Mastercard partners with M1xchange to offer invoice discounting solution to agri-MSMEs, FPOs

Credit and finance for MSMEs: The digital platform allows credit and working capital access along with connecting farmers and farmer producer organisations (FPOs) directly with buyers, negotiating the best price for their produce and getting paid.

Written by MSME Desk

April 20, 2023 13:25 IST

This has been aided by introducing features like RuPay credit card on unified payments interface.

Credit and finance for MSMEs: Payments company Mastercard on Thursday announced its collaboration with one of the Reserve Bank of India-licensed TReDs platform M1xchange to offer invoice discounting solution to farmers, farmer producer organizations (FPOs), and agri-MSMEs through its agritech platform Farm Pass. The digital platform allows credit and working capital access along with connecting farmers and farmer producer organisations (FPOs) directly with buyers, negotiating the best price for their produce and getting paid.

As part of the collaboration, M1xchange will bring on board its network of agri-businesses and lenders. Sundeep Mohindru, CEO, M1xchange, said the large network of financiers on M1xchange will enhance liquidity flow for buyers and sellers on the Farm Pass platform.

Also read: How MSMEs can get cash against unpaid invoices online? Check more details on TReDS here

“TReDS offers a unique proposition that discounts invoices raised by FPOs for their end customers based on their credit profile. This makes FPO business scalable as their dependence on credit for working capital financing is removed through invoice discounting. All FPOs registered on Farm Pass will get instant access to a network of more than 55 banks and NBFCs via M1xchange,” said Mohindru in a statement.

Farmers and agri-MSMEs often have to sell their goods to middlemen to avail quick payment as they face delays and follow-ups in directly engaging with buyers, said Mastercard. Moreover, FPOs also struggle with access to working capital which prevents them from procuring effectively from farmers.

Also read: RBI’s TReDS financed this many MSME invoices involving Rs 1.42 lakh crore till Feb 2023

Through credit access by invoice discounting, FPOs will have working capital to purchase goods from farmers and sell them to buyers at the best price with instant payment. “This will help start a self-sustaining cycle for the FPOs, resulting in self-sufficiency over the medium to long term.”

“Through an auction-based mechanism for selecting the best interest rates against the trade, the solution aims to benefit 10 million farmers,” said Vikas Varma, COO, South Asia, Mastercard. So far, Mastercard said it has benefitted over 1 million smallholder farmers through Farm Pass.

To address this issue by financing trade receivables from corporate and other buyers including government departments and public sector units through multiple financiers, the central bank had introduced TReDS back in 2014. As of February 2023, 54.56 lakh invoices involving Rs 1.42 lakh crore were financed by TReDS platforms, according to the data shared by Bhagwat Karad, minister of state in the finance ministry informed Lok Sabha in a written reply to a question in March.