The FMCG and pharmaceutical industries are critical pillars of the Indian economy. These sectors thrive on complex supply chains and fast-paced operations. However, working capital management remains one of their biggest challenges. Fintech innovations in Supply Chain Finance (SCF) are now paving the way for new financial solutions. With 63 million MSMEs (Micro, Small, and Medium Enterprises) contributing to these industries and facing liquidity crunches, fintech-led SCF is gaining momentum, promising financial inclusion, operational efficiency, and sustainable business growth.
In this blog, we’ll explore how fintech-powered SCF solutions are revolutionising working capital management for FMCG and pharma sectors. From buyer-side finance to reverse factoring, we’ll look at how these digital innovations are creating opportunities for both small suppliers and large corporations. The insights shared will provide practical information for investors, financial professionals, and tech enthusiasts keen to understand the future of SCF in these fast-moving industries.
Role of Supply Chain Finance in FMCG and Pharma
Supply Chain Finance (SCF) stabilises the working capital needs of FMCG (Fast-Moving Consumer Goods) and pharmaceutical companies. These industries operate on thin profit margins, deal with high operational costs, and face long payment cycles. A seamless flow of goods, from raw material procurement to final delivery, requires timely financial support. SCF ensures liquidity at every stage, benefiting both buyers and suppliers.
Here is how SCF addresses explicitly the unique financial challenges in these two sectors:
For FMCG Companies
FMCG businesses need continuous inventory restocking to meet consumer demand, particularly for packaged foods, beverages, and personal care items. However, payments from retailers or distributors may take time, creating cash flow gaps. SCF provides short-term liquidity to suppliers and manufacturers, ensuring that:
- Suppliers receive payments early, even if buyers delay payment.
- Manufacturers can purchase raw materials to maintain production schedules.
- Retailers get financial flexibility through buyer-side finance tools like reverse factoring, helping them stock goods without upfront payment.
Example: A packaging supplier providing materials to a large FMCG company uses SCF to receive early payment for invoices, ensuring it has funds to continue operations without waiting for full payment.
For Pharmaceutical Companies
Pharma businesses have strict drug production and distribution timelines, making financial delays problematic. With complex regulatory approvals and frequent audits, these companies have longer payment cycles up to 120 days or more. At the same time, production facilities, medical distributors, and chemists require liquidity to stay operational. SCF helps ensure:
- Suppliers get immediate payment after delivering raw materials like APIs (Active Pharmaceutical Ingredients).
- Distributors can manage inventories, especially during high-demand periods such as flu seasons or pandemics.
- Hospitals and retail pharmacies get early payment options to stock essential medicines without cash flow constraints.
Example: A pharmaceutical distributor can use SCF to receive advance payments for orders fulfilled to hospitals, ensuring steady cash flow and preventing disruptions in medicine supply.
Why SCF is Essential for Both Industries
- Working Capital Management: Both industries must manage regular operational expenses including salaries, raw material procurement, and logistics—while waiting for buyer payment.
- Supply Chain Stability: SCF ensures that supply chain partners are paid on time, reducing the chances of disruptions or delays.
- Sustainable Growth: SCF helps smaller vendors in these industries remain financially viable, fostering long-term business relationships with larger corporates.
With SCF, FMCG and pharmaceutical companies can better manage cash flow, ensuring production continuity and uninterrupted consumer supply. This financing solution is a backbone for these industries, which rely heavily on timely payments and smooth supply chain operations to thrive in a competitive environment.
How Fintech is Disrupting Traditional SCF Models
The traditional supply chain finance (SCF) model relies on banks and financial institutions to deliver working capital solutions to businesses. However, these conventional models have significant limitations. For example, banks prefer lending to large corporations with strong credit histories, leaving smaller retailers and suppliers needing more access to credit. This is where fintech platforms disrupt the traditional approach, bringing innovative, tech-driven solutions to the forefront.
