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We see 40-50% growth in all our key businesses: Ram Iyer
Articles- Jun 27,25
In this interaction, Ram Iyer, Founder and CEO, Vayana, elaborates on challenges faced by MSMEs in accessing finance and probable solutions to ease their situation.
Vayana, India’s largest supply chain finance platform, offers trade credit and trade-enablement solutions across all supply chain tiers. To date, Vayana has financed over $ 42 billion, serving 300,000+ enterprises and 1300 corporates. In this interaction, Ram Iyer, Founder and CEO, Vayana, elaborates on challenges faced by MSMEs in accessing finance and probable solutions to ease their situation.
Despite so many policies and financial schemes announced by the government, why MSMEs face challenge while accessing finances?
According to PIB, MSMEs form the foundation of India’s economic engine—contributing about 30 per cent to the GDP, nearly 45 per cent of the country’s manufacturing output, and employing more than 110 million people. They also play a critical role in exports, accounting for 45.7 per cent of India’s total outbound trade in 2023–24.
Their balance sheets are distressed because:
- Delayed payments from larger corporate buyers: Rs 10.7 trillion is the total sum of delayed payment to MSME suppliers according to GAME Report (5.9 per cent of gross value addition by Indian businesses).
- Access to finance: As they are perceived as high risky borrowers, roughly 14 per cent MSMEs have access to credit
- The Rs 20–25 lakh crore credit gap, as highlighted by the Lok Sabha Standing Committee on Finance, underscores the scale of exclusion MSMEs continue to face in India’s formal financial system. This is not merely a funding problem—it is a systemic issue rooted in how creditworthiness is assessed, how lending is structured, and how cash flows are managed within supply chains.
- Lack of collateral
Payment delays only worsen the situation. Across supply chains, MSMEs are routinely forced to wait 60 to 90 days beyond contractual terms for payments from larger buyers. At the same time, they must clear their own dues—often in advance or on delivery—leading to a persistent mismatch in cash flows. This working capital stress becomes a recurring drain on their financial stability, pushing many toward informal borrowing or forcing operational cutbacks.
A key challenge is the misalignment between MSMEs’ financial realities and the design of formal credit systems. Majority of India’s 70 million-plus MSMEs are locked out of the formal credit market. Micro enterprises, which make up most of this segment, are particularly vulnerable and are unable to offer collateral and therefore remain ineligible for most traditional loans.
The cost of borrowing compounds the issue. Traditional unsecured lending to MSMEs often comes at prohibitively high rates of 15–30 per cent per annum. For businesses operating on thin margins—typically less than 3 per cent—this is simply unsustainable. Many are forced to rely on informal credit at even higher rates, which deepens their financial vulnerability. Moreover, formal credit products often come with turnaround times of over three months and cumbersome documentation requirements that MSMEs, especially in smaller towns and remote areas, find difficult to manage.
How is Vayana helping MSMEs solve their financing issues?
At Vayana, our mission is to make access to affordable and timely credit a reality for every business, regardless of size or location. The current credit ecosystem is not built to serve the long tail of micro and small enterprises that dominate India’s supply chains. These businesses are typically excluded from formal finance due to a lack of collateral, limited credit history, and small ticket size requirements that don’t fit traditional lending models.
We have taken a fundamentally different approach to bridge this gap. We have built a Comprehensive Trade Credit Infrastructure, where we operate a network-centric, anchor-led model that integrates deeply into corporate supply chains. By leveraging the creditworthiness of large anchor enterprises and capturing real-time trade data, we enable financial institutions to assess and extend credit to MSME vendors and dealers more accurately and with lower risk.
What makes our model work, is its scalability and efficiency. Our platform onboards MSMEs in as little as 15 minutes, automates transaction flows in real-time, and seamlessly integrates with stakeholders with minimal disruption. This allows for deeper penetration into Tier 2 and Tier 3 cities, where more than half of the MSMEs on our network are located.
Crucially, we are not just extending credit—we are improving its quality and cost. Traditional unsecured loans to MSMEs often come with prohibitively high interest rates, but Vayana’s network-based financing and deeper partnership with financial institutions, enables effective rates between 8 per cent and 10 per cent, significantly lower than the 15–30 per cent typical in the market. This translates to substantial savings in interest costs for the borrowers.
