Alternate financing to capitalise on $500B SME credit opportunity in India: Redseer-GetVantage Report
SME Credit Report 2023 released today in collaboration between GetVantage and Redseer Strategy Consultants estimates that a potential US$ 220 Bn credit deficit poses a roadblock to unlocking the economic potential of millions of digitised businesses.
Out of the current US$ 220 Bn requirement (as of FY22), Redseer analysts estimate US$ 165 Bn as serviceable when adjusted for sick and commercially unviable businesses. Even after an infusion of US$ 53 Bn in FY22 into the market through various channels, the current working capital deficit stands at US$ 112 Bn.
The consultants project in the report that in the next 5 years, as the number of digital SMEs doubles, the demand for credit is expected to cross US$ 570 Bn.
The deficit, according to Redseer and GetVantage, hinders new-economy and emerging businesses from innovating new products, creating jobs, scaling operations, and building efficiencies. According to Kanishka Mohan, Partner at Redseer, “Small businesses account for 90% of credit demand but continue to struggle to raise capital, owing to poor business metrics, limited assets, and uncertain growth projections.
If the current economic and regulatory climate continues, this gap is likely to widen significantly over the next five years.”
The report further adds that India is home to 64 Mn MSMEs, which contribute to 30% of the nation’s GDP. Although the sector is a crucial growth engine for the country, it is riddled with challenges such as limited digitization and strained access to capital that inhibit growth.
According to the Redseer analysts, about 12% or 7.7 Mn MSMEs in India are digitized and businesses that have been able to shift part of their operations online have been able to take advantage of new economic
