Over the last few years, Supply Chain Finance (SCF) has grown rapidly in India, but this growth has been limited to the top of the chain, where anchor buyers and first-tier suppliers can borrow against strong balance sheets. Further down, the picture is very different. Suppliers wait months to be paid, struggle to borrow on acceptable terms, and carry working capital costs that their buyers have pushed down the tiers. For most of these businesses, that gap slows growth first and closes businesses later. SCF has to reach these players, and it has to do so on a scale.

A sector too large to leave behind

India has 7.47 crore+ MSMEs that contribute about 31.1% of GDP and 48.58% of exports, but most of them are in the lower tiers of supply chains, so when they stall, the manufacturers and anchors above them feel it in their production lines.

Why traditional credit cannot meet the scale

Only 14% of India’s MSMEs have access to formal credit, according to Deloitte’s State of Financial Services in India report. It estimates the formal credit gap in India at around Rs 25 trillion as of March 2025 and suggests it could exceed Rs 50 trillion against a healthy credit-to-GDP benchmark. The comparison with other large economies is stark. MSME credit penetration stands at 14% in India, against 37% in China and 50% in the United States.

One of the reasons for this credit gap is that traditional formal lenders underwrite against collateral, audited financials, and credit history, and most micro and small firms have little of any of the three. Branch-based lending also carries a fixed cost for each borrower, which makes small working-capital lines uneconomic. Reaching millions of businesses one application at a time cannot close a gap of this size.

The cost of waiting to be paid

Late payment is the most direct route from a healthy order book to a failing business. A supplier that waits 90 days for payment still has to pay its workers, raw material vendors, rent, and other operational expenses. It borrows at punishing rates, delays its own suppliers, or turns down orders it cannot fund. The delay also travels down the chain, as smaller businesses that are paid late pay their own suppliers late. Growth becomes the first casualty when survival becomes a challenge.

Why SCF can reach the lower tiers

SCF starts with an invoice that a buyer has committed to pay, not from the borrower’s collateral. This difference is important for the lower tiers. A supplier’s credit case can rest on the buyer’s obligation and the underlying transaction, without depending on property the supplier may never have owned.

India has already tested this at scale. TReDS, the RBI-regulated Trade Receivables Discounting System, lets MSMEs upload approved invoices to a platform where banks and NBFCs bid to discount them without collateral or recourse to the seller. It reported financing worth Rs 3.47 lakh crore in FY2025-26 alone.

Suppliers and buyers already extend informal trade credit to small firms, often on terms no lender can see. SCF moves that credit onto documented, priced, and traceable terms.

Role of Data in SCF

In SCF, the lender’s main comfort is the buyer’s credit rather than the sellers. An anchor with a strong rating approves a supplier’s invoice, and a bank or NBFC funds that invoice against the anchor’s obligation. So far, it has been hard to reach suppliers further down the chain because lenders often cannot verify that an invoice is genuine, that goods were delivered, or that the buyer approved of it.

However, these verification gaps are narrowing. Government-registered e-invoices, GST filings, and e-way bills create official records of many transactions as they occur. When this is integrated with a corporate’s ERP, purchase orders, deliveries, and approvals can be captured in near-real time. When those records line up in a shared system, a lender can fund a supplier, who may be several tiers away from the anchor, by relying on the credit of whichever buyer in the chain has approved the invoice. In this model, data makes the buyer’s credit visible and usable at every tier where the buyer’s invoices flow.

How Vayana solves SCF

Vayana integrates with a corporate’s ERP to capture invoices and purchase orders as they are raised. The anchor approves each supplier invoice, and the approved data passes to a bank or NBFC, which sets credit limits based on the program’s parameters. The supplier receives early payment against the approved invoice, and the anchor repays the financier at term, so the early payment does not burden its balance sheet. The same platform supports vendor financing, reverse factoring, dealer financing, receivables financing, factoring, and Trade Receivables Securitization (TRS), with cross-border post-shipment finance for exporters. With more than 20 major financial institutions on its platform, Vayana engages over 600,000 MSMEs, and that number is only increasing.

The case for going deeper

Formal lenders reach a small minority of MSMEs, and the businesses left out are the ones whose cash cycles are most exposed to late payment. SCF already shows that a buyer’s creditworthiness can become working capital for its suppliers. The next phase of SCF penetration has to carry that benefit to the suppliers of suppliers. Without it, the lower tiers will keep running out of cash, and the upper tiers will keep losing the suppliers they depend on.