Even as fears have been expressed about credit flows for small businesses in the near term, a Wednesday study sets digital lending to the MSME sector to grow 15 times up to USD 100 billion annually in five years. This will be mainly possible on the back of dependence on informal sources of funding, the study said by Omdiyar Network's impact investment company and BCG advisory company. "From 2018, most of the credit demand for USD 600 billion is met through informal sources … India stands for the rest of the minute and can be a case study to other nations to raise the role of MSME in the economy, "said Omdiyar partner and managing director of India, Roopa Kudva.
The study comes even as there are concerns about credit flow for the micro sector, SMEs as non-bank finance companies, which have increased their play in loans of & # 39, kind, faced with problems. There are also concerns about the ongoing impact of demetisation and GST on the sector, because the RBI board has advised the central bank on Monday to establish a plan to restructure loans up to 25 crore.
The study says that 60 million MSMEs are currently turning from under £ 260 gross and contribute to the country's GDP as well as creating employment. However, the Indian MSME contribution is much lower than averages in the US or even China as they do not have access to formal sources of funding and paying interest rates that are 2.5 times the ones that are being raised by the formal sector, he added.
The study argues that this situation will have a rapid change, stating that 40 per cent of MSME will be acceptable to digital lenders. This will be possible on government policies such as the introduction of the unified payment (UPI) and goods and services tax (GST) interface, a huge reduction in data connectivity costs and also India & Stack.
"Flexible and cheaper credit through digital lending has the potential to trigger a virtuous cycle for formalization: up to 85 percent of MSME could be formal by 2023," said BCG's senior partner, Saurabh Tripathi, adding, Currently, 60 percent of MSME is dependent on informal sources of funding. An increasing number of MSMEs are willing to share their online data and 60 percent of the view that they will receive more payments through digital methods over the next three years, said the study.