Attempt this previous-year question. The correct option stays hidden until you choose.
Which of the following statements about Mlxchange's role in Micro, Small & Medium Enterprises (MSMEs) financing is/are correct ?
1. Mlxchange provides collateral based loans to MSMEs.
2. Mlxchange facilitates discounting of invoices and Bills of Exchange for MSMEs.
3. Mlxchange functions as a credit rating agency for MSMEs.
Select the answer using the code given below :
Pick an option to check yourself.
Approach: *Identify the specific nature of TReDS (Trade Receivables Discounting System) platforms in India to distinguish between credit facilitation and direct lending/rating services.*
- **Correct Answer:** (b) 2 only
- **M1xchange (TReDS):** It is an electronic platform for facilitating the financing/discounting of trade receivables of MSMEs through multiple financiers. It enables MSMEs to convert their trade receivables into liquid funds by auctioning their invoices.
- **Statement 1 is incorrect:** M1xchange does not provide loans. It is a marketplace for invoice discounting. Financing on TReDS is 'non-recourse' to the MSME, meaning it does not require traditional collateral in the way a bank loan does.
- **Statement 3 is incorrect:** M1xchange is not a credit rating agency. While it may use credit information to facilitate transactions, its core function is acting as an intermediary platform for invoice discounting, not assigning credit ratings to firms.
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