Drip Capital Bullish On Export Factoring Prospects In India

Digital trade finance firm Drip Capital sees strong growth opportunities for its export factoring solutions to small and medium businesses in India, according to co-founder and co-CEO Pushkar Mukewar.

The Palo Alto-headquartered firm, which started its India operations three years ago, has already financed $800 million of exports originating in India through its bill discounting platform, Mukewar told BusinessLine.

“There is massive market opportunity given that 50 per cent of exporters in India need some form of working capital solutions. We will continue to target SMEs who are into exports from India. A big part of our strategy is going to be international expansion into markets that have dynamics like India and Mexico,” he said.

Drip Capital provides unsecured collateral-free working capital solutions to small and medium sized exporters in emerging markets and has offices in Palo Alto, Delhi, Mumbai, Bengaluru and Mexico City.

Currently, it does not support transactions within India. ”We only do cross-border trade receivables as opposed to TReDs, which is focused on domestic receivables”, he added.

Over time, Drip Capital would like to develop products for imports as well. There is lot of potential in India itself, he said.

Mukewar said that onboarding of SMBs into digital platforms like Drip Capital still requires some hand-holding. But most of them are pretty comfortable doing digital once they are on boarded, he said. Many SME clusters in tier 3 and 4 cities are at ease with digital tools and platforms for their export financing needs, he added.

Asked about the reforms that are needed in factoring, Mukewar said that there is a need to encourage more independent factoring companies to come into the market. Currently, entry into the factoring business is licensed and one has to get RBI registration as an NBFC to undertake this activity.

On credit flow to MSMEs, he said there has been a squeeze over the past 12-18 months in the flow of credit due to NPAs in the banking system. “Lack of credit is a huge problem in the MSME sector,” he added.