India’s trade finance ecosystem is undergoing a digital transformation as businesses seek faster access to working capital. Micro, small and medium enterprises (MSMEs) play a significant role in the country’s economy, but delayed payments and limited access to credit continue to constrain their growth. Digital platforms, automated processes and data-driven underwriting are creating new opportunities to address these challenges.
In this episode of Industry Wired Conversations, host Priya Dialani speaks with Anurag Chaturvedi, CTO and co-founder of M1xchange, about the evolution of India’s trade finance infrastructure. Chaturvedi explains how invoice discounting, digital integration, artificial intelligence, and deep-tier financing can help MSMEs manage cash flow, expand production and participate more effectively in domestic and international supply chains. Here are the key excerpts:
Why is trade finance infrastructure becoming critical for India’s economic growth?
MSMEs are no longer a peripheral part of India’s growth story. They are a major contributor to the economy, accounting for roughly 30% of GDP and close to 46% of exports, according to the figures discussed in the podcast. Yet, the sector continues to face a substantial credit gap, which I estimate at around Rs. 30 lakh crore.
The challenge is largely structural. A small supplier may deliver goods or services to a large corporate buyer but wait 60, 90 or even more than 100 days for payment. During that period, the supplier still needs to pay workers, purchase raw materials and manage operating expenses. The business may have secured the next order but lacks the working capital to fulfil it.
How does M1xchange help MSMEs access working capital?
M1xchange was built to address the gap between delivering a product and receiving payment. When a supplier completes an order for a large corporation, the payment may take several weeks or months to arrive. However, the supplier’s operational expenses continue throughout that period.
The buyer’s credit strength becomes an important factor in the financing decision. Once an invoice is accepted and financed, the supplier can receive funds much faster than through traditional processes. In some cases, disbursement can happen within hours.
Today, M1xchange connects more than one lakh MSMEs with large corporate buyers and over 80 financial institutions across more than 2,000 cities. The platform has cumulatively facilitated more than Rs. 3 lakh crore in financing, as stated in the podcast.
What should next-generation trade finance infrastructure deliver?
Our priority is to extend financing beyond the immediate supplier of a large corporation. Supply chains operate across multiple tiers. A large manufacturer may purchase components from a Tier 1 supplier, which sources materials from Tier 2 and Tier 3 vendors. Smaller businesses further down this chain may face even greater financing constraints because they have limited financial resources and weaker balance sheets.
The third priority is data-driven underwriting. Instead of depending primarily on historical financial statements, lenders can use relevant information from GST records, invoices, account aggregators and emerging digital lending infrastructure. Security must remain a core requirement. Digital platforms need robust safeguards against malicious activity while maintaining reliable, transparent and compliant financial processes.
How are digital platforms and automation transforming trade finance?
Digital platforms have changed the structure of financing, not just its speed. Earlier, a supplier might approach one bank and accept its offer or continue searching for credit. A digital marketplace enables multiple financial institutions to compete for the same approved invoice, giving suppliers greater choice and potentially more competitive rates.
At M1xchange, we are also using analytics and AI to understand the behaviour of buyers and sellers. Predictive insights can help identify business opportunities and indicate how a supplier working with one corporation might expand its business relationships with others.
We are also developing capabilities such as automated bidding and acceptance. By analysing the bid thresholds a customer typically accepts, the system can potentially make decisions within predefined parameters without requiring the customer to intervene each time manually.
How can AI and data analytics improve trade finance?
AI can help financial platforms move beyond processing transactions to understanding customer behaviour and anticipating business needs. By analysing available data, platforms can identify patterns in how suppliers and buyers operate and generate insights that support business growth.
Predictive analytics can help identify opportunities for suppliers to work with additional corporate buyers. Automated bidding and acceptance can also reduce repetitive tasks, allowing businesses to focus more on production, expansion and customer relationships.
However, these capabilities depend on reliable data, appropriate system integration and secure processes. Technology must support sound financing decisions while maintaining the necessary safeguards and operational controls.
How can trade finance support Make in India and India’s global trade ambitions?
Make in India is about enabling manufacturers to increase production, improve quality and meet global demand. But manufacturing requires substantial working capital. A business may have the orders and production capacity to grow, yet struggle to expand because it must pay for raw materials today and wait weeks or months to receive payment.
The challenge also extends beyond Tier 1 suppliers. Much of a supply chain’s productive capacity sits with smaller businesses several levels below the main corporate buyer. If financing reaches only the largest companies and their immediate suppliers, smaller enterprises may remain unable to participate fully in the growth opportunity. For India, the opportunity lies in combining strong physical infrastructure with equally capable digital and financial systems. By making trade finance faster, more accessible and more responsive to business needs, India can strengthen its MSME ecosystem and support its broader manufacturing and export ambitions.
Listen to the full discussion on Industry Wired Conversations.