Lending Platforms to Provide Financial Assistance to the Logistics Players
Through the use of technology and partnership with NBFCs, players remain financially capable while executing their business operations
As per the latest Economic Survey of India, 2017-18, the Indian logistics sector is expected to touch $215 US billion over the next two years.
The sector makes use of various modes for transportation such as air, water, rail and road out of which road transportation accounts for a majority of the movements. The Indian logistics sector, however, is largely unorganized with about two-thirds of the domestic transporters and fleet owners owning only five trucks or less. The sector has also seen a rise in the number of new-age technology players who are helping to revamp the sector.
Start-ups in the sector are changing how the world conducts business today through innovative technology-based solutions. The products set forward by these logistics players include a shipment-tracking system, the use of IoT and RFID to assist in the supply chain and labour savings, autonomous trucks, and drones for delivery, fuel pilferage detection system, cloud-based platforms to help ease business etc.,
Moreover, one can witness how start-ups are on a quest to develop technology-based solutions to resolve the problems in the sector. As the sector progresses, there is a need for ethical and trustworthy players who can help the ecosystem transform into a more organized one. This is a combination of Regulatory & Tax compliances, Borrowing from Regulated channels and adequate Financial literacy to manage their cash flow & profitability.
However, despite the changes, there continues to exist a lag in providing financial assistance to fleet owners and truck drivers in the market wherein lies a wide gap in the access to working capital not met by the banking sector. This will help members practice transparent and ethical business practices and guide them in the transformation of the unorganized sector into an organized one.
Fintech and Logistics
Digital technologies and the initiatives by the government need to play together to encourage, build and interconnect the ecosystem where players can reach out to other players in the market. There is always a need for funds before and during the conduct of the business which needs to be urgently addressed in the logistics sector. However, the banking partners failed to fill the void in the working capital lending space.
The government had come up with options to help SMEs to fund daily businesses such as the Mudra scheme, the Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS), Stand-up India Scheme, among others. The motivation behind these projects was to assist the small businesses to acquire funds within a shorter span and also helped entrepreneurs from across industries. Logistics’ start-ups are doing their part in helping industry players from the market to avail funds by associating with NBFCs.
Previously, a driver or a fleet owner had to approach the banks and place a request for funds for running their businesses which would take several weeks, & sometimes months, to process. These traditional lending processes, including underwriting & draw-down, were expensive and slow, affecting the momentum of the business and diminishing the quality of services provided. Through the use of technology and partnership with NBFCs, players remain financially capable while executing their business operations.
Benefits of the Lending Platform
Lending platforms can be a boon for many start-ups from the sector, who aim to transform the logistics sector into a more organized one. The players can leverage the platform to avail of easy loans to meet both their personal and professional needs. It helps small and medium-sized enterprises to procure loans quickly at reasonable rates of interest. The players also benefit from a flexible option to repay their loans. This helps the members on the platform expand their business and provide quality service.
Start-ups can play a huge role by linking their cloud platforms with NBFCs to fill this gap in the lending space. This encourages more ethical and organized players into the market, helping revamp the logistics ecosystem. Lending platforms are targeted at smaller players in the market. Drivers, fleet owners etc. can make use of this quick means to secure funds to meet their daily expenses. This is expected to encourage more players to be part of the ecosystem and help build a trustworthy, ethical and financially-enabled sector.
Future of Logistics Ecosystem
The Indian logistics sector is slowly gaining in prominence, thanks to the initiatives by both the public and private entities. Each business requires adequate funds for growth. Lending platforms in an organized sector allow for the smooth functioning of transactions and bring more players into the industry. This also assists both the players on the platform as well as the sector, to grow. Start-ups in the logistics space can leverage their platform to provide financial assistance to their players and assure quality service. Cloud platforms will help players connect with one another as well.
The collaborations between fintech and logistics would be a game-changer in the industry and, boost participation and activity in the sector. This combination of fintech and logistics helps improve administration, working capital, and supply chain finance, provide finance for equipment, inventory, and real estate and also facilitate international business, cross-border movements, and trust. The use of technology also ensures complete transparency for the players and this will help revamp the Indian logistics sector to turn into an organized one.
For a crucial sector such as logistics, it is imperative that it has access to finance without too many hassles. That is when lending platforms would play a crucial role in ensuring the health of the logistics players by giving access to finance to the players operating in the sector.