Philanthropy can democratise credit for India’s 60 million micro-enterprises by supporting a new digital tool.

The Open Credit Enablement Network (OCEN) is a digital protocol being developed in India that has the potential to revolutionise credit and financial services, especially for historically underserved groups. Historically, borrowers who lacked creditworthiness, such as micro-enterprises in India, have been unable to access affordable credit and financing, which has limited their potential to scale and grow. The OCEN offers a promising solution and framework for providing fast, small-sized, and customised loans to micro businesses without the need for physical collateral.

However, to deliver on its promises and effectively include micro-enterprises in the financial fold, the design and implementation of OCEN must be carefully executed. Philanthropy can play a crucial role in ensuring that OCEN delivers on its promise to democratise credit for the ‘next billion‘ by supporting its design and implementation.

OCEN is an open-source protocol infrastructure that enables the seamless exchange of credit information between different actors and allows for decentralised credit services to be built on top of it. Instead of relying on traditional methods of assessing creditworthiness, such as audited financials and physical collateral, OCEN leverages digital data sources to provide real-time projections of a borrower’s cash flows. This approach known as ‘cash flow-based lending’ is ushering in a new paradigm of lending in India. Furthermore, OCEN reduces credit costs and optimises the risk assessment process, making it feasible for formal financial institutions to offer low-cost, timely, and small-sized loans to underbanked populations such as micro enterprises. OCEN thus promises to revolutionise the way credit is offered to micro-enterprises, making it easier for them to access the credit market, improve their working capital flows, and stimulating progress, ultimately leading to economic growth and employment opportunities.

Read the full article about India's Open Credit Enablement Network by Abhishek Modi and Asawari Luthra at Alliance Magazine.