Over the last 2 years, micro-businesses from the MSME sector have seen the maximum growth – even in the face of a pandemic.
How did that happen? It’s probably because of digital lending innovation. Also, India has over 6.3 crore MSMEs out of which 6.30 crore, 99.4% are micro-enterprises.
A report by Transunion CIBIL and Ministry of Statistics and Programme implementation states that micro-enterprises utilised the facilities provided by microloans to propel growth.
Factors used to analyse growth for micro-businesses –
- Increase in exposure value
- Increase/decrease in the credit risk of non-performing assets
- Increase in collection efforts by lenders
3 ways digital lending helped micro-businesses survive – and grow
A new definition for MSME size
While medium-sized enterprises have adhered to a traditional form of lending (private banks, larger loans), micro-businesses have stuck by microloans.
The revised definition of MSMEs could play a role too. For example, micro-units are any business with investments up to Rs. 1 crore and turnover of fewer than 5 crores. This allows them to borrow less, in smaller amounts and payback at lower interest rates.
Businesses took a hit mainly with cash flow. Microloans take care of that problem with quick, easy to repay incentives.
Also read: MSMEs get new definition in India – based on investment
Increased business in tier 2 cities
According to OkCredit, micro retailers are switching to online digital solutions, from e-commerce to digital khata books. Since 2020, 16 out of 36 states bounced back to business levels higher than pre-pandemic times.
How? Complete digitisation of business. Tamil Nadu, Uttar Pradesh and Maharashtra show maximum growth in micro-businesses from tier – 2 towns. The states have also sanctioned the maximum amount of loans for MSMEs ( particularly micro).
Increased digital lending by NBFCs
The impact of the Emergency credit line guarantee scheme has shown how quickly micro-businesses are bouncing back.
Increased lending by NBFCs and Public Sector banks have increased over the past year. The study by Transunion CIBIL shows that micro-businesses are the largest beneficiaries of the ECLGS scheme.
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Thanks for the information that is really useful for me.