MSME digital lending to surge by upto 10 to 15-fold by 2023: Report
New Delhi, Mar 14 (KNN) Micro, Small and Medium Enterprises' (MSME) digital lending has the potential to increase by 10 to 15-fold to reach Rs 6-7 lakh crore in annual disbursements by 2023, said a Report.
As the number of digital lending platforms rise and the availability of data around small businesses improves, digital lending to the country’s MSMEs could surge, said a report co-authored by consulting firm BCG and philanthropic investor Omidyar Network.
The report estimated the need for SME credit at Rs 45 lakh crore. Of this, Rs 15 lakh crore is met via formal lending to these entities and another Rs 10 lakh crore comes in the form of borrowing by proprietors of these companies.
The remaining Rs 20 lakh crore are still sourced from the informal sector said the report.
“Across India, the MSME lending landscape is now shifting, with formalization and digitization driving the market toward disruption. Based on our research, we believe that MSME digital lending has the potential to grow 10 to 15 times larger by 2023, to Rs 6-7 lakh crore —nearly as large as the entire global microfinance industry today,” the report said.
“We are seeing more MSMEs formalize for cheaper credit and non-monetary, long-term benefits like better credit score, ability to scale the business, access to loan options.” – Chartered Accountant for India MSMEs
Moreover, only 50% of sales from formalized MSMEs are getting reported through GST.
The report said, “We believe the availability of credit will incentivize more MSMEs to formalize over time.”
About 99% of formal MSME lending is met by incumbent banks and NBFCs, most of it non-digital. But these longstanding players are already expanding their existing lending capabilities into the digital realm.
According to the report some MSMEs have taken advantage of these e-commerce platforms to expand their customer base, while others have leveraged group buying platforms to drive down costs.
While MSMEs are becoming digitally savvy, most will be participating in digital lending journeys for the first time.
More than 90% of MSME digital borrowers in the next five years will be first-timers, according to the report.