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In India, small businesses contribute over 30 percent of the country’s GDP, but most remain unserved by formal banking channels. Host Amee Parbhoo talks with Shrinivas Kasar, Co-Founder of Cashinvoice, to discuss how Cashinvoice unlocks supply chain financing for micro, small, and medium enterprises (MSMEs) in India through embedded finance.
Fintech has the power to build a more inclusive world. Fintech for the People is about the innovators who are developing fintech solutions that reach the people who’ve been left behind. In each episode, we’ll hear from innovators who are creating financial solutions that bring every person the financial tools they need to grow their business, support their family, and build their community. Together, we’ll learn how fintech looks different in spaces and places where basic financial services are a luxury — and how solutions to address these challenges require a different level of creativity, empathy, and execution.
Fintech for the People is an Accion podcast hosted by Amee Parbhoo, Managing Partner of Accion Venture Lab – an early-stage investor in inclusive fintech startups. Learn more about Accion Venture Lab here. Episodes will be released in seasons, on a weekly schedule.
Amee Parbhoo (00:12):
Welcome back to the final episode of season two of FinTech for the People. I'm Amee Parbhoo, your host and managing partner of Accion Venture Lab. As always, FinTech for the People is produced by Accion Venture Lab, an early stage investor in inclusive FinTech startups around the world. This season, we've spoken with entrepreneurs in our portfolio about how their embedded finance solutions are seamlessly integrating financial services into small businesses' everyday experiences. Today, we're wrapping up our journey by talking to Shrinivas Kasar, co-founder of Cashinvoice, a digital marketplace that unlocks supply chain finance for small businesses in India. By leveraging technology, the Cashinvoice platform links financial institutions, large corporations, and their small business partners. And it extends embedded working capital for the small businesses to grow and scale. Thanks for setting aside some time to be a guest on the podcast Shrinivas.
Shrinivas Kasar (01:12):
Thanks Amee. Thanks. It's a privilege to be here.
Amee Parbhoo (01:15):
Great. Well, before we dig into what you're building at Cashinvoice, I'd love to hear more about your journey getting here. I know that before you chose this more kind of entrepreneurial path, you worked for a number of big companies, Tata Capital, Axis Bank. Tell us about that journey and how you ended up as a founder.
Shrinivas Kasar (01:32):
It's been right. So I started my career as a banker. I have been with many banks in NBSC that, these five or six of them, and I had a privilege to deal with various businesses right from the smaller size ones to the larger size ones and deal with the entrepreneurs and the decision makers to understand the dynamics of the business. And that's something that really fascinated me, always. Something that really, I thought as a perk of working in the bank. But, something really changed when I actually pursued my masters at Syracuse, where I took a few courses in entrepreneurship. And I thought this is a route that would make sense because having worked with banks, I thought that it would be much, much easier to be able to execute the ideas that you have in an entrepreneurial, smaller setup in a meaningful way.
Shrinivas Kasar (02:35):
I and Arun, we go back a long way. We, the other co-founder, Arun Poojari, he's been a friend all my entire professional career. And we thought that having dealt with small businesses throughout our career, that's one area where we could really make an impact because less than 1% of the Indian businesses are digitally served in terms of the lending requirement that they have. We thought that supply chain finances is one way that we could really create an impact and try to extend that coverage way beyond where it is. That's that really set us up. And then we thought that let's take the plan and started this about three years ago.
Amee Parbhoo (03:20):
Taking the plunge is always the hardest part. Tell us more about how this idea of Cashinvoice came about and exactly what you do at Cashinvoice.
Shrinivas Kasar (03:32):
The MSMEs especially. So as we call micro small and medium enterprises in India. They contribute about over 30% of the country's GDP. Very, very smaller fraction of them are served in general in about 60% of them still remain completely unserved by the formal banking channels. And we thought that there's a clear way of improving this by creating a bridge between how the MSMEs want to be seen usually how the banks or NBFCs, the non-banking finance companies in India see them. And that's where we came up with this idea of building this platform where we start giving importance to the alternate data that the MSMEs bill over a period of time by the sheer trade history that they build with each other and give a new importance and weight to those parameters and help banks bridge the trust deficit, I would say, call it with the micro or smaller businesses.
