Six jars of Nutella, a case of Dove bars, and a couple of dozen Lay’s packages These may just be the boring weekly sales data for soap, chips, and bread spread to the proprietor of a small mom-and-pop store. They’re all crucial pieces of a gigantic banking jigsaw to Solv, a business-to-business marketplace for India’s 60 million-plus small businesses.
Ninety percent of the country’s trade passes through small “Kirana” stores with yearly sales of less than $0.5 million. Their proprietors, for the most part, do not have a company license and do not have access to a formal banking system. “They might not have a credit bureau score, or they might have a bad score,” says Amit Bansal, CEO of Solv.
Small stores rely on informal financing from distributors of brand owners such as Unilever Plc and Procter & Gamble Co. in the absence of formal working-capital lines. However, distributors inside a small circle of trusted merchants strictly ration relationship-based funding, which comes integrated into the inventory. Not everyone who wants to expand their business can acquire the credit they need.
Lenders like StanChart were established to provide both corporate and consumer banking services. Going downstream from major firms, however, necessitated a fresh strategy. Small and midsized businesses — India’s “lost middle,” as Manson calls them — had complicated demands. They were desperate for money. However, they needed to attract new customers and acquire access to more products and faster logistics before they could swallow it.
That’s why a London-based bank decided to enter India’s vast, chaotic realm of everyday commerce, establishing links between dependable suppliers and buyers and ensuring door-to-door pickup and delivery — even before providing credit to these small enterprises. StanChart supported Solv through its innovation unit SC Ventures, which has been Manson’s new perch since 2018.
The marketplace finished its first full year of operations in 2021 and currently has an annualized run rate of $190 million in gross merchandise value, which CEO Bansal expects to triple this year as new cities and product lines are added. By the end of the year, the goal is to deliver each order profitably, allowing Solv to build up without burning up investor funds.
Not every tech-driven commerce platform is created equal. Some will maintain long-standing patterns of mutual dependency between giant brands and smaller intermediaries; others will eliminate layers of middlemen, causing public worry over job loss.
It’s difficult to determine which of the two models will prevail, but in the end, both try to entice business users to a network by promising growth and extracting data helpful to lenders by monitoring their activities. As finance enters the picture, more companies sign up to provide new data. India’s underfunded but quickly digitized small-business landscape makes it an ideal testbed for data, network, and activity — DNA — loops.
Rather than attempting to decipher the meaning of growth, unemployment, and inflation, bankers may instead prefer to examine orders for Nutella jars.
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