Cash is the key ingredient to run a business – from inception to expansion. This is especially true in the case of MSMEs (Micro, Small, and Medium Enterprises), which require a constant flow of cash to run their daily operations. However, for long, the MSME sector has been facing challenges in terms of getting loans approved, due to the lack of several lending requirements and credentials. Enter alternative lending platforms, that are transforming the Indian MSME market, facilitating them with a constant supply of credit flow.
The MSME sector is the cornerstone of the economic growth in the country, directly impacting nearly 22% of the nation’s GDP. Often referred to as the ‘engine of economic growth,’ the MSME sector alone comprises of almost 60 million businesses and employs about 120 million people. However, in spite of its excellent contribution to the economic development of the country, access to funding has been a matter of concern for the majority of the MSMEs.
It is surprising to see that the MSME industry, which plays a crucial role in guaranteeing several socialistic objectives like economic and regional development needs to face such challenges. A report released by the Economic Survey of India revealed that MSMEs face rampant challenges in availing adequate credit and receive only 17.4% of the total outstanding credit. This means the disproportionate supply of credit to this division is very low for the amount of productivity and contribution that it can accomplish.
Since, most of the small and medium enterprises don’t have proper credit history or score, or hard assets to keep as a mortgage; it remains largely under-served by banks and other institutional lenders. This mode of arbitrary red-tapism and excessive security-scrutiny performed by the traditional lending bodies has put alternative lenders in a sweet spot!