Small retailers in India have always been neglected by banks. Standard Chartered is taking a granular approach to helping them get credit.

A case of Dove bars, a couple of dozen Lay’s packets, six jars of Nutella. To the owner of a tiny mom-and-pop store, these may just be the humdrum weekly sales figures for soap, chips and bread spread. But to Solv, a business-to-business marketplace for India’s 60 million-plus small companies, they’re all crucial pieces of a gigantic banking jigsaw.

Ninety percent of the country’s trade passes through neighborhood “kirana” shops, each with annual sales of $0.5 million or less. Their owners mostly operate without business registration and lack access to the formal banking system. “They may not have a credit bureau score, or have only a poor score,” says Amit Bansal, chief executive officer of Solv. “Traditional banks don’t have a method to measure their ability to pay.”

In the absence of formal working-capital lines, small stores rely on informal credit from distributors of brand owners like Unilever Plc and Procter & Gamble Co. But relationship-based financing, which comes embedded in the inventory, is tightly rationed by distributors within a small circle of trusted retailers. Not everyone who’s able to grow can get the credit they need.

It’s a strange predicament in a country that boasts one of the world’s biggest success stories in capital-guzzling modern retail in recent years. Billionaire Mukesh Ambani’s Reliance Retail is an $18-billion empire spanning groceries, electronics and apparel, more than three times the size of its nearest rival and growing roughly 40% bigger every year, according to Sanford C. Bernstein & Co.

While Ambani raised billions of dollars for his retail venture during the pandemic from Singapore’s sovereign wealth fund GIC Pte. and private-equity firms Silver Lake Partners, TPG, KKR & Co. and General Atlantic, the smaller firms that keep the society fed and clothed and employ 110 million people — more than the population of Vietnam — are being held back by $400 billion in unmet credit needs.

As the head of Standard Chartered Plc’s global transaction banking until 2018, Alex Manson sensed the gap. Some of his corporate clients were telling him: “You’re banking us, and it’s fine, but you aren’t banking our suppliers, our distributors, or the distributors of our distributors.”

Lenders like StanChart were set up to offer corporate and consumer banking. But going downstream from large corporations required a new playbook. The needs of small and midsized enterprises — India’s “forgotten middle,” as Manson describes them — were complex. They were hungry for credit. But before they could digest it, they had to attract new customers and gain access to more products and faster logistics. “What SMEs were really after was a platform that would help them grow their business,” Manson says.

Which is why London-based bank decided it needed to step into India’s enormous, messy world of everyday commerce, facilitating connections between reliable suppliers and buyers and ensuring door-step pick-up and delivery — even before offering financing to these small businesses. Via its innovation arm SC Ventures — Manson’s new perch since 2018 — StanChart backed Solv.

The marketplace completed its first full year of operations in 2021 and has a current annualized run rate of $190 million in gross merchandise value, which CEO Bansal is confident of tripling this year by adding new cities and product lines. The goal is to deliver each order profitably by yearend, so that Solv can be scaled up without burning investor cash.