{"id":20025,"date":"2022-07-07T07:06:03","date_gmt":"2022-07-07T07:06:03","guid":{"rendered":"https:\/\/blog.habiletechnologies.com\/?p=20025"},"modified":"2022-07-18T11:31:00","modified_gmt":"2022-07-18T11:31:00","slug":"rise-digital-sme-lending","status":"publish","type":"post","link":"https:\/\/wiki.cloudbankin.com\/index.php\/2022\/07\/07\/20025\/rise-digital-sme-lending\/","title":{"rendered":"The Rise of Digital SME Lending"},"content":{"rendered":"\t\t
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\u00a0<\/p>

The SME sector plays a significant role in our society. <\/span>It contributes majorly to the growth of India\u2019s economy. <\/span>According to <\/span>Economic Times<\/span><\/a><\/span>, the Ministry of MSME reported that India has about 63 crores of MSMEs which adds to the country\u2019s economic development. Even with such a high number, a staggering 85% of the sector is underserved in terms of credit. The factors behind this issue are underwriting, access and cost.\u00a0<\/span><\/p>

Traditional Lending faces many challenges in this segment which resulted in a credit deficit of Rs. 16 lakh in India. The only way to overcome such a problem is the digitization of lending in the SME sector. Digital Lending is the way to bridge the wide gap that exists in the financial industry, especially in terms of lending to SMEs.\u00a0<\/span><\/p>

We recently had a speaker for our June 2022 webinar who imparted us with immense knowledge on the rise of Digital SME Lending. He is none other than the CEO of <\/span>RapiMoney<\/span><\/a><\/span>, <\/span>Sharad Agarwal<\/span><\/a><\/span>. This article summarizes the webinar. Read on to learn more!<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Role of SMEs in the Indian Economy<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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The SME sector is the driving force for contributing to India\u2019s GDP growth<\/a>, exports and employment. They are the prime agenda for the government to see development in the Indian economy. They comprise manufacturing, services, packaging, IT, food processing, infrastructure and many other industries. It has seen tremendous growth in recent years. And, it is also providing employment opportunities in many rural areas.<\/p>

However, the SME sector is heterogeneous and creates a high risk for many financial institutions. Due to the fact that the majority of businesses are family-run, their promoters prefer receiving financial support from unorganized sources even at extremely unfavourable terms. Banks\u2019 capacity to judge the credibility of such units is constrained by inadequate credit history. Banks face obstacles due to poor recordkeeping and financial planning. The possibility of obtaining formal finance and developing a stronger track record for future needs are further limited by fear of low ratings and reluctance to dilute equity holdings.<\/p><\/div><\/div>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Covid-19 Impact on SME Sector<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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Because of its size, the scale of business, and accessibility to financial resources, the MSMEs sector<\/a> has been one of the most susceptible sectors during the pandemic<\/a>.\u00a0<\/p>

According to various studies and surveys, the national lockdown that was enforced in April 2020 had a negative impact on about 95% of enterprises, and 70% of those businesses continued to experience disruptions through August 2020.\u00a0<\/p>

Even after progressive unlocking, statistics indicate that up to 40% of firms had service interruptions through the end of February 2021. Market access, overall productivity, and gaining access to more finances are the three main obstacles MSMEs must overcome.\u00a0<\/p>

Lockdown in 2021 caused a drop in business volume of Indian MSMEs of an average of 11% as opposed to a 46% drop during the nationwide lockdown in 2020.<\/p><\/div><\/div>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Government of India Initiatives to promote SMEs<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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To enhance the proportion of MSMEs in government procurement, the Government of India launched its e-marketplace<\/a>. It is basically a digitally engaged market ecosystem that can lower costs, increase productivity, promote product development, and increase worker safety. Collaboration with research institutions, tech start-ups, and established overseas firms may prove to be a successful business strategy for MSMEs looking to establish a base of low-cost manufacturing and enter the Indian market.\u00a0<\/p>

The Indian government\u2019s initiatives to assist SMEs, such as\u00a0<\/p>