New Delhi, Mar 9 (KNN) India's MSME Finance Market is projected to reach Rs 46 trillion by Base Case Scenario by FY'2020, according to a research conducted by Ken Research.

Ken Research recently announced its latest publication on ‘India MSME Finance Market Outlook to 2020 – Driven by Government’s Financial Inclusion Agenda and Newfound Profitability in Segment’ which provides a comprehensive analysis of the MSME Finance Market in India.

The report highlights that the future growth of MSME Finance in India is expected to be led by further product innovations to meet the requirement of MSME sector.

Public sector banks would remain as the main source of funding for the MSMEs despite losing a big chunk to the private sector banks and NBFCs.

Fintechs such as Faircent, Indifi Technologies and Capital Float are likely to disrupt the market by aggregating financial services for MSMEs and building a strong base for innovative concepts like peer-to-peer funding, noted the report.

With an elevation in number of entrepreneurs in the country and a rise in financial literacy, a higher number of companies have looked forward to obtain finance from banks and other financial institutions. The increase in application and approval of loans has also given rise to the total outstanding loans.

The amount of finance that has been outstanding from MSMEs has witnessed an increase from INR ~ billion in the year FY’2010 to INR ~ billion in FY’2015.

The increase in demand of credit has also heightened the competition amongst banks, NBFCs and MFIs who have developed unique schemes and solutions to assist customers in obtaining the best possible credit solutions.

The total demand for credit inclined at a CAGR of ~% during FY’2010-FY’2015.

Micro Enterprises accounted for greater proportion of overall demand for credit in FY’2015. The MSME finance market of India has witnessed presence of Various Banks, NBFCS and MFIs, with State Bank of India and its associates capturing the maximum share of the overall finance provided to the Micro and Small enterprises.

According to the research report, the India MSME Finance market will grow at a considerable CAGR rate thus reaching INR 46,426.0 billion by FY’2020 owing to increasing government efforts, rising profitability and increasing presence of a large number of Banks and NBFCs offering a variety of schemes.

“Rising government initiatives, increasing awareness among Entrepreneurs, augmenting financial infrastructure support to MSME and adoption of online mode of loan application are anticipated to give a boost to India MSME Finance market. Poor accountability of staffs in Banks and other institutions, collateral requirement and inadequate penetration of formal finance are few of the major challenges which will affect the growth of this industry in the future,” according to the Research Analyst, Ken Research. (KNN Bureau with Inputs from Ken Research)