MSMEs’ credit demand is bouncing back post-pandemic: Report


Micro, small and medium enterprises (MSMEs) sector’s credit demand has been able to bounce back stronger post-pandemic, according to a report by NeoGrowth, the MSME-focused fintech lender leveraging the digital payments ecosystem.

The MSME Insight Report 2022 – Rising in The Face of Adversity – revealed that at the onset of the pandemic in early 2020, 97% of the MSMEs surveyed from NeoGrowth’s customer base of 16,087 MSMEs were worried about the negative impact on their credit scores due to non-payments.

According to the report, 93% of MSMEs planned to reduce operations costs to manage liquidity and only 1% expected a complete shutdown of their business operations.

Business Impact & Support Structure

The report revealed that 46% of MSMEs across India needed financial support to mitigate the impact, with higher demand from non-metro cities.

Financial support availed by non-discretionary MSMEs was lesser compared to other businesses.

As Maharashtra was the worst affected state during the first wave, approximately 50% of MSMEs in Pune and Mumbai needed financial support.

Revival & Back to Growth

In the second wave of the Covid-19 pandemic, MSMEs adjusted to the new business environment. Only 30% of MSMEs required support in the second wave.

Interestingly, 75% of MSME borrowers who upgraded their pre-pandemic loans went for a higher amount with an 80% average increase in the principal loan amount.

This year in March, MSME credit demand from non-metro cities was back to the pre-Covid level. The non-discretionary demand-oriented business segments such as Petrol pumps, Infrastructure, and Auto recovered faster than consumer-facing and discretionary demand-oriented businesses.

The credit demand by MSMEs in Bengaluru and Chennai exceeded pre-pandemic levels.

Also Read | Factoring Services – The most effective low-cost working capital solution for MSMEs

Arun Nayyar, Whole Time Director & Chief Executive Officer, NeoGrowth, said, “The MSME ecosystem in India is a ‘Survival to Revival’ saga. The vital lessons learned from the pandemic have transformed the way businesses operated and fast-tracked their move to digital. The credit demand from MSMEs is back to a healthy level. We believe that the Indian MSME sector is on a successful resurgence trajectory, which opens up the pathway for strong growth of the Indian economy in the years to come.”

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