Rs 15 trillion potential in e-lending to MSMEs

According to a study jointly conducted by BCG, Ficci and IBA, currently, digital lending to MSMEs accounts for only 5 per cent of total lending to the sector and can increase to 21 per cent over the next five years. “The key drivers of this growth are increasing MSME digitisation and readiness for digital lending as well as an ecosystem readiness in terms of data sharing and access,” the report said. This significant likely jump will close the gap with digital retail lending, which is expected to reach around 48 per cent of the total retail lending in the next five years. 

“With a high degree of variability in the quality of assets in the MSME segment and the small ticket size of advances, success in this market will belong to players who have the resources and capabilities for reliable credit underwriting, and a comparative cost advantage through end-to-end digitisation,” says the report. According to the study, currently, of the total formal credit of around Rs 100 trillion, only 25 per cent is extended to MSMEs now.