Pushkar Mukewar is the co-founder of Drip Capital Inc, a global financial technology company that offers collateral-free trade financing to small and medium-sized (SME) business owners in India, Mexico and the US. 

The Palo Alto-based company provides operating capital to SME business owners who require liquidity of credit to carry out exports. It uses technology to assess risk whenever a business owner places a request for credit and offers financing via a digital end-to-end process. 

Being invested in emerging markets such as India, Mexico and developed markets such as the US, Mukewar has developed an in-depth understanding of the needs of the global financial services market. 

In his 13-year-long career, Mukewar initially started out by developing credit risk analytics for the subprime consumer loans business of US-based Capital One. 

His role as a venture capitalist at Saama Capital helped him work with Indian startups including Paytm, Snapdeal and Bluestone. 

He has been a consultant with Oliver Wyman in the US, UAE and Switzerland, and he holds an MBA degree from The Wharton School, University of Pennsylvania.

He loves to experiment with food and is a new vegan-convert.

In a conversation with Forbes Advisor India, he spoke of the opportunities technology can create for the Indian financial services industry and why he is interested in catering to credit needs of the small and medium enterprises.  

What are the opportunities in credit financing in India?

India, like many other emerging economies, has faced challenges in terms of credit. We have been a credit-starved market, especially when it comes to credit for SMEs. 

There are some obvious reasons: One is that most banks that operate are not comfortable providing any kind of credit unless the SME has collateral and can provide security in terms of physical assets. Unless you are a manufacturer, it is hard for you to have a physical asset to provide to a bank. 

The second reason is when you think about small businesses, they may not be savvy enough to organize their finances, or their corporate governance and their documentation is often not in compliance to suit brands’ needs when they are being evaluated for creditworthiness. 

Both of the challenges translate to a large chunk of the SME market being credit starved. 

With respect to the credit lending space broadly, the traditional players are not servicing the gap and that’s what creates opportunities for new-age, data-led, technology-driven lenders or finance providers to fill the gap. The opportunity is massive, and given there has been a very strong movement toward digitization of data, it is a great combination of an untapped market opportunity and tailwinds with respect to digitization of data. 

Broadly speaking, in the current market environment with the COVID-19 crisis, we see banks are still very conservative and the problem is they don’t have a great way of accessing those who are creditworthy, this is leaving a large part of the market under-served. 

Thus, a lot of new-age companies in the long term will have to partner with big lenders to provide credit. 

How can India fill the credit financing gap for SMEs? 

India has approximately $200-300 billion of exports, out of which 50% of exports come from SMEs. Multiple studies indicate at least half of these SMEs face a bank rejection to their trade financing applications. So the gap we are talking about is massive; up to $75-80 billion of trade, which doesn’t get financed through traditional channels of finance. 

At the end of the day, small new-age players will need to be bigger to become technology providers to more traditional lending institutions who will be able to channel the credit such that new players end up becoming the underwriting provider. 

Why do systemic issues need to be addressed in terms of SMEs access to finance?

One is the distribution channel; India being such a large country at some level when you think of SMEs in Tier III and Tier IV towns, the main source of finance will be public sector banks (PSBs). For a new-age company to get to the last mile client is still a challenge. 

I think the way this issue can be solved is by leveraging the current infrastructure we have. When it comes to PSBs, to have them partner with new-age players can greatly help. Banks have a huge strength, which is their distribution network. Many new-age players would lack that so how can the government promote that is to be seen. When it comes to PSBs to do any kind of innovation, the push has to come from the top. 

The second area is regulation. While there is a thought process behind regulating industries, I think creating a balance helps. Having a very strong regulation prevents innovation so establishing a balance is crucial. 

To foster innovation while having the right controls in place for the financial ecosystem of the country is what we need. I think we still have an overhang of regulations in India as compared to other countries such as Mexico.

How significant is the role of technology in addressing SME credit requirements?

When we talk about technology, three aspects relating to credit play a role:. One is customer acquisition, second is customer servicing and third is how you manage everything at the backend. 

I would say in India, we are starting from the backend. In most fintech companies, the backend is where most technology is getting adopted—you are automating your assessment engine, you are automating your analytics, data mining among others. 

In customer serving, some players are already innovating. In the consumer space, it is completely digital; in the SME space, it is partly digital. 

The third aspect is how do you acquire customers. In the consumer space, we are more digital than in the SME space. This is typically because the loan requirement is significantly higher for a SME than a personal loan for a consumer.

Technology has to play a very big role. In application, our SMEs are yet to become completely digital savvy and have an end-to-end digital credit journey. COVID-19 has changed this to some extent.  

What is your motivation to operate in credit for SMEs space?

Entrepreneurship is very exciting. Access to SME credit and challenges around that is something I have grown up seeing. After my MBA, I was clear I wanted to come back to India. 

I have always wanted to build something impactful and from scratch. We (business partner and I) ended up picking up exports for SMEs because we saw a big opportunity, and the broader aspect is that exports make a meaningful percentage of a country’s GDP. 

I am very passionate about solving problems for India. If we (Drip Capital) are able to impact India’s economic growth, that will be a real impact.