Deep tier financing in India: The future of sustainable supply chain finance

economictimes.indiatimes.com:

India's GDP. Despite the growth of the MSME sector, they struggle to be a part of the mainstream financial ecosystem. This is where Deep Tier Supply Chain Finance comes into play.Deep Tier Financing is a business solution that leverages business relationships within the supply chain.

It focuses on providing working capital to small downstream suppliers in Tiers 2, 3 and so on bringing transparency and visibility across the value chain. The Deep Tier Supply Chain Financing (DTSCF) system enhances liquidity and traceability, minimizes financing expenses and risk evaluation, and decreases the overall cost of goods. One of the significant issues in the global trade system is the trade financing gap.

The Asian Development Bank (ADB) has reported that the worldwide trade financing gap grew from $1.5 trillion in 2018 to $1.7 trillion in 2020. Economic and financial uncertainties since the pandemic increased the gap by another $2 trillion. MSMEs have borne the brunt of this gap, with challenges ranging from low financial and technological literacy to inefficiency in providing collaterals and compliance requirements.

However, the digital transformation of the supply chain ecosystem offers a ray of hope for MSMEs. Technological advancements have ushered in an era of enhanced transparency and traceability, significantly benefiting various sectors and industries. Fintechs are leveraging technology in the lending space with custom-made models to help overcome credit history and score challenges.