Digital Trade Finance Platform Launched by MODIFI

Narendra Kumar

05 Sep, 2019

European Fintech Technology “MODIFI” announced to launch Digital Export Finance in India. The motive behind the introduction of this platform is to allow Small & Medium Enterprises (SMEs) to thrive and offer convenient and attractive payment terms to its International Buyer.

MIDIFI in the year 2018, has introduced the digital trade financing platforms in Europe, is now interested to expand its operation in the areas of Asia, so accordingly decided to enter the Indian Market.

What is the Scope of Digital Trade Finance in Indian Market?

The SMEs hold a major proportion of total export made by India. Total export stands at $292 billion of a financial year, out of that total proportion of 40% of this trade is made by SMEs. But there is a certain amount of difficulty in securing finance by these SMEs.

The problem faced by SMEs is tedious paperwork, high rates of rejection and collateral requirement. As per the founder and CEO of MODIFI, the Current Indian environment has a favorable opportunity to welcome digital trade platforms.

There is certainly high demand for this platform and lenders like MODIFI can meet this need of increased demand for digital trade financing platforms. With the introduction of the initiative of “TReDS” in the budget 2019, there is a widened scope of digital trade finance in India.

Indian Government’s Initiative for Encouraging Digital Trade Financing

The Government of India has taken many initiatives to promote digital infrastructure and digital payments platforms:

• Fintech has not anymore confined itself to digital products or services in the financial sector and banking segment. It has stepped towards strategic areas in the financial including digital payments.
• Finance Minister, Ms. Nirmala Sitharaman has provided payment platforms for small businesses such as MSMEs, for filling of the bills to waive off its delayed payments and solving all its cash flow problems.
• The government has continuously taken a step for enhancing rural infrastructure making it easier for MSMEs to increase their digital footprints.
• The government to boost up end-to-end payments for MSMEs has also set up a single-window platform.
• The government also introduced a new scheme for easy loans to MSMEs in just 59 minutes of application through online application
• Easy KYC norms of NRIs and by merging the portfolio route of NRIS with FPIs lead to access to investment by NRIs in India.
• For the business establishment with an annual turnover of INR 50 Crore or more, there is an offer to avail low-cost digital payment such as BHIM-UPI, AAdhar Pay, etc

Also, Read: Changing World of Small and Medium-Sized Enterprise Lending.

Brief Description of TReDS

The Trade Receivables Discounting System is an online bill discounting platform for helping cash-starved MSMEs to raise the funds by selling their cash receivables to corporate. It was introduced by RBI in the year 2014 with the motive to boost up the performance and operating of MSMEs without hurdles.

One of the distinguishing features of TReDS is that MSMEs, who are selling their receivable needs not to submit any collateral and in case of default there will be no recourse to them.

TReDS ensure that there is a regular flow of operational funds too MSMEs at attractive rates. It also ensures that their working capital limit is not affected as they are “off-balance sheet finance”. It helps corporate to comply with the MSMEs Act, which says that the buyer has to pay within 45 days of its purchase from MSMEs.

In November 2018, Prime Minister Narendra Modi introduced compulsion to get registered on this TReDS platform for the Companies whose annual turnover exceeds INR 500 Crore. Also, RBI has classified the bank’s disbursement under the priority sector lending (PSL).

TReDS gives equal business opportunity to all banks irrespective of their size. Banks can reach out to maximum customer information with the vast amount of data available now as compared to once no information available.

MODIFI Expansions to India

With the initiatives for boost up of digital trade finance platforms in India by creating TReDS, and other digital trade finance for boosting trades in India.

MODIFI is a European Fintech Company that is setting up digital trade finance platforms in India. It’s a platform meant to provide Small & Medium Size exporters and offer attractive payment terms to their buyers. MODIFI started its global trade finance platform for SMEs in Europe in 2018, now in 2019 is stepping in India to further international expansion.

MSMEs are committed to solving trade finance for thousands of underserved MSMEs. The partnership between MODIFi & Winning Maersk will provide plenty of opportunities for cooperation beyond equity investment.

FAQs

What are the financial issues faced by MSMEs?

Around 30% of global trade is held by SMEs. Access to financial services is a worldwide problem & around half oh MSMEs face this problem. Half of the funding requirements of MSMEs are rejected by the banks. And 60% of those rejected trades collapse due to insufficient funds.

How MODIFI benefits are connected with the TReDS platform?

As per Dr. Nelson Holzner, CEO of MODIFI, the digital payment trade services are great platforms for MSMEs in India. India in its budget had shown a commitment to encourage digital finance with the introduction of TReDS.

What is TReDS?

It’s a program for reducing the digital bill for the SMEs supported by the government. It is expected to allocate Rs 25,000 to Rs 30,000 Crore in FY 2019-2020. At present, this scheme does not cater to exporters and only focuses on the domestic market.

What are the expectations of MODIFI by the year 2020?

MODIFI expects to invest a finance volume of $1 Billion in India by the year 2020. Though at present it focuses on creating awareness about this platform and benefits to MSMEs.