What is SOLV SCORE and How Does it Help Small Businesses?

Nabin Kumar Ram, Head- Data Analytics

In a country of 1.3 Bn people, nearly 63 Mn+ businesses represent the MSME (Micro, Small, and Medium Enterprises) sector in India and contribute to 30% of the country’s GDP. These MSMEs are integral to keeping the country’s economic engine running and generating employment for millions, both directly and indirectly. Despite the sector’s vast participation in the economy, this sector struggles to fulfil its credit requirement for business growth and is not yet well-serviced by financial institutions.

However, to help MSMEs reeling under the impact of COVID-19, government’s focus on offering significant credit flow to this segment will create enormous opportunity for their growth in coming years. Furthermore, a better and more transparent tax regime through GST along with increasing levels of digitisation played a vital role in establishing digital footprint for such businesses.

Serving MSMEs financial needs through traditional underwriting models bring several challenges for them as banks and financial institutes are highly dependent on assessing creditworthiness and ability to pay, but underestimate their willingness to pay. These institutes focus on their Bureau Score (CIBIL) and a detailed audit mechanism on documentation fulfilment further damages their business finance needs.

While bigger manufacturing firms can mortgage their machineries as collateral against loans, 98% of micro businesses still remain under-served because of unavailability of adequate or any form of collateral.

NBFCs have opened their arms to fill this gap however their collective scale at present is not seeming enough to make a significant repair. That is where the alternative, technology-driven credit scoring and psychometric models can make a huge difference. Using alternate data driven models, SOLV aims  to create a win-win situation with SOLV SCORE for MSMEs struggling to obtain credit and lenders unsure of MSMEs’ ability to repay. Let’s understand how SOLV SCORE works through Arjun’s journey.

Arjun, 21, has a small Kirana shop in the outskirts of Bangalore where he sells basic groceries to local villagers. His father ran this shop for 20 years and Arjun took it over after his father’s demise. Living in the digital era today and being digitally active, he wants to connect with other MSME shopkeepers and grow his business while serving neighbourhood villages and expanding his store to become a midsize retailer. However, given the fact, he has never taken a loan or held a credit card, his Bureau presence in nil. Also, at an age of 21, banks do not feel comfortable considering his loan requirement.

On the other hand, being a very focused and trusted individual based on the feedback from locals, he fulfils the requirement of willingness to pay. He also maintains a joint saving account with his father and puts some reserve money every month for rainy days. This shows his strategic planning behaviour.

With the help of SOLV SCORE, his ability to pay and willingness to pay is measured. Herein, his traditional bank statements and GST can support his ability to repay. However, a big portion of alternate data driven models with sophisticated machine learning and data analytics would help to measure his behavioural aspect on willingness to pay. His litigation attributes like pending court cases, operational attributes relating to his store and services, psychometric assessment through interactive game, data leveraged from Blockchain technologies – the factors deriving SOLV SOCRE – would provide a strong foundation for the new-age credit underwriting models employed by fintech lenders, ensuring faster and much better access to credit for MSMEs located even in smaller cities and towns of India.

Furthermore, being onboarded to the SOLV platform and through strong SOLV SCORE, he would be able to connect with a niche set of MSMEs. With transparent and smooth transactions, his business would grow in almost real time. Sustaining a strong and consistent transactional performance would not only make him best in class on the SOLV platform, it would also open the doors for his business expansion fulfilling his credit needs.

Know more about SOLV, click here.

Even in Crisis, Opportunities Abound for MSMEs

The ongoing COVID-19 pandemic has affected more than 150 countries, destroying lives, stalling economic growth and disrupting international trade & business. The Micro, Small and Medium Enterprises (MSME) sector in India has been one of the worst-hit in this calamity. This sector is ~64 Mn strong, many of which are in semi-rural or rural areas and employs close to 120 million people.

With the Government’s ‘Atmanirbhar Bharat’ initiative and support to the MSME sector with manufacturing and import substitution sops, opportunities are galore for businesses of all sizes to flourish.

Reducing import dependency on China
The call for a self-reliant Bharat and the stress on being “vocal for local” has opened up the possibilities for a larger demand for locally manufactured goods. The intention to reduce import dependency on China and the need to diversify our supply chains, coupled with the recent trend of going into manufacturing rather than largely services by MSMEs, signals a sizeable opportunity for seize here, especially in sectors like auto components, iron & steel, pharmaceuticals, textiles, plastic, furniture and toys, where the potential market size for domestic demand is significant. It will likely take a few years to gain the right competencies and for the results to show, but now is the time to make a start!

Renewed focus on solar manufacturing
India’s heavy dependence on China in solar energy, with 80% of the domestic demand for solar cells and modules being met by Chinese imports, received a rude jolt due to the pandemic, when installations were severely disrupted. This has led to renewed focus by the Government on expanding domestic solar manufacturing capacity to ensure energy security for the country. We have so far been manufacturing cells, modules, ingots and wafer, but now we need to go beyond that and also start manufacturing other ancillary equipment like backsheets, glass, inverters, transformers and cables, among others. This will enable us to cater to an entire ecosystem of renewable energy. Exports could form another pillar of this enterprise. GoI is considering setting-up new export hubs focused on renewable energy equipment opening huge opportunities for scale in this segment.

