Digital Lending for MSMEs in 2022

In a conversation with Prashant Muddu, Managing Director & CEO, Jocats, it is found that how the year 2022 has gone from the perspective of digital lending for MSMEs.

Mr Muddu said, “2022 has been a watershed moment for MSME digital lending in India with a dramatic growth in bank and fintech partnership and transformation of the entire MSME credit value chain, right from origination and servicing to collections. However, there have been three key shifts that define this moment. First is the rapid formalization and digitization of MSMEs, which is evident from the eight-fold increase in MSME’s data consumption. Next is the maturing India tech stack underscored by the availability of API-based data that has rendered end-to-end digital lending for MSMEs a reality, With this the loan approval turnaround time for the sector is as short as one day. And finally, the increased receptivity and adoption of digital lending by MSMEs. Yet, there is a 25 lakh crore credit gap that needs to be addressed. This year, we saw a 70-80% growth in credit demanded by MSMEs as compared to 2021.

To bridge this gap in 2023, we can expect the regulators to further advance the digital MSME lending opportunity by facilitating consent-based data sharing for MSME formalization. This coupled with embedded finance will enhance the credit approval process by looking at transactional data and offer personalised financial products. Further, with RBI bringing GST under the ambit of account aggregators, we will see GST serving as a valuable tool to facilitate cashflow based lending to MSMEs.”