Microloan disbursals in India surged by 80% with rise of MSMEs in post-pandemic era

After the lockdown brought economic activity to a screeching halt, more than 94,000 micro enterprises started by individuals grew into small businesses in the post pandemic era between 2020-2022. Quick and simplified access to funding via apps has been the game-changer for Indian entrepreneurs who have started small during this period. Latest data shows that microloan disbursals in India went up by 80 per cent on a year on year basis in the April-June quarter, as the microfinance sector reported 24 per cent growth.

There are currently 120 million loan accounts, through which the sector has served 60 million borrowers so far. About 12 banks are the biggest providers of microcredit, while NBFCs and MFIs together are the second largest providers of quick small loans in the sector. The change comes with ease of doing business for micro and small entrepreneurs, who are able to sell their products directly through social media, and reach a larger consumer base in the process.

Financing India’s future via MSMEs

There are more than 6.3 crore MSMEs in the country, out of which almost 99 per cent are micro ventures, and the sector together has helped create 11.1 crore jobs. The economic survey of 2021-22 found that micro enterprises also accounted for 95 per cent of the 66 lakh MSMEs that registered on the Udyam Platform, which facilitates zero-cost establishment of businesses. MSMEs currently contribute 30 per cent to India’s GDP, and the government hopes to take it to 50 per cent.

Enhancing the informal sector

The availability of microfinance and options such as Udyam is crucial when 99 per cent of the MSMEs in India are unorganised. Of these, two-third still aren’t registered, and growth will help them enter the formal sector. Banks currently have Rs 1.13 lakh crore in outstanding loans while NBFC-MFIs have Rs 1.03 lakh crore.