India’s economy relies heavily on micro and small enterprises, which contribute a huge 40% to its GDP. However, a crippling challenge plagues this segment, which is that only half of these entrepreneurs can secure loans due to a substantial credit gap. The primary obstacle is the lack of collateral among these entrepreneurs, leaving them unable to meet traditional loan requirements.

Though easier said than done, to address this issue, the Government of India, through the MSME and the Small Industries Development Bank of India (SIDBI), established the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) in 2000 to guarantee loans for MSEs, enabling banks to lend money without collateral. 

“Despite these efforts, women entrepreneurs in India still face significant challenges in accessing institutional finance, including social attitudes and bias, difficulty in securing collateral-based loans, and poor awareness or knowledge of financial schemes. To close the financing gap for MSEs, there is a need for focused and prompt action,” said Harish Gupta, in an exclusive interaction with AIM at Oracle CloudWorld 2023, held in Las Vegas, last week.

Oracle to the Rescue 

Thanks to Oracle, CGTMSE has benefited approximately 12 million borrowers, including 21% women-led entrepreneurs and 92% first-time borrowers. “We guaranteed loans totalling $53 billion, of which $21 billion are currently active with $13 billion in loans over the last year,” Gupta commented.

CGTMSE moved to Oracle Cloud in 2021 and as a result, underwent significant changes in its data infrastructure and application modernisation processes. Over 23 years, they have managed to disburse a total of $52 billion in loans, resulting in an 87% increase in their top-line revenue. In a single year, CGTMSE disbursed $13 billion. 

The Oracle adoption led to a 56% growth in the first year, increasing their revenue from INR 36,000 crore to INR 56,000 crore. “In the second year, it surged from INR 56,000 crore to INR 101,000 crore and INR 4,000 crore,” shared Gupta. This growth demonstrates a significant return on investment, both in terms of IT savings and substantial business expansion, with no human intervention required for daily operations. 

One of CGTMSE’s core responsibilities is managing various government schemes in India, including those aimed at non-banks, banks, and COVID-affected entrepreneurs. However, they faced challenges stemming from the outdated architecture, which required separate application environments and databases for each scheme. To address this, they unified their applications into a single, highly configurable platform built on micro-services architecture.

“So, the adoption of Oracle Cloud services had a significant impact on our operations by improving their time-to-market for new schemes and resolving resource scaling issues during peak periods,” shared Gupta, saying that automation was a key aspect of their transformation, particularly in the loan application assessment process, resulting in significantly reduced processing times. 

“Loans that previously took two weeks to disburse were now processed and disbursed in real-time,” commented Gupta, on how Oracle has boosted their productivity. 

Furthermore, CGTMSE implemented digital initiatives like fast-tracking Mudra loans for lower-income segments, contributing to their financial growth. In fact, within a year, their top line improved by an impressive 87%, demonstrating a substantial return on investment (RoI), largely attributable to savings generated through Oracle ATS (Application Testing Service), impacting loan sanctions, increasing from INR 100 crore a day to an impressive INR 500 crore a day, a five-fold growth.

CGTMSE also started their journey with MySQL this year with Oracle’s MySQL HeatWave helping them with “what–if” analysis, especially when dealing with extensive 23-year data sets, which used to require manual efforts with tools like Excel and Power BI. However, the recent shift to MySQL HeatWave has helped in automating what-if analysis for better decision-making, focusing on areas like borrowing, repayment trends, Non-Performing Assets (NPA), and their impact on revenue. “Our organisation now relies on MySQL HeatWave, collaborates with partners to develop models, and plans to share this data with the government soon,” Gupta added.

Migration Struggle 

“A 100% of our infrastructure relies on Oracle Cloud,” said Gupta, emphasising CGTMSE’s dependence on Oracle. Before that, the organisation was on a private cloud partner and faced data transfer issues during migration. The primary challenge was aligning applications with Oracle’s database parameters. After resolving issues and conducting security audits, DR drills, and compliance checks, Oracle proved reliable, especially for data security. The team migrated their whole infrastructure to Oracle Cloud in just four weeks. 

In addition to Oracle, Path Infotech serves as a crucial partner for them. Application development is based on Java, Angular, and PrimeMG, all hosted on Oracle. However, their HRMS system is hosted on AWS, and their accounting system currently runs on Tally but is planned to migrate to a standard ERP system. In terms of security, they use FortiGate for firewall protection, and they are pursuing ISO 27,001 compliance for their SOC center. They are also exploring external vendors for various security solutions, including web and social solutions, and have been in contact with VMware for potential solutions.

What Next? 

With a lean team of 40 employees, CGTMSE is currently integrating with various entities, including IndiaStack and ONDC to ensure lenders have access to borrower eligibility information. Alongside traditional banks, the company is expanding their reach to Loan Service Providers (LSPs) and Digital Service Providers (DSPs), creating a comprehensive ecosystem. “Our APIs enable these entities to assess borrower eligibility early in the loan application process,” he said. 

CGTMSE is also betting big on generative AI. “We plan to invest in AI for automation and cost reduction, including chatbots for both public and internal use, leveraging cognitive search and generative AI for efficient information delivery,” Gupta added.

“We aim to use chatbots for customer support to reduce costs, especially for our widespread user base of 10,000 people across India, including various banks. We also intend to automate incident management, develop crash analytics, and utilise generative AI,” said Gupta. However, this involves two aspects: a multilingual public-facing bot using cognitive search and generative AI, and another one for internal business users, integrating with their systems to handle queries efficiently. These automation efforts will require ongoing investment, with a conservative target of $25 billion for this year.

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