In all the years that I have been Consulting and Training in the Retail Lending space especially in the MSME sector I have always felt the need for NBFCs /Banks to look at consultative approach rather than product centric approach to MSME lending. Covid has now made it imperative for NBFCs and Banks to start looking at making a paradigm shift in MSME lending strategies to achieve desired scale and portfolio quality. We need to build skills in validation and discovery model of credit assessment . Often a combination of two will become imperative.

This calls for a strategic shift in the way MSME lending is practised presently. Rather than pushing lending products we need to figure out solutions which fit MSMEs operating in the specific sector , the specific geography , following specific business models , the structure of the their supply chain. A strategic shift to building MSME solutions team capable of identifying the right lending intervention to suit specific needs . The need for intervention could be multi-pronged .

It will call for deep understanding of the business , the risks going forward,the structure of the supply chain, business model pursued and liquidity needs at different points. Build MSME financing solutions team rather than LAP team, Channel Finance and Vendor Finance team etc. It will call for substantial reorientation of the credit and sales team , building business specialists in the team and of course substantial technology intervention in the credit appraisal process to enable rapid learning and scaling up.

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