Shrinivas Kasar (04:37):
That really was what was the at the heart of Cashinvoice. So, like I said, most of the small businesses, they struggle to raise financing based on their own financial strength as they really don't fit the criteria as laid down by the banks. But when they trade with a party, which is better rated as compared to them, the transaction itself becomes finance worthy with a lower perceived risk. So we leverage that the credit worthiness of the larger businesses which trade with smaller businesses and get them the credit for their sales and purchases. That's essentially what we do at Cashinvoice. And we started with this about three years back. And we currently are one of the largest supply chain finance marketplaces in India, catering an ecosystem of suppliers, the distributors or the multi-brand retailers. We funded over a million invoices, over a billion worth of transaction throughput the finance value of the transactions. And we have over 25,000 small businesses on the platform today.
Amee Parbhoo (05:42):
Incredible to hear. Maybe you could just for our audience tactically, take us through how it works.
Shrinivas Kasar (05:48):
Yeah. So typically if you see the profile of who we are dealing with here as our two kinds, primarily smaller manufacturers with an annual return of less than $1 million, or the traders or the retailers with an annual return of as low as even $100,000. So there are people with very small manufacturing setups, employing dozens of people in a very small setup in the periphery of larger manufacturers. On the other side, an example that I would like to delve deeper into is, many other your Western countries in India, we have a lot of corner shops where there are like mom and pop shops, which are serving the requirement of the local communities as against the penetration of the supermarket and these shops, they deal with variety of the articles right from fruit to the consumer durable appliances, electronics.
Shrinivas Kasar (06:47):
Most of them are completely outside of the ambit of the formal financing channels, because they do not have the documentation that is acquired by the banks to fund them out. So what we are doing is delving deeper into the transaction history by integrating the platform with the ERP systems that they use. These are really small ERP systems with some formal level ledger. And then we dig deeper into those ledgers to be able to establish the credit worthiness.
Shrinivas Kasar (07:17):
This is much different than how the banks look at the financial proposals wherein we fundamentally give more importance to the transactional data as compared to the financial or the balance sheets, et cetera. And the technology in real sense, and especially because of the public infrastructure that has been set in place in recent years in India, has really enabled collection of this information with literally few clicks. So any business who's 60 credit, they can just simply come onto the platform, allow access to their ERP, assess their account receivable position and get the funding against them by just simply giving a few consent. So that's fundamentally different than how the conventional financing worked wherein you had to go to the banks with a lot of paperwork and the guarantees and collaterals, et cetera. That's what we are doing. It's essentially a platform that connects the ecosystems to the financial ecosystem.
Amee Parbhoo (08:24):
And maybe you could speak to the other party here, which are the larger corporations, the partners. Is that how you're primarily acquiring small businesses today?
Shrinivas Kasar (08:35):
Yeah. So that's the part of the strategy. So what we thought at the beginning, which is something that we have built on, is that one of the reason why this segment remains under penetrated is because of the cost of acquisition. The one who is responsible for sourcing would meet hundreds of businesses even before they're able to shortlist one or another that they want to really lend to.
Shrinivas Kasar (08:58):
And that really leads to a higher cost of acquisition, the deals in general vis-a-vis, when you do go top down and it's basically the anchor led approach as we call it, when we acquire the larger anchor relationships and then, we integrate with their ERP systems to be able to reach out to the exact set of customers that we would want to deal with or associate with. And that narrows down the set to such a level where we know exactly which are the guys who would be fitting the banking norms or the criteria that we have laid down for them, and also makes it almost a zero cost acquisition for us. And that's the reason we've been able to onboard as many people so far, practically, very, very small setup. That's been the approach, the top down approach or the anchor approach as we call it.
Amee Parbhoo (09:54):
Got it. One thing I'd love to get your thoughts on is the topic of the season is around embedded finance as a way to reach small businesses and serve them. How do you describe your model? What cash invoice does as embedded finance? And what kind of advantage does that give you as well over these other traditional lenders?