States setting up Manufacturing SEZs
Most states have plans in place to develop new manufacturing SEZs to give the sector a boost. Karnataka, for example, has identified industrially backward districts and tier 2 and 3 towns to develop MSMEs. Relaxations similar to the IT/ITeS industry are being provided to Manufacturing SEZs, to encourage manufacturing exports.

Digitization of MSMEs – Cloud and SaaS-based business processes
Adoption of technology will be a key factor in ensuring MSMEs’ future success and open up new vistas of growth for them. The pandemic has accelerated the adoption of digital sales channels and the digitization of MSMEs is a welcome trend that is here to stay. In almost every area of operation, be it book keeping and accounting, taxes, payment receivables and payables, Cloud and SaaS technologies can be leveraged to improve efficiencies and productivity. This is already happening, with many home-grown tech players using SaaS models to ease the business service pains of MSMEs. India was already a leading adopter of FinTech globally; the COVID-19 pandemic is now pushing larger numbers on to this bandwagon and helping them become future-ready.

Adoption of cloud-based technologies will help MSMEs reduce costs, increase information visibility and therefore improve decision making, and enhance worker safety – a critical area for compliance & governance in future especially in context of social distancing, contact tracing and ensuing timely interventions.

Advent of e-marketplaces for MSMEs
B2B e-marketplaces for MSMEs are gaining wider acceptance among buyers and sellers, which have also prompted the Government and the largest bank in India, SBI to enter the space. . It is a watershed moment in India’s B2B e-commerce, similar to the likes of Alibaba’s success story when China went into its manufacturing spree and internet penetration was at historical highs . Many forward-thinking MSMEs are integrating with such e-marketplaces, preferring to have an omni-channel presence in these times of social distancing and contactless, digital transactions.

The benefits that MSMEs reap from using these e-marketplaces are diverse –connecting with large networks of customers and suppliers, financing and business processes automation, and establishing a credible digital footprint; enablers for MSMEs to become future-ready.

Developing partnerships and local networks
There is a strong need to develop localized services and local networks across the country to enable the Government to expand economic hubs beyond tier 1 cities. MSMEs have an opportunity to actively shape this through forging partnerships with big players – including foreign entities looking to set-up low-cost manufacturing bases and pay a premium for hyperlocal data and specific knowledge of micro markets that MSMEs possess.

The next phase of growth for India will clearly be defined by MSMEs that stay abreast of trends and are willing to reimagine their businesses and evolve.

Digital Marketing: 5 Simple Steps to Increase Visibility & Connect with Retail Customers

By Pankaj Nawani – Product Head

One of the best managers I have ever worked with, a man who is credited with creating a powerhouse financial services firm from virtually nothing was very fond of a particular quote- “Small strokes fell great oaks”. Big outcomes do not necessarily come from seemingly big actions. More often than not they are a result of repeatedly doing small things right. And these words are true for the digital future of our small businesses too.

Due to the recent COVID-19 lockdown my mother-in-law, has been stuck in Pune (where I live) for the past few months. Not knowing local shopkeepers and chemists, she found a nearby pharmacy on Google for her monthly supply of medicines and since then gets them delivered by the store on time every single month. Since the supply was regular and there were no complaints, I never gave the arrangement a second thought, till yesterday when I saw that the pharmacy, she ordered from is nearly 6 km away from our home! I was surprised that the search skipped 20 other pharmacies enroute! How did this happen and was it a one off? I made some enquiries with other people and found that this particular pharmacy makes at least 2 deliveries to our housing society every day. With an average order value of Rs 3000 per delivery, the pharmacy is earning at least Rs.2 lakh per month from one housing society alone. Astonishingly, he doesn’t play the price game either to woo his customers! Then what accounts for his popularity? Here are the reasons –

1. Understand search marketing & how you rank on it: Most small business owners do not understand search marketing. Their view is that being listed on Google with their phone number alone should suffice. It doesn’t work that way. You have to make sure that your listing is 100% (working phone numbers, photos of your store, correct location etc). Most business owners do this listing as a one-time exercise and don’t update.

2. Have a social media presence for your business. What’s seen is what’s sold: You might think having a small website, Facebook page or a twitter account is a fad, but your customer is present on these platforms and so should you. It helps your customers remain in touch, establish credibility for your business and also helps you build more authority. Put simply the more you are present online, the more you’re searched & talked about by your customers, the better your chances of discovery on a Google search wrt. your competition.

3. Invest in a CRM system. Don’t ask the customer the same question twice: Who is your customer, what does she order and what is her desired frequency of delivery. It will help you not only be in constant touch but also cut down the cost of doing business. It does not take much to update your simple excel worksheet and set reminders on the same. There are shopkeepers who do this on nothing more than pen and paper. While the age-old system works, your customer’s behaviour is changing towards expecting flawless service at the click of a button, your business should adapt quickly to the change.