Vayana is one of the first entities to operationalise its ITFS (International Trade Finance Services) platform through Vayana TradeXchange at GIFT City, under the guidelines issued by International Financial Services Centres Authority (IFSCA), enabling affordable financing for MSME exporters.
Vayana is unlocking alternative liquidity sources (private credit) for MSME Financing through its one-of-a-kind Trade Receivable Securitization product – transforming MSME receivables into a perpetual funding engine.
Vayana enables newer funding options for MSMEs using emerging technologies such as asset tokenisation. Through its asset tokenisation platform, VDP (Vayana Debt Platform,) MSMEs can issue tokenised loans, bonds, trade financing instruments such as Bills of exchange and promissory Notes and avail Deep Tier Supply Chain Financing
Will the new MSME classification help in creating more funding opportunities?
The revised MSME classification, which came into effect from April 1, 2025, marks a pivotal shift in how India supports and enables its small business ecosystem. By raising investment limits by 2.5 times and doubling turnover thresholds, the government has redefined the growth trajectory for India’s MSMEs—especially for manufacturing units that previously faced hard ceilings on scale due to fears of losing policy-linked benefits.
This change could not be timelier. Between 2020–21 and 2024–25, the number of exporting MSMEs surged from 52,849 to 173,350, with their share in total exports touching 45.79 per cent by May 2024. These figures reflect a sector that is scaling rapidly, integrating with global value chains, and demanding more sophisticated financial services to keep pace. However, under the earlier thresholds, many of these businesses found themselves constrained—either holding back on capacity expansion or splitting operations to remain within MSME limits.
The new classification offers breathing room. Manufacturers can now invest up to Rs 1.25 billion and report turnovers of up to Rs 5 billion while retaining their MSME status. This not only removes the ‘fear of growth’ but also enhances eligibility for formal credit and government-backed schemes. Lending institutions will have greater confidence in underwriting larger exposures under MSME lending programs, and businesses can access collateral-free loans, interest subventions, and credit guarantees at scale.
In fact, the revised limits are likely to lead to:
- Improved access to credit, particularly for growing firms that previously straddled the line between small and medium classification
- Longer growth runways, as firms can scale operations and technology investment without an immediate reclassification
- Better risk-adjusted credit models, as turnover-based assessments provide a more holistic view of financial performance than capital investment alone
That said, some structural challenges persist. With 99 per cent of India’s MSMEs still operating below Rs 10 million in turnover, there is a genuine concern that the top 1 per cent—now enjoying a wider benefit net—may capture a disproportionate share of incentives and credit. Moreover, access to finance remains uneven, particularly for micro-enterprises and those in Tier 2 and Tier 3 cities, who may lack the financial literacy, digital adoption, or collateral required even under relaxed definitions.
Another challenge lies in awareness. Many MSMEs are still unfamiliar with the evolving definition, government benefits, or how reclassification affects their financing opportunities. Unless this gap is addressed through targeted outreach, much of the reform’s potential may go unrealised.
Nonetheless, for MSME manufacturers that are growth-oriented, export-ready, or already digitised, the 2025 classification update is a significant enabler. It not only legitimises their ambitions but also aligns policy incentives with the realities of modern manufacturing. Over time, as financial institutions adapt to the new classification with revised products, risk frameworks, and outreach strategies, we expect to see more MSMEs accessing structured finance, expanding capacity, and investing in innovation without having to choose between growth and government support.
What are your growth plans for Vayana?
We see continued growth at 40-50 per cent in all our key areas of business with MSME affordable credit still an unresolved problem. We see export and import financing along with opening alternative liquidity options other than bank lending especially in a strong distribution and services-oriented country as ours. Corporates will continue to need credit assessment and collections to keep their supply chains healthy. Bharat Connect initiative by NPCI will be a game changer for B2B invoicing, payments and credit. Our NBFC and payment aggregation business will help us provide relevant solutions in this context.
The uncertain global trade scenario changing on a daily business will require Vayana to be agile in crafting new solutions to MSMEs. We see global identity initiatives like LEI (Legal Identity Identifier) important and we plan to play our role in this.
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