BENGALURU: Omidyar Network, the impact investing firm established by eBay founder Pierre Omidyar, and Boston Consulting Group on Wednesday released a study showing that digital lending to micro, small, and medium enterprises (MSMEs) in India has the potential to grow.
The study, Credit Disrupted: Digital MSME Lending in India, said digital lending to MSMEs is projected to increase 10-15 times by 2023, to Rs 6-7 lakh crore ($80-100 billion) in annual disbursements.
“Digital lending has the potential to propel the productivity of India’s MSMEs to global leadership,” said Roopa Kudva, Partner and Managing Director (India), Omidyar Network.
According to the study, three factors have led to a rapid change in the digital lending scenario in the country: while government policies like the UPI launch and GST have led significant numbers of MSMEs to formalise in and digitise their businesses, increased market competition has led to a dramatic reduction in mobile data cost, driving significantly increased MSME connectivity.
Finally, the maturing India Stack, along with API-based data availability, now allows for end-to-end digital MSME lending with loan approval times as short as one day.
“With almost 60 per cent of MSMEs borrowing informally today, MSME lending is set for disruption with massive growth in formalisation and digitization,” said Saurabh Tripathi, senior partner and director and Asia-Pacific leader, Financial Institutions Practice at BCG.
Trust factor
As MSMEs connect and generate digital data, a majority of firms in the sector indicate that they are comfortable sharing data digitally; over 60 per cent expect to have significant digital payment streams in the next three years.