India’s economic story has many chapters, but few are as enduring as the role played by its small businesses. With over 63 million micro, small, and medium enterprises (MSMEs), this sector is often called the “growth engine” of the country, contributing nearly a third of GDP, driving 40% of exports, and employing more than 110 million people.

Yet, this engine often runs on fragile fuel. The sector faces a credit gap of INR 20–25 lakh crore, compounded by delayed payments worth over INR 10 lakh crore. These gaps don’t just hinder small enterprises, they also create ripple effects across entire supply chains. For banks, NBFCs, and fintechs, the challenge is equally clear: if smaller businesses falter for want of liquidity, the strength of entire industries, from manufacturing to retail, is compromised. 

This is where supply chain finance (SCF) comes into sharp focus. With digital rails now firmly in place, SCF is becoming a strategic priority for lenders across the BFSI space.

Supply Chain Finance: Beyond a Credit Product

At the heart of supply chain finance is the relationship between corporate anchors and their supplier ecosystems. Anchors (often large, credible corporates such as manufacturers or retailers) have established reputation and payment reliability. Their credibility allows lenders to extend early payment options to the anchor’s suppliers, or “spokes” such as distributors, small vendors or sub-suppliers with greater confidence. 

For example, a leading auto manufacturer may enable financing for its well established supplier network based on its own strong creditworthiness. Lenders can then structure SCF programs where the anchor’s payment track record helps unlock liquidity for multiple spokes, in turn, efficiently circulating credit through the ecosystem.

So, in essence, supply chain finance is about ensuring liquidity flows smoothly through business networks. It allows suppliers to access early payments against receivables while enabling corporates to keep their working capital cycles intact. 

But the value of SCF for lenders goes deeper. In an economy like India where traditional credit frameworks have long excluded smaller enterprises, SCF provides a way to extend credit to borrowers without expanding risk disproportionately. Tethered to trade activity and supported by corporate anchors, it creates lending opportunities that are traceable and defensible. 

However, while the promise of SCF has long been evident, its true potential was often constrained by operational hurdles. Lenders struggled with fragmented retailer bases that were difficult to onboard, manual KYC and compliance checks that slowed down access, and manufacturers or distributors unwilling to take on the onboarding burden. Add to this the difficulty of scaling invoice-based SCF and the lack of real-time visibility into customer behaviour, all of which together made serving high volumes of small-ticket transactions profitably a steep challenge.  

But today, with digital lending platforms, SCF has crossed from being a niche solution to a scalable and strategic growth driver. 

How Digital LPaaS Can Revolutionize SCF 

Digital Lending Platforms as a Service (LPaaS) are widely used by banks and NBFCs to originate, assess and disburse business and personal loans efficiently. Their flexibility, automation and data-driven capabilities also make them highly effective in managing SCF as well.

These platforms are agile and that helps SCF immensely because supply chains are not monolithic. Financing needs differ between industries, regions and even within the same corporate ecosystem. For instance, a lender working with textile exporters in Tirupur may need different assessment frameworks than one financing auto-part suppliers in Pune.

LPaaS platforms don’t just automate old processes, but reimagine how SCF can be delivered, monitored and even scaled. 

Instead of the one-size-fits-all lending products of the past, these systems allow for:

– Loan Journeys & Workflow Flexibility

Each MSME’s financing needs differ based on industry, geography and supply chain dynamics. Modern LPaaS platforms enable lenders to design customizable backend SCF journeys that integrate automated credit assessments, risk validations and rule-based approvals with pre-existing systems and APIs. 

At the same time, lenders can configure flexible workflows across sales, credit & operations, in turn, tailoring processes to specific micro-markets or partner ecosystems. This combination ensures that data is captured, processed and verified efficiently. Overall, manual intervention is minimized and small but complex supply chain transactions can be managed without compromising speed and compliance.

– Data-Driven Credit Scoring

In the MSME landscape, lending has normally taken the traditional form of asset-backed credit viz. loan against property plus the typical KYC, credit bureau data etc. This is woefully inadequate since a large component of potential borrowers are unorganized, have limited structured financial data and credit history, fluctuating cash flows and sector-specific vulnerabilities, making the credit risk inherently higher. However, significant data-points like the purchases/sales data that exists in the transaction system of the anchors in respect of these small spokes or GSTN digital footprint does not get used much. 