4. Customer Testimonials are important. Actively seek them out: In today’s world nothing gives more legitimacy to your business than customer testimonials and ratings. This is something that you need to be actively promoting. Make it your goal to get a couple of good testimonials per week. Conversely be very aware of negative comments on your business. Do everything you can to make sure that the customer complaint/feedback is not only addressed but also seen to be addressed. Your reputation is very important. Enhance it and guard it with all you have.

5. Create interesting content: No matter how boring you think your business is, there are always things that customers don’t know about your product and which if told to them, is likely to be appreciated. Put that content out, gather feedback and improve. I still recall how a juice seller showed me how to peel a pomegranate and pick the right watermelon. It’s been 12 years since then and I still remember him fondly. Make your trade knowledge more accessible to your customers and they will appreciate it. Repeat the process and over time you will have a repository which will put you far ahead of your competition.

History of Indian Handloom

The beauty and variety of Indian handloom is legendary. The texture and colour with the most intricate of woven patterns and embroidery can leave most anyone spellbound. As we celebrate India’s rich history of handlooms on National Handloom Day (August 7), let’s take a look at the checkered history of this celebrated craft that is still standing strong in the face of many challenges and delighting textile aficionados the world over.

Archaeological evidence traces the beginning of handloom in the Indian sub-continent back to the Indus Valley Civilization. Subsequent Aryan settlers in the region also adopted and further honed techniques of weaving cotton and wool followed by embellishing these fabrics with dyes and embroidery. Spinning, weaving, dyeing and other textile related artforms gave rise to a flourishing cottage industry. The Indian handloom industry while being driven at a household level also found growing adoption across the world. Indian cotton and muslin fabrics were traded with the Roman Empire and Indian silk traded through China via the Silk Route to western countries. Indian textiles have been praised in several accounts by explorers and historians, from Megasthenes and Herodotus to Marco Polo.

The advent of the Mughal empire saw weavers getting patronage from the royalty and creation of new fabrics such as ‘Mulmul’, ‘Benarsi Brocade’, ‘Jamawar’ etc. As the Mughal empire expanded its boundaries, so did the Indian handloom industry with weavers from Kashmir and Persia contributing their share.  Demand for Indian textiles grew by leaps and bounds as the world marveled at the mastery of Indian weavers. India was manufacturing 25% of the world’s textiles in the 17th century, Bengal accounted for more than 50% of textiles and 80% of silks imported by the Dutch from Asia.

The arrival of the East India Company, however sounded the death knell for the Indian textile industry.  The weavers were forced into selling exclusively to the British at extremely low rates, pushing them into poverty. The taxation structure also benefited textile imports into India from Britain versus Indian exports. The decline was further accelerated by the industrial revolution. Advances in manufacturing technologies flooded markets in India and abroad with cheap, mass produced fabrics that Indian handlooms could no longer compete with.

The freedom struggle brought the Indian handloom sector back to the fore, with Mahatma Gandhi spearheading the Swadeshi cause. In no other nation has something as basic as one’s clothing or an act as simple as spinning cotton become so intertwined with a national movement. The humble charka (spinning wheel) and khadi became a dominant symbol of self-reliance, self-determination and nationalist pride.

Post-independence, the Government of India took several steps to revive the handloom sector. Parliament of India passed the Khadi and Other Handloom Industries Development Act in 1953. The All India Handloom Fabrics Marketing Cooperative Society was set up in 1955 to promote sales of fabrics made in handloom cooperatives. Several other institutions were also set up like the Weavers’ Service Centre, the Indian Institute of Handloom Technology and the National Handloom Development Corporation (NHDC), to name a few. The credit for the revival of handlooms in India also goes to pioneering individuals like Suraiya Hasan Bose, Pupul Jayakar and Laila Tyabji.  Designers like Ritu Kumar, Sabyasachi, Sanjay Garg and others have also given much needed exposure to handloom weaves not just in India but across the world.

The Indian handloom industry today employs over 4.5 million people, both directly and indirectly, and is the second largest employer for rural India next only to agriculture. There are about 2.4 million looms of different kinds. The export of handloom products from India was valued at US$ 343.69 million in FY19. In FY19, the US was the major importer of Indian handloom products, with an estimated purchase of US$ 93.94 million, followed by the UK, Italy and Germany at US$ 17.77 million, US$ 16.47 and US$ 14.65 million, respectively. Nearly 15 per cent of cloth production in India is from the handloom sector. Production of hand-woven fabric from India constitutes 95 per cent of the global production. While the numbers seem impressive, the handloom sector is still plagued by problems. Low wages, rising costs, rise in power looms and proliferation of fakes are some of the issues that weavers have to contend with. New initiatives by the Textiles Ministry along with private entrepreneurship will hopefully help the Indian handloom industry regain its prominence.


SOURCES: https://www.ibef.org/exports/handloom-industry-india.aspx