Mumbai, Feb 5 (FN Bureau) A report on the latest lending ecosystem in MSMEs has revealed that formal credit penetration to MSMEs is expected to increase as the government acts proactively towards formalisation of Micro, Small and Medium Enterprises (MSMEs). The report, prepared jointly by U GRO Capital and Dun & Bradstreet, titled ‘MSME Sampark Bi-annual report on the latest in MSME lending ecosystem’, signals optimism for domestic demand and profitability. It is highly optimistic of increasing capex and hiring by MSMEs, which bodes well for overall growth momentum. The study, conducted over a three-year period and involving more than 25,000 MSMEs, has showed a dip in business and sales activity in the year of COVID-19 pandemic, followed by a massive 77 per cent of customers showing resumption of activity in the first year after pandemic, and over 68 per cent of customers showing over 10 per cent year-on-year (Y-on-Y) sales growth in the second year after the pandemic.
As a result, risk levels have fallen and delinquency rates have improved in the MSME segment which, in turn, is improving the prospects of borrowings by MSMEs, resulting in increased credit growth and the share of credit disbursed to MSMEs by Scheduled Commercial Banks (SCBs) and non-banking finance companies (NBFCs). As per the report, healthy penetration of credit is seen across sectors and geographical footprints across the studied universe of business entities. According to the report, since inception of the UDYAM in 2020, MSME registrations on the platform have increased 2.4 times, while they have generated 1.6 times more employment opportunities by FY23. The study showed that in more than 10,000 micro-sized MSMEs credit penetration in the sector has risen, reflecting the lenders’ positive view on their resilience and recovery.
Now, as the MSMEs get formalised through various direct and indirect incentives that the government (central and state) undertakes, formal credit penetration to MSMEs is expected to increase. Also, various policy interventions taken by the government to increase productivity and competitiveness of MSMEs, skill development, technology upgradation and market access, MSMEs are likely to grow which is crucial in sustaining the current momentum. Maharashtra, Gujarat and New Delhi top the list in the distribution of debt, while Light Engineering, Hospitality and Healthcare are the sectors that attracted the most debt, a press release said here on Monday.