- Faster Onboarding through Digital KYC and E-Invoicing
Traditional banks often require extensive paperwork and multiple approvals, leading to long delays. Fintech platforms streamline this process through VideoKYC and e-invoicing systems, reducing the time it takes to onboard new clients. Suppliers can register on these platforms in hours, allowing them to access SCF solutions quickly.
- Example: An FMCG supplier can onboard with a FinTech platform digitally and start accessing invoice financing without visiting a physical bank branch.
- Proprietary Risk Scoring Models and Better Credit Assessment
Fintech platforms use advanced algorithms and machine learning models to evaluate real-time financial data, including GST filings, past transactions, and payment history. Compared to banks, which rely heavily on traditional credit scores, fintech assesses cash flow and operational data, making extending loans to MSMEs with little or no credit history possible.
- Impact: This allows fintech platforms to serve small suppliers, retailers, and distributors that banks often ignore, reducing the economy’s credit gap.
- Matching Algorithms for Better Lender-Borrower Connections
Fintech platforms use intelligent algorithms to match lenders with borrowers based on specific criteria, such as industry type, payment cycles, and creditworthiness. This real-time matching eliminates the guesswork involved in traditional lending and ensures faster disbursement of funds to businesses in need.
- Example: A pharma distributor in Tier 2 or Tier 3 cities can connect with the right lender through a fintech platform, which assesses and approves financing requests in minutes.
- Blockchain for Secure Transactions and Transparency
Blockchain technology ensures secure, tamper-proof financial transactions by creating immutable records of every payment and invoice. This improves transparency between buyers, suppliers, and lenders, building trust across the supply chain.
- Benefit: Blockchain reduces risks by eliminating disputes over payments or invoices, encouraging more suppliers and buyers to use SCF platforms.
- Flexible Financing Options through Reverse Factoring and Dynamic Discounting
Fintechs offer flexible SCF solutions that go beyond traditional factoring. Reverse factoring allows suppliers to receive payments early when buyers approve invoices, while dynamic discounting gives buyers discounts for settling invoices. These tools create win-win scenarios for suppliers and buyers, ensuring seamless cash flow.
- Example: A large FMCG buyer may negotiate early payment terms with multiple small suppliers, offering a small discount in return for faster payment processing.
- Remote Access and Paperless Operations
Fintech platforms offer mobile-based apps and cloud-based platforms, allowing businesses to access SCF services remotely. Suppliers and buyers can upload invoices, track payments, and receive financing from anywhere in the country without visiting physical branches or offices.
- Impact: This is particularly helpful for MSMEs operating in rural and semi-urban areas, ensuring that even small businesses benefit from SCF solutions.
Supply Chain Finance Mechanisms for FMCG & Pharma
- Buyer-Side Financing (Reverse Factoring)
In reverse factoring, large buyers (corporates) initiate financing for their smaller suppliers. This benefits suppliers by giving them immediate cash flow, while buyers enjoy early payment discounts.
- Example:
- A large FMCG company places an order with several small packaging suppliers. Instead of waiting 90 days to pay the invoice, the corporate buyer arranges for a financial institution to pay the supplier upfront.
Impact: Suppliers maintain cash flow, ensuring uninterrupted production, while buyers get favourable terms through early payment incentives.
- Seller-Side Financing (Factoring)
In factoring, suppliers sell their invoices to a lender at a discounted rate to obtain instant liquidity. This allows them to cover operational expenses while waiting for payments from buyers.
- Example:
- A pharmaceutical supplier that provides medicines to retail outlets can sell its invoices to a fintech lender for quick cash instead of waiting 120 days for payment.
Impact: This improves cash flow, ensures business continuity, and reduces dependency on high-cost private loans.
Challenges Faced by FMCG and Pharma MSMEs in SCF Adoption
Despite the benefits of SCF, many MSMEs in FMCG and pharma struggle with adoption due to:
- Limited Data Availability: Many MSMEs need digital records, making it difficult for lenders to assess creditworthiness.
- High Perceived Risks: Traditional lenders often need help to provide SCF services to smaller suppliers due to high operational risks.
