Credit to SMBs Not A Problem DIGITAL and Faster
Entrepreneur magazine|April 2021
Basis, achieving a high level of sophistication, compliance and trust from SMBs

The Small and Medium Businesses (SMBs) in India will have a major and significant role to play in the new formula for India’s economic growth, Digitisation + SMBs (and their exports) = Indian Economic Growth. With 6.3 crore SMEs contributing 30% to nominal GDP, 48% to exports and providing employment to 11 crore individuals, they have emerged as the cornerstone of India’s growth story. Despite the pandemic hitting SMBs hard, questions being raised about their future, some ground realities depict a different picture. Industry experts share their observations and views at the 10th Small Business Conference & Awards 2021, held virtually on 26 February 2021.

THE PROBLEM OF FINANCING

A sensitive sector, the MSMEs operate on 10%-15% margins and even a three-month lockdown can wipe off cash flow and profitability for a whole year. With finance for SMBs being severely curtailed, some questions on their future have made it necessary to have a hard look. However, by showing more resilience than mid and large corporate, SMBs have proven their mettle even in the pandemic. Sachindra Nath, Executive Chairman and Managing Director, U GRO Capital, says, “SMBs have been the hardest hit and continue to suffer. But simultaneously, this is the sector that will revive at the fastest pace, because the tenacity of an SMB entrepreneur is the highest vis-à-vis a mid or large corporate.”

Amit Mandhanya, Business Head (Retail Initiatives), Northern Arc, says, “As per December 2020 data, collection efficiencies have come back to 85% from 40%-45% in the initial months of the pandemic. Six percent of MSMEs have been unable to pay in the last nine months or made only a single repayment as they have been badly hit. While 93%94% of the MSMEs have been able to make payments. Assuming things stay the same, it should be a smooth recovery and we should see more of this tenacity playing out.” Manish Lunia, co-founder, Flexi Loans, shares, “After the initial shock, when collection efficiencies went down, there are still 15%-20% of overall borrowers that are badly impacted. But optimism is coming back.”

IS ACCESS TO CAPITAL THE PROBLEM OR IS IT SOMETHING ELSE?

Says Lunia, “I believe access to capital has increased. Every month, two lakh people across the country from 1,400 cities and towns apply for Flexi loans. We are now expanding access to the hinterlands, our discoverability on SM has increased, we now require thin documentation of KYC norms and no family background checks or money lenders required either. So access has increased. We are looking at the crisis more favourably and helping these people with the intent to get back on their heels and who have paid in the past, except for this moratorium period.”

However, he says, “If we become more digital, we can use more digital media to transfer the day’s galla (earnings) to the bank and use the bank account and digital. A lot of lenders are accessing these customers.”

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