MSME Lending: How various lenders are addressing the credit gap of small businesses
In the past few years, MSMEs have been badly bruised by demonetization and policy reforms such as GST, which inflated compliance costs that small entrepreneurs found difficult to bear. The pandemic in the past two years and more recently high inflation have only compounded their financial and operational woes.
According to the MSME Ministry, the country has 63.3 million MSMEs. These enterprises contribute around 30% of the country’s nominal GDP and 48% of its exports. But the vast majority of them lack adequate access to formal credit. Consequently, small businesses are affected by a lack of cash flow for working capital since there is a time gap in receiving payments from clients as well as capital expenditure due to the lack of adequate documents and collateral required for traditional forms of lending