LPaaS platforms can go beyond traditional bureau scores to provide a holistic, data-driven view of risk which enables lenders to move from asset-based to flow-based credit.  This will hugely enable lenders to broaden the credit framework to assess the creditworthiness of small businesses. This approach not only expands access to finance but also ensures disciplined risk management, enabling lenders to extend credit confidently to the middle & bottom of the MSME pyramid.

– Program Modularity & Business Rules Engines (BREs)

LPaaS platforms enable lenders to structure SCF programs around anchors (corporates) and their associated spokes (suppliers/distributors) while giving them full control over the rules that govern these relationships. Through Business Rules Engines (BREs), credit teams can define program-level rules (such as overall limit for the industry/anchor, the number of spokes per anchor, credit limits for each supplier, repayment schedules, & risk thresholds) seamlessly without heavy dependence on IT. 

This backend configurability brings consistent, rule-driven lending, allows quick adaptation to changing regulations or market conditions, reduces manual intervention and makes it easier to manage complex supply chain relationships while extending credit responsibly.

– Straight-Through Processing (STP)

SCF eventually operates at an invoice level. Hence, STP in modern LPaaS platforms goes far beyond simple automation of flows. It enables fully digitized, end-to-end handling of SCF transactions. From loan origination and credit assessment to disbursal and repayment tracking, every step is processed automatically according to pre-defined business rules. This eliminates manual intervention, reduces errors, and accelerates turnaround times at scale. For lenders serving MSMEs, where ticket sizes are small but volumes are high, STP ensures being able to build scale, operational efficiency and cost-effectiveness while maintaining strict compliance. 

– Integrations 

In supply chain finance, timely and accurate data is critical to assess risk and make credit decisions that can be scaled across complex supplier networks. Modern LPaaS platforms leverage pre-integrated APIs to banking systems, GSTN, credit bureaus, KYC repositories, ERP systems & logistics platforms which enables lenders to ingest data in real time for data-driven credit scoring. At the same time, these integrations feed processed information downstream into loan disbursal and repayment systems which ensures that financing flows seamlessly from origination to execution.

By connecting both upstream and downstream systems, lenders gain transaction-level visibility across the supply chain and this allows them to tie credit decisions directly to actual business flows.

– White-Box Transparency

In SCF, where lenders extend credit based on anchors and supplier ecosystems, transparency is critical to trust. White-box models provide application-level visibility and audit trails so that every credit decision is explainable. For BFSI leaders, this transparency not only strengthens governance and reporting but also builds confidence in scaling SCF within a heavily-regulated industry.

Strategic Advantages of Digital Lending Platforms in SCF

For BFSI decision-makers digital lending platforms for SCF offer some clear advantages:

– New Growth Markets: 

India’s MSME base is massive, but credit penetration remains low. Digital credit access through SCF enables lenders to build scale in  this segment profitably, creating new revenue streams without disproportionately increasing risk.

– Portfolio Diversification & Risk Management: 

Lending linked to supply chains distributes risk across ecosystems rather than concentrating it in large corporates. With alternate data and configurable scorecards, lenders can differentiate good risk from bad risk more effectively.

– Operational Efficiency & Cost Reduction: 

Automation through STP and workflow management reduces operational bottlenecks and cost-to-serve. This is critical in fintech supply chain finance for MSMEs, where ticket sizes are small but volumes are high.

– Stronger Ecosystem Relationships: 

By embedding credit into supply chain transactions, BFSI players become partners in growth for both corporates and their suppliers, enhancing long-term customer stickiness.

– Deeper Market Penetration: 

With tailored and automated journeys, lenders can profitably reach supplier segments that were previously excluded with trade finance solutions.

– Better Risk Management: 

Data-rich scoring and configurable frameworks allow for sharper differentiation between good and bad risk, reducing defaults while expanding access.

– Governance Confidence: 

Transparent, auditable systems make compliance easier, enabling growth with confidence under regulatory scrutiny.

Conclusion 

What once made SCF difficult was its complexity given too many moving parts, too much reliance on manual intervention and too little visibility. Digital lending platforms are rewriting that reality. They bring clarity into processes through data granularity, allow credit teams to configure and control their own rules and provide a white-box view into every application.

More than adding another layer of technology, this is about re-engineering how credit flows through supply chains.

At Wonderlend Hubs, this philosophy drives our approach. Our digital LPaaS IncrediHub, built around a GrowthOps principle, brings all capabilities together into a single hub that simplifies, secures, and scales supply chain finance growth. 

We believe the future of supply chain finance in India is about building systems that allow BFSI leaders to enable growth, strengthen resilience and support the evolving economy at scale.