Shrinivas Kasar (10:15):
Yeah, we are actually, I mean, I like to believe that we are one of the unique ones in the embedded financing space, because most of the embedded financing that happens today is actually complimenting the online or the digital marketplaces. Whereas we are fundamentally serving the offline marketplaces as well.
Shrinivas Kasar (10:34):
What I mean by that is that when we integrate with the larger anchor ecosystem, which is the ERP systems, like the SAPs, Oracles. We are able to have the embedded financing option within the ERP channel of the corporate itself, which is completely outside of the formal digital platform ecosystem. And in that sense, we are quite unique. And we believe, especially in countries like India, which is still very, very lopsided, I would say, towards the offline marketplaces than the online marketplaces, we can create a lot of impact basis revolution embedded financing that we have been able to build so far in terms of the purely embedded financing space. Also, the other point is that most of the banks and the finance companies in India were not API ready, let's say a couple of years ago or so. And now throughout our journey, we've seen that more and more banking companies or finance companies are API ready, and they're able to provide the financing as a service as we would like them to. That's also creating a big impact.
Amee Parbhoo (11:47):
Maybe you could say more there. I mean, what's been the appetite and excitement sort of from the different partners on the platform, both on the lending side, as well as on the corporate side to participate?
Shrinivas Kasar (12:02):
The key there is the incentivization that you're able to bring for each of the platform players. So the obvious ones is the smaller businesses, which tremendously benefits out of the cash flows and the value proposition that we've been able to offer. But like I said, our approach is the top down or the anchor led approach. And it's very important for us to incentivize the anchor companies to be able to participate on the platform. And that set the heart of what we do. Through our proposition, we've been able to create an impact on the bottom line of as much as one to 1.5% for the larger anchor companies. And this is primarily as a result of the difference between the borrowing cost of the MSMEs vis-a-vis the borrowing cost of the transaction itself when you look at the payment risk of the anchor companies. That's the reason why we've seen a very, very good participation by most of the top rated anchors that we currently have on board.
Shrinivas Kasar (13:05):
On the other side, what we've really been able to build in last two years or so is a completely plug and play a marketplace for a financial, wherein they do not have to invest any time or energy into either sourcing or onboarding the customers, executing the documentation, as well as serving the customers. So everything is just plug and play. So we really do the legwork for them. And since we are actually not even doing that as a legwork, because it's a completely digital framework, and that's why we've seen most of the banks and NBFCs warming up to the idea of participating on the platform and also opening up their infrastructure in terms of the APIs that we are directly connecting with, which is only going to scale this up further.
Amee Parbhoo (13:59):
Just shifting gears a little bit, as you think about kind of embedded finance and what the future looks like, what's informing your product roadmap? What are you thinking about next?
Shrinivas Kasar (14:12):
That's an interesting one. So, I mean, taking that also brings me back to one of the question that you asked earlier about the embedded financing. So currently, we've been limited to mostly the financing aspect of the small business ecosystem. What we are shortly launching and we are currently piloting it with few of the large size consumer goods distributors, is a product where we are also giving them the ability to collect their receivables and automate their receivable collection. What it means is that we, through the integration channel that we build with their ERP systems, we are not only giving their downstream channel to be able to fund their credit requirements, but also to pay them effectively using our platform, and also reconcile those back into the app system.
Shrinivas Kasar (15:02):
So from a smaller business perspective, much of their time actually goes into this activity of collection and reconciliation. There is tremendous amount of manpower. They have to invest in terms of simply doing the follow-ups for the payment, et cetera. And they see a lot of value in the proposition where we've been able to automate their entire receivable cycle. That's going to be quite exciting because we've already identified a few set of industries and this, we believe has a potential to revolutionize the whole collection process for the downstream side of the supply chain.
Amee Parbhoo (15:37):
Yeah. Incredibly exciting and natural extension of some of the work that you're already doing. As a founder of a business that's growing incredibly fast and innovating and a number of different areas, there's a lot going on, I'm sure, at any given point in time. What are some of the things that keep you up at night? What do you feel like you're spending most of your time and energy on right now?
