Economy

Digital lending to MSMEs poised for major growth in India, says report

Updated : November 23, 2018 05:36 AM IST

India's 60 million MSMEs are broadly defined as businesses with annual revenue up to Rs 250 crore make a significant contribution to its employment and its gross domestic product (GDP).

Digital lending to MSMEs in India is expected to rise 10 to 15 times by 2023 to 6-7 lakh crore ($80-100 billion) in annual disbursements, according to a report. The study has been released by Omidyar Network, the impact investing firm established by Pierre Omidyar, the founder of eBay, and The Boston Consulting Group.

"Digital lending has the potential to propel the productivity of India's MSMEs to global leadership," said Roopa Kudva, partner and managing director, India at Omidyar Network.

"As of 2018, most of the credit demand for $600 billion is being met through informal sources. And therefore, the report indicates that India stands on the cusp of a watershed moment and can serve as a case study for other nations to elevate the role of MSMEs in the economy."

India's 60 million MSMEs are broadly defined as businesses with annual revenue up to Rs 250 crore make a significant contribution to its employment and its gross domestic product (GDP).

"With almost 60 percent of MSMEs borrowing informally today, MSME lending is set for disruption with massive growth in formalisation and digitisation," said Saurabh Tripathi, senior partner and director and Asia-Pacific leader, Financial Institutions Practice at BCG.

"Easier and cheaper credit through digital lending has the potential to trigger a virtuous cycle for formalisation: up to 85 percent of MSMEs could be formal by 2023, he added.