MICRO, small and medium-sized enterprises (MSMEs) across the world have borne the brunt of today’s global supply chain challenges, brought on by the Covid-19 pandemic and compounded by the ongoing Russian-led war in Ukraine.

In India, however, many small businesses face a more rudimentary, chicken-and-egg problem: a poor credit rating that precludes them from getting the financing they require to purchase inventory in bulk.

Enter Solv, a full-stack business-to-business (B2B) e-commerce marketplace for MSMEs by SC Ventures - the innovation, fintech investment and ventures unit of Standard Chartered Bank. 

Launched in December 2020, the platform hopes to bridge a massive credit gap in India’s 60 million-strong MSME sector - one that accounts for nearly 30 per cent of the country’s gross domestic product and 40 per cent of its exports, said SC Ventures member Jiten Arora in an interview with The Business Times. In a nutshell, Solv aims to help MSMEs digitalise their traditional supply chains. The platform allows businesses to have their own digital storefronts, access a wide range of products at the best prices, optimise their inventory, digitalise their payments, generate goods and services tax (GST) compliant invoices, and reconcile their accounts.  But what is most significant is Solv’s ability to generate an alternative credit score - called the Solv Score - for MSMEs using data from their transaction history, enabling them to establish their creditworthiness within the ecosystem. The platform also offers invoice financing to MSMEs through its “buy now, pay later” (BNPL) solution and network of 11 financial service providers. “Previously, MSMEs would pay for inventory on an upfront cash basis. That means the quantity of procurement is limited by the amount of cash they have,” said Arora.  With Solv, an increasing number of India’s thin-file MSMEs can now receive the financing they need to grow into larger businesses. As of March, over 200,000 MSMEs in the country have been onboarded to the platform.

This will hopefully slow down India’s “missing middle” phenomenon, which has seen more mid-sized firms disappearing from the market across the years, as smaller firms do not have the resources to scale up, Arora noted.

Solv has since been rolled out in more than 200 cities in India and has a current annualised run rate of over US$250 million in gross merchandise value. The platform was also launched in Kenya in March, and has a user base of 100 MSMEs to date.

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Capturing Southeast Asia’s underserved MSME segments is the next goal for Arora, with Solv set to pilot launch in Malaysia and Vietnam later this year. According to research by SC Ventures, over 418,000 SMEs in Malaysia remain largely untouched by technology, while over 60 per cent of Vietnam’s 790,000-strong MSME ecosystem have unmet financing needs.

When it comes to Vietnam, however, the biggest challenge lies in adapting the platform to suit the market’s part manufacturing-driven, part-consumer economy - where its MSMEs occupy a different position along the supply chain - as compared with the mostly consumer economies of India and Kenya, Arora said.

“In India, MSMEs such as your mom-and-pop shops are typically the buyers, while the brands are the sellers. For a more manufacturing-driven economy, MSMEs that manufacture chips or microprocessors for instance would be the sellers, while their buyers would be large corporates.”

As Vietnam’s MSMEs require a greater amount of financing as compared with MSMEs in a retail environment, Solv will need to bring on different financial institutions to the market to finance these bigger ticket sizes, he added. 

Another challenge Solv faces is adapting its credit models to take into account Vietnam’s different data sources - for instance, the market applies a value-added tax to goods and services, while India has the GST. The platform will also need to be operational in Vietnamese instead of English as it is in India, Arora said.

For SC Ventures, Solv is just the first step in a grander scheme to strengthen the resilience of supply chains both domestically and globally. 

In February, the unit launched Trade and Supply Chain Connect (TASConnect), a bank-agnostic cross-border supply chain finance platform that aims to help multinational corporations (MNCs) have more oversight of their supply chains, by bringing their buyers and sellers onto 1 platform. SC Ventures also set up Olea last August, a digital blockchain trade finance platform that connects businesses which require supply chain financing with investors who invest in trade finance assets as an alternative asset class. While these 3 platforms may be entirely separate ventures, they are intended to work hand in hand to improve and galvanise the supply chains for all its participants - be it micro-SMEs, SMEs or MNCs - in emerging markets, said Arora. 

“We created these ventures with a complete ecosystem mindset, so they would start complementing one other to solve a wider problem around supply chains and trade finance,” he said. “This is how we think new age banking will be - one that is more inclusive, and brings many more complementary players into the ecosystem.”