{"id":15385,"date":"2020-11-09T20:43:34","date_gmt":"2020-11-09T15:13:34","guid":{"rendered":"https:\/\/www.instamojo.com\/blog\/?p=15385"},"modified":"2022-03-16T14:20:47","modified_gmt":"2022-03-16T08:50:47","slug":"how-digital-lending-led-to-growth-for-micro-businesses-in-india","status":"publish","type":"post","link":"https:\/\/www.instamojo.com\/blog\/how-digital-lending-led-to-growth-for-micro-businesses-in-india\/","title":{"rendered":"How Digital Lending Led To Growth For Micro Businesses In India"},"content":{"rendered":"

Over the last 2 years, micro-businesses from the MSME sector have seen the maximum growth – even in the face of a pandemic.<\/p>\n

How did that happen? It\u2019s 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.<\/strong><\/em><\/p>\n

A report by Transunion CIBIL and Ministry of Statistics and Programme implementation<\/a><\/span>\u00a0states that micro-enterprises utilised the facilities provided by microloans to propel growth.<\/p>\n

Factors used to analyse growth for micro-businesses –<\/p>\n

    \n
  1. Increase in exposure value<\/li>\n
  2. Increase\/decrease in the credit risk of non-performing assets<\/li>\n
  3. Increase in collection efforts by lenders<\/li>\n<\/ol>\n

    3 ways digital lending helped micro-businesses survive – and grow<\/h3>\n

    A new definition for MSME size<\/h4>\n

    While medium-sized enterprises have adhered to a traditional form of lending (private banks, larger loans), micro-businesses have stuck by microloans.<\/p>\n

    \"Growth<\/a>
    Image credit – Transunion<\/figcaption><\/figure>\n

    The revised definition of MSMEs could play a role too. For example, micro-units\u00a0are 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.<\/p>\n

    Businesses took a hit mainly with cash flow. Microloans take care of that problem with quick, easy to repay incentives.<\/p>\n

    Also read: MSMEs get new definition in India – based on investment\u00a0<\/span><\/a><\/p>\n

    Increased business in tier 2 cities<\/h4>\n

    According to OkCredit, micro retailers are switching to online digital solutions, from e-commerce to digital khata books. Since 2020, 16 out of 36<\/a> <\/span>states bounced back to business levels higher than pre-pandemic times.<\/p>\n

    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).<\/p>\n

    Increased digital lending by NBFCs<\/h4>\n

    The impact of the Emergency credit line guarantee scheme has shown how quickly micro-businesses are bouncing back.<\/p>\n

    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.<\/p>\n

    \"Impact<\/a>
    Image credit – Transunion and moSPI Report<\/figcaption><\/figure>\n

    Scared to borrow loans? Take a course on finding funds<\/h4>\n

    Is your business funding ready? What are the documents you need to compile a funding report? What funding schemes can you take advantage of as a small business?<\/p>\n

    mojoVersity partnered with deAsra to bring you a free online course on finding funds for your business.<\/a><\/span> Your business could be micro, small or medium but a smart lending decision matters irrespective of business size.<\/p>\n