Among micro, small and medium enterprises (MSMEs), those involved in food products and construction materials, as well as the ones involved in investments in technology are driving the post-Covid credit growth in the sector.
Lenders to MSMEs say e-commerce was strong even during the pandemic, and retail and food services picked up about a year back.
“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,” said Hardika Shah, founder & CEO, Kinara Capital, in an email.
The MSME sector was one of the worst hit during the pandemic and the resultant lockdowns led to loss of business.
“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, said.
The State Bank of India’s (SBI) Ecowrap report released in July also echoed the trend, stating that incremental credit 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,” read the report.
The Emergency Credit Line Guarantee Scheme (ECLGS) was unveiled as part of the comprehensive package announced by the government in March 2020 to aid the MSME sector in view of the economic distress caused by the Covid-19 pandemic.
According to the Ecowrap report, around Rs 2.36 lakh crore has been disbursed to MSMEs under the ECLGS. However, it is not just the pandemic; the sector is also suffering from delayed payments. Data from Bengaluru-based non-profit Global Alliance for Mass Entrepreneurship (GAME), data analytics company Dun & Bradstreet, and Omidyar Network show that delayed payments to the MSME sector have increased to Rs 10.7 lakh crore till the end of 2021.
About 81 per cent of the total amount 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, however, says that the demand for credit, beyond March 2021, is to fund growth. “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 said.