How finTech is revolutionising rural economies by empowering nanopreneurs

The ubiquitous small merchant store is the heartbeat of the rural economy in many ways, where small entrepreneurs manage stores selling everything from knick-knacks to groceries and the occasional agricultural products. The Kirana store usually works on a cash-heavy model with the shopkeeper depending on the customers’ liquid cash to purchase and sell the goods they need. 

With no lending options from the formal sector financial lenders, the merchants relied on informal channels and borrowed capital from moneylenders at massive interest. A spike in demand for goods would, in turn, mean the stores ran empty soon, forcing consumers to travel longer distances to get the items they needed, and the lack of supply chain credit impacted these stores. It meant the merchant could not scale his business, was stuck to making ends meet, and constantly worried about the cash flow. 

Opening up access to financial services 

These were the critical pain points faced by fintechs, especially those in the rural sector, who are looking to solve for India. An SBI report suggests that UPI is a huge success and has brought down cash circulation. Fintech apps, backed by AEPS, India stack, and apps offering unified services, have aided in bringing millions of rural denizens into the financial system.

Over the past few years, the trinity of Jan Dhan, Aadhaar, and mobile has increased the number of bank accounts and helped a shift to democratise data sharing and better access to digital payment solutions. Reports suggest a surge in digital transactions from 127 crore in FY14′ to a whooping Rs 12,375 crore in FY’23. RBI Governor Shaktikanta Das stated that more than 37 crore users used AEPS, which was crucial in financial inclusion. 

As digital payments transformed the financial services space, fintechs saw the small merchant as an ally. They are good partners in offering digital payment solutions to end consumers, and small merchants became nanopreneurs, offering multiple digital transactions. 

They have emerged as a bridge linking formal financial institutions with banking infrastructure and facilities-deprived customers. They manage banking operations, aid in opening bank accounts, and assist with deposits, withdrawals, remittances, and payments. Kirana owners enjoy the trust of the locals and work well as nanoprenuers. 

Alternative lending and more 

For a kinara store owner/nanopreneur, this offered an extra source of income, solved their credit availability issues, fixed the supply credit issues, and ensured scale and growth. It has also aided in a surge in microfinance options in rural communities. According to an MFIN micrometer report, India’s microfinance gross loan portfolio (GLP) increased to around Rs. 3.5 lakh crores in FY23, marking a 22% leap in the last fiscal. Moreover, complete digital records of financial activities created a solid transaction history, established credit histories, and brought the nanoprenuers into the formal ambit. Moreover, alternative credit assessment methods, including smartphone data and payment history, enabled them to access funds at competitive interest rates, along with financial literacy programmes, targeted insurance packs, and so on. 

Better market access with commerce

Outside of fixing the lending puzzle, Fintech has also aided in opening up the market for the nanoprenuers in collaboration with the government via initiatives such as the Open Network for Digital Commerce (ONDC). It brings sellers and buyers on a digital platform and offers a vast platform to retail goods to a larger audience, directly improving margins and sales while helping them earn extra income and fixing lending loopholes.

Streamlines payment

In an earlier era, individuals in rural areas had to travel to multiple locations for utility payments and go to faraway banks to collect cash. This process was costly and time-consuming. The Bharat Bill Payment system fixes this by bringing multiple utility bill payments on a single platform. Embedded with digital payment options, it has enhanced accessibility to financial services and reduced cash dependence. The success of QR codes, now a regular presence across the country has been a huge success that has boosted digital payments options. A report by Worldline India suggests UPI QR codes grew 57% and reached 31.7 crore in December 2023, with Bharat QR codes growing to 59.6 lakh. Paying is as simple as scanning a QR code using the payment app. This ease facilitates quick and efficient transactions at various establishments, from roadside tea stalls to key store payments and so on. It offers a user-friendly solution that empowers individuals to participate in the formal economy regardless of location or banking status. By leveraging QR codes, individuals can conduct transactions with their mobile phones, bypassing the need for physical cash. It allows cardholders and UPI users to participate in the digital payment ecosystem. This democratisation promotes financial inclusion by providing a convenient and secure alternative to cash transactions.

These initiatives will place fintechs as catalysts of change, empowering nanopreneurs and transforming traditional stores into hives of financial services activity, and unlocking lending access while opening markets in rural India. In due course, tech tools with a human touch will herald a future where everyone can access essential financial services and participate in the larger financial revolution.