Budget announced an extension of the ECLGS scheme till March 2023.

2. The TReDS facility for MSMEs could also do with some simplification, and hopes that the government opens new avenues for MSMEs to get invoice and cash-flows-based financing through digital means in the open market.

3. Co-lending is yet another innovation that’s reshaping the nature of MSME credit, but the government needs to do more to promote the same and boost financial inclusion. Clear risk mitigation policies around the model would also amplify its popularity.

Aditya Malik, Founder of ValueMatrix.ai and a mentor with the Nasscom DeepTech Club, says,

“After the Digital India push of the Govt., we now need Innovation First India to Institutionalize that we need investment which can create a back demand for our PhD and research talent to grow, stay back and not be brain drained by the more developed economies. Our DeepTech Industry desperately needs Tax SOPs to bolster sustained and stable growth. Given the unstable global signs of IT, this could be one of those sniper shots which can re-energize the Industry.”

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