Revolutionising credit accessibility through OCEN

Imagine a scenario where a person owning a small food business dreams of expanding it. However, for business expansion, he needs a loan, and his attempts to secure a loan are all unsuccessful, because lenders have access to limited financial history of the borrower. An all too familiar scenario for small enterprises in India, right?

MSMEs (Micro, Small and Medium Enterprises) are the backbone of India’s economy, contributing significantly to employment and manufacturing. This sector created 111 million jobs and employed 36 million people in manufacturing nationwide, according to data from the 73rd National Sample Survey (NSS) conducted in 2015-16. That’s an impressive feat!

However, accessing formal credit remains a persistent challenge for these businesses, with less than 11% of these enterprises having access to it. The credit gap for MSMEs is estimated to be at an astounding 20-25 trillion INR.

Traditional lending methods rely heavily on bureau data to assess the creditworthiness of any borrower. However, many small businesses do not have sufficient bureau data to be able to qualify for loans. This is because traditional systems fail to account for alternative financial data. For example, a restaurant processing 1,000 orders a day on a food ordering platform might struggle to secure a loan because its bureau report doesn’t reflect its trading volumes. This is where the OCEN protocol can play a key role.

OCEN makes loans accessible to MSMEs by enabling lenders to access additional information about businesses that is otherwise unavailable through traditional channels. With the borrower’s consent, such platforms can share trade data with lenders, offering a complete picture of the borrower’s financial health. This alternate data, like trading volumes and order values, helps lenders assess risks more accurately, which in turn can lead to a higher approval rate for loans for small businesses.

Finarkein is delighted to be at the forefront of this financial inclusion! We are a proud volunteer contributor to the OCEN framework, and help banks and NBFCs to integrate with the framework as lenders. You can contact us to know more about the work we do.