Formal credit meets only 40 per cent of MSME credit demand, leaving Rs 60 trillion demand gap: Report

MUMBAI: Despite a massive digitisation of finance, close to 60 per cent of small businesses are still outside the formal finance ecosystem, leaving a whopping Rs 60 trillion credit gap, an NPCI-Bain & Company report said Friday. Despite digitising and standardising nearly every building block of the business ecosystem individually, gaps in cross-platform connectivity and information flow continue to create inefficiencies and constrain access to capital, further impacting MSME growth and leaving a credit gap of Rs 60 trillion. "Meanwhile, formal financing channels so far meet only 30-40 per cent of credit demand," the report said.The report, launched at the ongoing global fintech summit in Mumbai, said, "As much as Rs 8.1 trillion of MSME receivables remain locked in delayed payments. Now, the formal credit flow to small businesses is only Rs 34 trillion and meets only a part of an estimated Rs 92 trillion of debt demand. Also, the smaller enterprises are disproportionately underserved, with formal channels meeting only 30-40 per cent of debt demand, translating to a whopping Rs 60 trillion formal credit gap," the report pointed out."Though the country has progressed substantially on digital payment penetration, many B2B workflows spanning business systems, payment providers, banks, financiers and public systems remain largely fragmented. A gap that affects small businesses," said Saurabh Trehan, a partner and head of financial services practice at Bain & Company.