The Rise of Collateral-Free Trade Credit: Ushering in a New Era of MSME Loans for Inclusive Credit.

Vayana India’s Largest Trade Credit Infrastructure aims at giving timely & affordable credit to every entity in the supply chain. With this vision, not to so long back, we went onto the streets of metros and tier II

gunjan

Jul 3, 2025 - 14:14

The Rise of Collateral-Free Trade Credit: Ushering in a New Era of MSME Loans for Inclusive Credit.

Vayana – India’s Largest Trade Credit Infrastructure aims at giving timely & affordable credit to every entity in the supply chain. With this vision, not to so long back, we went onto the streets of metros and tier II cities of India and surveyed the distributors, manufacturers and retailers on how they consume credit, to keep every day business running.

Every Tier in the supply chain has a unique way of managing cashflow and therefore, a one-size-fits-all approach from FinTechs & Financial Institutions is no good.

For instance, 31-year-old Ganesh, heads Susvani Medicals & Surgicals, in a metro. He prioritizes long-standing trade relationships which aid with a relief in credit period for short-term loans
Hussain, a leather goods shop owner in Dharavi – Asia’s largest slum, must pay up front to the leather manufacturers in Kanpur & Chennai but gets his payment from corporates to whom he supplied leather bags, after 30 days. He is on a constant lookout for collateral-free loans for MSME

Balani, a leading distributor of frozen foods in Tier II city, is worried about wholesalers who don’t provide any document & can run away with the stock without making payments. He sources the material from Haryana where he needs to make upfront payment but with the wholesalers, his books show an outstanding of INR 300,000/-

These findings reinforced Vayana’s belief that trade credit should be given where its due and MSME Loans and Short-Term Loans should be customised and simplified for this segment.

MSMEs, the lifeline of our economy work with just 2% to 3% net margins with limited skill sets. The cost of lending needs to therefore come down for them to grow sustainably.

Inclusive Credit and Trade Finance for Indian MSMEs (Micro, Small, and Medium Enterprises) plays a vital role, where it leverages India’s Digital Public Infrastructure - driven by FinTech Revolution.

Let us begin by understanding, what is inclusive credit ?

Inclusive Credit is one which can be offered to all MSMEs - regardless of size, collateral, or formal credit history. They can access short-term loans on time, at an affordable cost and on fair terms.

There is ample innovation by Policy Makers and FinTechs to drive growth for MSMEs via trade credit enablers. Some of which are:

MUDRA Loans under PMMY - Small manufacturing units, service sector units, shopkeepers, artisans, food vendors, repair shops can avail the benefits of these loans
CGTMSE (Credit Guarantee Trust for MSMEs) – Launched in 2000, this scheme was jointly developed by Govt. of India and SIDBI to encourage banks and financial institutions to lend to MSMEs without insisting on collateral or third-party guarantees, by providing a credit risk cover
Anchor-Led Supply Chain Finance (backed by large corporates) – Vayana is a leading FinTech serving 1300+ Corporates in India
Cash flow-based lending (GST, UPI, and utility bill data) – Rubix Data Sciences – a Vayana Group Company studies 120 such structured and non-structured data to help banks and corporates make confident credit decision for their supply chain counterparties
Platforms like TReDS (Trade Receivables Discounting System) enable invoice discounting from buyers
Open Credit Enablement Network (OCEN) standardizes the access to embedded credit
Account Aggregator framework also democratizes financial data access of these MSMEs
GIFT City & Free Trade Zones promoting international trade for MSMEs – Vayana TradeXchange has already proven success for enabling cross-border trade under the aegis of IFSCA

Here’s how Collateral-Free Trade Finance with Vayana works for MSMEs, tapping into their unique business requirements, making them less reliant on informal lending & trade relations.