Access to credit is one of the most painful points among the MSMEs in India. However, MSMEs are hoping for a change in the credit positions - P2P lenders have stepped up to take up the challenge.

The Indian Micro, Small & Medium Enterprise (MSME) sector is massive. There are more than 60 million MSMEs in the country. The sector contributes 30 per cent to the country’s GDP and employs over 100 million people. And yet, often it is declined formal credit that helps keep businesses up and running.

According to an Omidyar Network and Boston Consulting Group’s report, the SME credit gap in the country is close to $600 billion and almost 40 per cent of MSMEs borrow from informal sources at double the interest rate. Most of the SMEs fail to raise funds due to inadequate financial records, lack of credit histories etc.

Building the Bridge

P2P platforms have now realized the importance of SME credit and also, it can potentially act as the chorus for the sector’s growth story in the future. Rajat Gandhi, CEO and Founder of Faircent.com, which has disbursed 64 per cent of its total loan in 2018 to SMEs, says with P2P’s digital platform, paper-less and presence-less process cuts intermediary cost, thereby, offering faster and cheaper credit. P2P lending is offering a ray of hope to a large chunk of the unbanked and under-banked population of India.

“By going beyond traditional means of credit evaluation and using tech-driven underwriting algorithm, the industry has brought thousands of SMEs under the purview of organized credit,” Gandhi says.

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