"Credit Funds for MSMEs" Podcast with Dr. Jayan Joseph

Summary

The podcast features an in-depth discussion with Dr. Jayan Joseph, founder of Appscook Technologies, about their innovative project called "Friendly Fund," designed to support Micro, Small, and Medium Enterprises (MSMEs) in India. MSMEs contribute nearly 60% to India’s GDP and face challenges such as limited credit capacity, cash flow issues, employee retention, and tax compliance. Friendly Fund aims to address these critical pain points by providing non-collateral loans and financial facilitation, focusing on short-term credit lines like salary payments, purchase financing, and tax payments.

Appscook Technologies initially developed a reliable payment gateway and ERP system for schools, managing transactions worth over ₹2,872 crore with minimal discrepancies, gaining trust from banks and stakeholders. Based on this credibility, banks approached Askook to extend similar financial services to MSMEs, who often struggle with obtaining collateral-backed loans and face bureaucratic hurdles. Friendly Fund acts as a trusted aggregator between MSMEs and banks, enabling easier access to credit without collateral, supported by a stringent eligibility and verification process, including financial audits, GST compliance, and credit scoring.

The video highlights Friendly Fund’s three core services:

1. Salary First – Ensuring timely salary payments to employees within 30 days credit, improving employee satisfaction and productivity.

2. We Collect – Helping MSMEs with purchase financing by directly paying suppliers, avoiding credit risks for sellers and improving cash flow.

3. Tax Buddy – Facilitating timely tax payments and compliance, reducing stress and penalties for MSMEs.

Dr. Jayan emphasizes that Friendly Fund is not a direct lender but a technology-driven platform that aggregates and facilitates credit from multiple banks. The fund’s non-collateral loan model requires strict financial and personal credibility checks to mitigate risks. The onboarding process involves two stages: financial and personal verification, taking up to 60 days initially. The service is available pan-India and aims to scale using digital marketing, influencer campaigns, and offline events targeting MSME entrepreneurs.

The Friendly Fund project addresses MSMEs’ cash flow and credit challenges, helping increase profitability and employment generation, contributing to India’s goal of becoming a $5 trillion economy by 2047. It also supports government policies promoting MSME credit and compliance. The platform’s transparency, trustworthiness, and technology-driven approach distinguish it from other financial service providers. Appscook Technologies plans to expand this service beyond schools to other industries and international markets like Japan, the Middle East, and Africa.

Highlights

- 💼 Friendly Fund supports MSMEs with non-collateral loans addressing credit and cash flow challenges.

- 🏦 Askook Technologies acts as a trusted aggregator between MSMEs and multiple banks.

- 💰 Salary First service ensures MSMEs can pay employee salaries timely, boosting productivity and retention.

- 🛒 We Collect facilitates purchase financing by paying suppliers directly, improving MSMEs’ cash cycles.

- 📊 Rigorous eligibility and onboarding ensure financial and personal credibility, mitigating risk.

- 🌐 The service is scalable across India and plans global expansion leveraging digital marketing and influencers.

- 📈 Friendly Fund aligns with government policies to strengthen MSME credit and boost India’s economic growth.

Key Insights

- 🌱 MSME Contribution & Growth Potential: MSMEs contribute about 60% to India’s GDP, primarily from services (53%) and manufacturing (28%). Supporting MSMEs’ growth directly impacts the nation’s economic expansion toward the $5 trillion economy goal by 2047. Friendly Fund is strategically positioned to catalyze this growth.

- 🏦 Aggregator Model Builds Trust: Unlike traditional lenders, Friendly Fund does not disburse funds but functions as a transparent aggregator, connecting MSMEs with banks. This model builds trust, helps banks manage risk, and provides MSMEs easier access to credit without collateral, a major bottleneck in conventional financing.

- 💸 Addressing Critical Pain Points: MSMEs struggle with limited credit capacity, delayed collections, and employee retention due to cash flow issues. Friendly Fund’s Salary First service ensures timely salary payments, reducing employee turnover and increasing productivity, which are critical for MSME sustainability.

- 🔍 Robust Eligibility and Verification: The platform requires audited financial statements, GST compliance, and minimum credit scores, ensuring only financially responsible MSMEs benefit. This stringent process helps mitigate default risk, maintaining service integrity and bank confidence.

- 📈 Financial Efficiency & Profitability: By enabling MSMEs to access short-term credit lines (30-day repayment cycles) for salaries, purchases, and taxes, Friendly Fund helps businesses maintain smooth operations and optimize working capital. For example, FMCG businesses can turn inventory 10 times a month, increasing profit margins by up to 50%.

