Maersk-backed trade financer MODIFI targets $1 billion volume in India

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MODIFI, a digital lending platform offering finance to exporters in the small and medium enterprises (SMEs) segment, plans to invest heavily in the Indian market to fund its expansion plan in the credit-starved country.

For the Germany-based company, founded in 2018 by founders of SME-focused payments company BillPay– Nelson Holzner and Sven Brauer, India is one of the top priority markets since the trade finance in the SME space is largely broken as the traditional banks and NBFCs are unwilling to cater to this segment.

According to MODIFI, the total trade finance is worth USD 20 trillion, in 50% of requests for trade finance by SMEs are rejected by banks, resulting in a funding gap of USD 1.5 trillion annually.

Talking to IBS Intelligence on the company’s plan for the Indian market, MODIFI’s CEO Nelson Holzner said, “India is witnessing a kind of digital revolution. We are very impressed with the Indian government’s initiatives on digitization and we see a lot of opportunity in the Make-in-India initiative too. With all these initiatives, we expect to reach our target of $1 billion volumes in this market in the next three years.”

The company has so far financed over USD 400 million worth of trade largely in the European market.

Holzner said that the opportunity in the Indian market is huge with exports worth USD 140 billion every year. However, 40% of the exporters are small or medium-sized businesses and are denied credit by banks and NBFCs.

The idea is to tap genuine exporters selling products in sectors such as textiles, handicrafts, pharmaceuticals, leather products and agriculture, Holzner said.

The company, which entered the Indian market about two months ago, is targeting SMEs with revenues ranging from USD 1 million to USD 50 million, with collateral free finance within 48 hours as compared to a duration of month or more at traditional banks. The company charges an interest rate of about a percent for a tenure of 30 days.

“However, there is always a risk associated with giving collateral free loans,” Holzner said adding that in a bid to mitigate the risk, the company requires the exporters to go through a Dutch-KYC process and documents stating the number and quality of their buyers. The exporters also need to sign a framework contract and upload past invoices.

“We need to ensure that the exporters are working with genuine and quality buyers and then disburse the loans. We have a stringent verification process,” Holzner said and added that the company has witnessed zero defaults so far.

The company, which raised about Euros 5.5 million from a clutch of strategic investors led by global shipping company Maersk, facilitates loans in the range of USD 5000 to USD 75,000.



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