Embedding real-time trade credit scoring systems needed

Mumbai, Aug 05

Embedding real-time trade credit scoring systems is required that reflect actual financial behavior rather than assumptions, feel experts.

India’s pharmaceutical trade operates on a complex network of distributors and retailers where transactions often run on informal trade credit instead of structured financial evaluation. Across this chain, distributors face a persistent challenge as they have limited visibility into the actual credibility of customers. Trade credit is usually granted based on past dealings or verbal assurances without real data backing those decisions. When payment delays arise there is often no immediate signal or tool to flag risks in advance. This absence of verified financial insight locks working capital, disrupts stock movement, and undermines operational stability especially for smaller distributors navigating tight liquidity cycles. What makes this trust gap more critical is the lack of standardized trade credit evaluation tools within pharma trade. In the absence of such systems, retailers with inconsistent payment behavior continue accessing stock while disciplined trade partners often go unrecognised.

Talking to Bizz Buzz, Mannuri Vamshi Krishna, Founder & CEO of MedScore says, “Addressing this imbalance requires embedding real-time trade credit scoring systems that reflect actual financial behavior rather than assumptions.”

Platforms like ours generate a proprietary trade credit score for every customer similar to a CIBIL score but designed specifically for pharmaceutical B2B transactions. Distributors can now gauge a retailer’s likelihood to pay on time even before the first order is shipped. These systems integrate seamlessly with ERP and billing software, automating credit checks, risk monitoring, and overall trade discipline. They offer automated alerts on repayment irregularities, customized risk reports aligned with operational needs, interactive dashboards that present trade credit trends visually, and secure integration through APIs. This transition strengthens not just working capital management but also the trust that holds India’s medicine network together.

Jeevan Kasara, Director and CEO, Steris Healthcare says, “The pharmaceutical trade is also characterised by increasing "trust gap" between distributors and customers, especially at the semi-urban and rural levels. This disconnect is based on challenges associated with the credibility of financial histories and their erratic payment cycle especially by retailers and sub distributors. As a pharma professional I think it’s no longer a matter of being paid late — it’s one of financial transparency and dependency. Today's distributors are more and more careful and their 'new era' way of distributing is to do business with fewer customers with a track record instead to have products spread to a large amount of business that is uncertain.’

Informal credit practices over time have exacerbated the problem. Most buyers also work on the agreement of a handshake and not written commitments resulting in buyer defaults and extension of credit periods. Distributors incur the cost of these losses even while being pressed by pharma companies to continue to hit sales targets and keep inventory flowing. This has created a vicious circle undermining trust and trapping working capital. What's more, the onslaught of online pharmacy platforms and B2B pharma marketplaces is increasingly putting pressure on traditional distributors and their margins as well. These platforms provide superior transparency, real-time credit appraisal and tech-assisted credit scores — something missing from traditional trade. To overcome this trust issue we need a fundamental change in the structure by which partnerships are formed in an ecosystem such as pharma. By digitizing the buyer verification process, establishing hardware-agnostic third-party credit assessment tools and promoting written contracts, confidence would return. These ground-level challenges need to be talked about a lot more, with the pharma companies recognising their distributors’ struggles, and providing better support - in terms of credit insurance, antibribery/antidispute resolution mechanisms, and digital onboarding tools.

If trust is eroded the at grass roots distribution level, there’s a danger the whole pharma supply chain could be thrown off kilter — and that could mean everything from availability to pricing, and ultimately the ability of patients to access essential medicine.

EoM.