- 💻 Technology-Driven Scalability: Askook Technologies leverages its robust payment gateway and ERP systems to automate onboarding, verification, payment disbursement, and reminders. This reduces operational costs, speeds up credit facilitation, and enables pan-India reach, with expansion plans into international markets.

- 🤝 Alignment with Government Initiatives: Friendly Fund aligns with RBI and government mandates on promoting MSME credit, non-collateral lending, and compliance. The platform addresses new tax rules, such as the 45-day credit repayment requirement, helping MSMEs avoid undue tax burdens and penalties, thereby supporting formalization and financial discipline.

Detailed Analysis

The discussion highlights the intrinsic challenges faced by MSMEs in India, such as lack of collateral for loans, cash flow mismatches, and compliance burdens. Friendly Fund directly tackles these by offering non-collateral credit lines, a rarity in the financial sector that traditionally relies on secured lending. The direct payment of salaries through the Salary First service is revolutionary because it ensures employee satisfaction and productivity, which are often overlooked in financing schemes but are crucial for operational continuity.

Appscook Technologies’ credibility, proven through its successful school payment gateway handling thousands of crores with negligible discrepancies, lends significant trustworthiness to its MSME financial services. This trust is critical since banks rely heavily on dependable partners to extend unsecured loans. The platform’s dual verification process—first financial credentials, then personal and business verification—demonstrates stringent due diligence, reducing non-performing assets (NPAs).

Furthermore, the We Collect service innovatively addresses the supplier credit problem. MSMEs often provide credit to suppliers, risking delayed payments and defaults. By channeling payments directly to suppliers, Friendly Fund enhances supply chain reliability and reduces collection risks for MSMEs.

The Tax Buddy service alleviates the compliance stress MSMEs face, ensuring timely tax payments and avoiding penalties. This is not only a financial benefit but also improves MSMEs’ standing with tax authorities, facilitating smoother business operations.

The platform’s cost structure—around 2% plus applicable GST—is positioned as a cost-effective solution compared to traditional credit costs. This is especially beneficial for MSMEs operating with thin margins. The repayment flexibility, including staggered payments, further supports business cash flow management.

Importantly, Friendly Fund’s design prevents misuse of funds. Since loans are tied to specific purposes like salary or purchase payments, there is minimal risk of diversion, which is a prevalent issue in unsecured lending.

Marketing and outreach strategies focus on precise targeting of MSME entrepreneurs using digital influencers, social media campaigns, and offline networking events. This ensures that the service reaches the right audience, further improving the quality of leads and reducing the burden on sales teams.

Finally, the video touches on future growth prospects, including expanding the model to other industries beyond schools and scaling internationally, highlighting Appscook’s ambitions for broader impact.

Conclusion

Friendly Fund, by Appscook Technologies, is a pioneering fintech solution addressing MSMEs’ critical financial challenges in India. Through a trusted aggregator model, non-collateral short-term loans, and technology-driven processes, it enhances MSME cash flow, profitability, and compliance. The project aligns with national economic goals and government policies, offering a scalable, cost-effective credit facility that promises to empower India’s backbone sector—MSMEs—towards sustainable growth and greater contribution to the economy.

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Highlights

- 💼 Friendly Fund provides non-collateral credit support tailored for MSMEs.

- 🏦 Acts as a trusted bridge between MSMEs and multiple banks, enhancing credit access.

- 💰 Salary First ensures timely employee payments, boosting workforce morale and productivity.

- 🛒 We Collect finances supplier payments directly, improving MSME cash cycles.

- 📊 Strict eligibility and verification mitigate default risks in unsecured lending.

- 🌐 Digital-first approach supports pan-India scalability and international expansion.

- 📈 Supports government initiatives promoting MSME credit and formalization.

Key Insights

- 🌱 MSMEs are vital to India’s economy, and their growth fuels GDP expansion; Friendly Fund targets this sector’s core needs.

- 🏦 The aggregator model is critical for building trust and reducing lending risks without collateral.

- 💸 Addressing salary delays directly improves employee retention and overall business health.

- 🔍 Rigorous financial and personal vetting ensures only credible MSMEs access funds, protecting all stakeholders.

- 📈 Short-term credit lines optimize working capital and enable MSMEs to increase profit margins significantly.

- 💻 Technology automation lowers costs, accelerates processes, and enables broad market reach.

- 🤝 Alignment with RBI and government policies ensures regulatory compliance and supports MSME formalization.