- Small Order Volumes: SCF programs are typically designed for large transactions, leaving out small retailers and distributors.
How GST Reforms and Digital Platforms Drive SCF Growth
Implementing GST and e-invoicing has enhanced transparency in business transactions, benefiting both lenders and MSMEs. Some key benefits include:
- Real-Time Credit Assessment: GST filings offer lenders insights into a company’s financial health, reducing reliance on traditional credit reports.
- Transparency in Transactions: E-invoicing ensures that all transactions are recorded, reducing fraud and encouraging MSMEs to adopt SCF.
With TReDS platforms (Trade Receivables Discounting System) linked to the GST Network, smaller suppliers can access credit more efficiently, further boosting SCF adoption.
Practical Tips for MSMEs to Leverage SCF
- Adopt Digital Platforms: MSMEs should register on TReDS platforms to access working capital solutions.
- Maintain Accurate GST Records: Proper GST filings and e-invoicing increase creditworthiness.
- Use Early Payment Discounts: MSMEs can negotiate early payment discounts with buyers, improving cash flow.
- Explore Reverse Factoring Options: Collaborate with larger buyers to benefit from reverse factoring solutions.
Global and Indian Market Trends in SCF for FMCG and Pharma
- Buyer-Led SCF Programs: The buyer-led SCF segment in the global market is growing at a 20-24% annual rate, highlighting the rising demand for flexible financing.
- SCF Market in India: India’s supply chain finance market has reached Rs 60,000 crore, with TReDS platforms reporting over Rs 2,000 crore in cumulative volumes annually.
- Expansion of Fintech in Tier 2 and Tier 3 Cities: With fintech platforms expanding into smaller cities, more retailers and MSMEs are gaining access to formal credit.
Impact of Fintech-Led SCF on the FMCG & Pharma Sectors
- Improved Cash Flow: SCF provides quick access to liquidity, helping FMCG and pharma companies avoid operational disruptions.
- Risk Mitigation: Real-time credit data allows lenders to offer better financing terms while minimising risks.
- Sustainable Growth: With anchor-led SCF programs, businesses can maintain long-term supplier relationships.
- Investment Opportunities: Fintech platforms provide attractive investment opportunities by aggregating smaller loans into more extensive portfolios, making SCF a win-win for MSMEs and investors.
Final Words
Fintech-led Supply Chain Finance (SCF) is revolutionising working capital management for the FMCG and pharma sectors, ensuring seamless operations and financial stability. By leveraging digital platforms, real-time data, and e-invoicing, SCF empowers MSMEs with quick access to liquidity, reducing the strain of long payment cycles. For larger buyers and anchor corporations, SCF minimises supply disruptions and promotes sustainable partnerships. As technology evolves, SCF will drive economic growth, financial inclusion, and supply chain efficiency.
CashnTech provides the best Supply Chain Finance services for the FMCG and pharmaceutical industries, ensuring smooth cash flow, operational continuity, and sustainable business growth. Their innovative solutions bridge the credit gap, empowering businesses to thrive in a competitive market.
FAQs
- What is reverse factoring in SCF?
Reverse factoring involves the buyer initiating the financing for their suppliers, helping suppliers receive early payments. - How does GST data benefit SCF platforms?
GST data provides lenders with real-time financial insights, enabling them to assess creditworthiness more accurately. - Why do MSMEs struggle with cash flow management?
MSMEs often face long payment cycles while needing to pay operational expenses regularly, leading to liquidity shortages. - What role do fintech platforms play in SCF growth?
Fintech platforms streamline SCF through e-invoicing, digital KYC, and risk-scoring models, making it easier for MSMEs to access credit. - How can SCF benefit the FMCG and pharma sectors?
SCF ensures timely payments, improves cash flow, reduces supply disruptions, and promotes sustainable growth in both industries.

CA Mohit Dhand specializes in delivering strategic risk assurance, consulting, and fintech solutions, empowering organizations to achieve sustainable success. With a strong background in finance and technology, Mohit is passionate about guiding businesses through complex challenges, ensuring growth and innovation.