Microfinance Story of India

Open Credit Enablement Network (OCEN)


From UPSC perspective, the following things are important :

Prelims level: Open Credit Enablement Network (OCEN)

Mains level: Credit facilities for MSMEs

A new credit protocol infrastructure called the OCEN protocol is set to be launched very soon.

Practice question for mains:

Q. What is Open Credit Enablement Network (OCEN)? How it is expected to be a gamechanger in the micro-credit facilitation services in India?

Open Credit Enablement Network (OCEN)

  • OCEN is a credit protocol infrastructure, which will mediate the interactions between loan service providers, usually fintech and mainstream lenders, including all large banks and NBFCs.
  • It is developed by a think tank, Indian Software Products Industry Round Table (iSPIRT).
  • With this, a credit will become more accessible for a large number of entrepreneurs and small businesses in the country.
  • Private equity and venture capital players, angel investors, high net worth individuals and others also could be part of this exercise as investors.

How will it work?

  • iSpirit is partnering with key leaders such as SBI, HDFC Bank Ltd., ICICI Bank Ltd., IDFC First Bank Ltd., Axis Bank Ltd. etc. for this new credit rail.
  • Account Aggregators which will be using these APIs to embed credit offerings in their applications, and will be called ‘Loan Service Providers’, which will play a crucial role in democratizing access to credit, and lowering interest rates for customers.

Why need OCEN?

  • The cost of lending being too high in India, small value loans becomes very unfeasible.
  • OCEN which seeks to connect lenders to marketplaces and thereby to borrowers is a technology system.
  • If implemented, the technology can democratize lending to micro-enterprises and street vendors in a big way.

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