TReDS platform M1xchange enables invoice financing for transactions between SME buyer and SME seller

The facility has digital credit analytics, which is enabled through a credit analytics engine (CAE) that leverages data available from multiple online data sources such as bank statements, GSTN, TReDS transaction data, etc.

M1xchange, India’s first and leading Trade Receivable platform, has expanded the scope of TReDS to enable Invoice finance for business transactions between Small enterprises i.e. SME Buyer and SME Seller. The product ‘M1xchange Small-Small’ is a one-stop plug-and-play platform for cash-flow based financing to small MSME seller on TReDS. The product was tested in RBI Third Cohort under the Regulatory Sandbox (RS) with ‘MSME Lending’ as its theme.

RBI vide its communication on 27th Oct 2023 has announced this to be viable. MSME buyers lack the balance sheet strength, and the new facility will enable cash flow-based credit analytics for MSME buyers instead of the traditional balance sheet-based risk assessment approach. The facility has digital credit analytics, which is enabled through a credit analytics engine (CAE) that leverages data available from multiple online data sources such as bank statements, GSTN, TReDS transaction data, etc.

The available data is used to evaluate capacity to repay and assess intent to pay. This CAE also enables banks to apply their respective business rules as per the bank’s internal approved risk policies in order to qualify each MSME.The tested product involved factoring of MSME seller invoices raised to MSME buyers under the TReDS model with buyers’ acknowledgement of invoices and confirmation of payment to the financier on the due date.

“We are grateful to four financiers who participated in this innovative solutioning process under sandbox. They helped us to finalise the data points that are needed for credit analysis of SMEs and used the engine effectively to evaluate credit limits.

M1xchange utilised its technology capability to create the engine for collection of SME financial data from various golden sources including Account Aggregator framework and further dissemination of processed analysis. The digital process of onboarding SMEs and collection of data for credit analysis saves manhours for banks and simplifies experience for MSME enterprise. This data is available for a number of banks in one go and therefore saves the repetition of work for each bank. MSME gets access to liquidity for his business growth. “said Mr. Amit Sachdev, COO M1xchange.”