Credit for micro, small and medium enterprises (MSMEs) which is a big issue, will now change for the better with the opening of the Mudra Bank and Start up India programme, according to the author of a new report on the subject.
Institute of Small Enterprise and Development (ISED) director P.M.Mathew, who has prepared the report that will be launched by Reserve Bank of India Deputy Governor S.S. Mundra at Mumbai's World Trade Centre on Thursday, said the new steps by the government in 2015, such as Mudra Bank's setting up, and Start up India have helped to broad base credit in the Indian economy, especially for MSMEs and other micro-level economic activities.
"This, unlike the 'Loan Melas' of the 1970s, are likely to make a significant impact on enterprise activities at the 'bottom of pyramid'," he said.
Mathew said that the international data shows that small business loans on the balance sheets of banks are down about 20 percent since the 2008 global financial crisis, while loans to larger businesses have risen by about 4 percent over the same period.
SME lending is shrinking with bank loans to SMEs in the US have been falling as a proportion of total loans over the years, he said, adding that this is true of many other European countries as well.
"Fortunately, in India, non-profit lenders, crowd funders, and other online lenders are stepping up to fill the gap. These lenders are often leveraging technology to access creditworthiness, underwrite, and service loans while traditional lenders can't or don't want to service anymore," said Mathew.