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Progcap, a fintech company which is into supply chain financing and catering to Micro, small and medium enterprises (MSMEs) has announced plans to digitise entire supply chains, developing user-friendly mobile apps and other technology solutions to help small businesses manage their transactions, check credit limits, and request disbursements on the go.

“We are building a comprehensive ecosystem for MSMEs, helping them digitise their operations and become part of the formal economy,” said Pallavi Srivastava, cofounder, Progcap. 

These efforts align with the broader push for financial inclusion in India. The MSME sector accounts for about 30% of India’s GDP and 45% of exports, and is crucial for job creation and economic growth, she said. 

Even though MSMEs contribute to 62% of employment in India, the lack of access to formal credit has prevented many small businesses from reaching their full potential, she added. 

The fintech which started operations in 2017, operates through co-lending partnerships with banks and NBFCs and taps into the lower cost of funds that banks can offer.

“Our co-lending model is beneficial for all parties. It allows us to scale our loan book faster, provides our partners with a low-risk entry into MSME lending, and ultimately enables us to serve more small businesses with better rates,” Ms. Srivastava said. 

The company aims to be the essential link between banks and retailers, offering a comprehensive suite of digital solutions, it said. 

 “Our goal is to be the first digital SME bank in India, addressing not just the credit problem, but the overall business challenges faced by small enterprises,” Ms. Srivastava said. 

Progcap was set after recognising the credit gap facing small businesses in India. 

“We identified a staggering $530 billion credit shortfall for MSMEs in India,” she said adding “Traditional banks often struggle to serve this segment due to lack of credit history, proper documentation, and collateral. We saw a chance to bridge this gap.”

To date, the company has disbursed nearly $3 billion in loans. 

Through its Fast Rotation Credit Line (FRCL), it provides flexible working capital to retailers and distributors. Unlike traditional loans with rigid repayment schedules, FRCL adapts to a business’s cash flow cycles, allowing for more flexible drawdown and repayment terms.

“Our FRCL product aligns with the unique needs of each business. It integrates with their inventory turnover and sales patterns, making it much easier for them to manage their finances,” Ms. Srivastava said.