Shrinivas Kasar (16:03):
So the challenge that we've taken up as a team is that, how do we make the affordable credit available to at least 10 million small businesses who are completely out of mainstream banking coverage? 99% of those are micro with annual revenues of less than $100,000. And digital lending is the key wherein the penetration for such a product like lending products, digital lending products in the West is almost over 15 to 20% as vis-a-vis something like 1% in India. And we believe that we can actually become the bridge between the mainstream financial ecosystem and the small business to effectively solve this. So throughout our journey, we had a lot of opportunities where we can meaningfully contribute. And we truly believe that we can actually become a pioneer in this space and solve constructively the MSME financing challenge that lays in front of us.
Amee Parbhoo (17:04):
So just thinking about how to take advantage of the massive opportunity and where to focus that time, I mean, big part of that of course, is a team and how you're building out your team. I'd be curious just, how do you think about building a team culture?
Shrinivas Kasar (17:20):
Yeah. So that's an interesting one, but yeah, so we have actually, always believed in a total transparency right down to the level of the last person who was executing. And what I mean by that is, as long as you keep the goal insight for the entire team, they're able to perform exactly as you expect them to. And I mean, a few of the examples is we've had multiple team outings wherein we communicate the organization's goal, and we are also able to give them the larger picture of what we are able to achieve, which really worked well for us. Something that's drives us is what is driving the team is what we really feel proud about. So we clearly, trying to build a culture where there's a sense of transparency and working towards the larger purpose in gender.
Amee Parbhoo (18:23):
Yeah. And creating that shared purpose that everyone in the organization is bought in and understands. Great. Well, last question for you. Just looking out into the future, what do you envision cash and voice looking like in five, 10 years time?
Shrinivas Kasar (18:42):
That's something that we try to take one step a time, but we aspire to become an end-to-end ecosystem FinTech, which can digitize and automate the whole procure to pay cycle. And there are multiple legs to it. Like I said, there are smaller aspects, not just in terms of the financing, but also in terms of optimizing the process and making an impact terms of simply reducing the working capital cycles. This would typically mean that many of the small entrepreneurs would be able to focus on their core strengths of running the business without having to involve themselves in tasks that could be easily automated. So our vision really is to make Cashinvoice a benchmark in small business financing.
Amee Parbhoo (19:30):
That's great. And we're excited to be on this road with you and with the entire Cashinvoice team. Thank you so much, Shrinivas, for being with us today and for this great conversation. Really appreciate your time.
Shrinivas Kasar (19:43):
Thank you. Thank you so much, Amee. Thank you.
Amee Parbhoo (19:47):
With that, I would like to conclude season two of the FinTech for the People podcast, where we talked about embedded finance and how this solution helps our entrepreneurs reach their goals and have a broader impact. Thank you to all our listeners for tuning in. I hope you enjoyed listening to the founders over the past six weeks from South Africa, Indonesia, India, Nigeria, and Brazil, and how they're using embedded finance to reach never before service small businesses in more contextualized and inclusive ways. We hope you've learned more about this area of FinTech and gotten more color around what embedded finance really means. Particularly, the power and potential in bridging the $5 trillion financing gap to small businesses around the world. As we've seen when financial solutions can be integrated into platforms, marketplaces and other non-financial solutions relevant to customers' lives, it can provide more convenient access, more seamless customer experiences and more tailored product offerings to those small businesses.
Amee Parbhoo (20:51):
We at Accion Venture Lab are incredibly excited about the potential impact of embedded finance for financials inclusion. If you're interested in the work that Accion Venture Lab does, feel free to reach out on Twitter, LinkedIn, or by visiting our website. Click on the link in the description below, or just type accion.org/venturelab. There you can also find the full set of season one episodes, where we talk to women founders who are disrupting financial services around the world. And of course, stay tuned for season three of FinTech for the People, where we'll be discussing one of the biggest topics in FinTech today, Web3 and decentralized finance. We'll be looking at it with a lens of how these technologies like crypto and the blockchain can help or potentially harm underserved populations and financial inclusion efforts around the world.