Construction, meals MSMEs gas post-Covid credit score rise

Among micro, small and medium enterprises (MSMEs), these concerned in meals merchandise and building supplies, in addition to those concerned in investments in know-how are driving the post-Covid credit score progress within the sector.

Lenders to MSMEs say e-commerce was robust even through the pandemic, and retail and meals companies picked up a couple of 12 months again.

“Companies that have seen an increase in borrowing in terms of percentage of total disbursal include food products, which has seen an uptick in borrowing from around 14 per cent in FY19 and FY20 to nearly 20 per cent in FY21 and FY22. During the same period, the construction materials industry has shown increased credit demand, going from around 4 per cent of the pie to over 7 per cent,” stated Hardika Shah, founder & CEO, Kinara Capital, in an e-mail.

The MSME sector was one of many worst hit through the pandemic and the resultant lockdowns led to lack of enterprise.

“We have seen a strong pickup in demand for credit over the past 12 months across these categories. In terms of gradation, while e-commerce continued to be strong through the course of pandemic, retail and food services sectors picked up about 12 months back, and travel has seen a strong revival over the past 6-9 months,” Alok Mittal, managing director, Indifi Technologies Pvt Ltd, stated.

The State Bank of India’s (SBI) Ecowrap report launched in July additionally echoed the development, stating that incremental credit score to the MSME sector has been on an upswing. “Around 74 per cent of such is purely because of the credit guarantee scheme, and the remaining 26 per cent is because of other schemes including the definitional change in the MSME sector. In terms of overall credit growth, the ECLG scheme has contributed 15 per cent of the expansion,” learn the report.

The Emergency Credit Line Guarantee Scheme (ECLGS) was unveiled as a part of the excellent package deal introduced by the federal government in March 2020 to assist the MSME sector in view of the financial misery brought on by the Covid-19 pandemic.

According to the Ecowrap report, round Rs 2.36 lakh crore has been disbursed to MSMEs underneath the ECLGS. However, it’s not simply the pandemic; the sector can also be affected by delayed funds. Data from Bengaluru-based non-profit Global Alliance for Mass Entrepreneurship (GAME), information analytics firm Dun & Bradstreet, and Omidyar Network present that delayed funds to the MSME sector have elevated to Rs 10.7 lakh crore until the tip of 2021.

About 81 per cent of the full quantity is owed to small and micro enterprises (SMEs) — Rs 4.29 lakh crore to small enterprises and Rs 4.44 lakh crore to micro enterprises. Mittal, nonetheless, says that the demand for credit score, past March 2021, is to fund progress. “The demand for credit has not been driven by desperation of funds, but by the growth opportunities available to these businesses. Also, given the sharp uptick in digitisation during the pandemic period, more of that demand is getting channeled to digital lenders,” Mittal stated.