Digital lending platforms such as LendingKart, Indifi and NeoGrowth, which primarily lend to micro, small and mid-sized businesses, are expecting a surge in credit demand among MSMEs for the upcoming festival season, notwithstanding inflationary pressures.
Several platforms expect loan applications from small businesses to surpass the previous year’s festive season figures, and have attributed the increase to healthy consumption in sectors such as auto, consumer durables, electronics and fashion. In fact, the RBI’s recent survey on consumer confidence also indicates an improvement in the spending sentiment.
“It is clear that consumer spending is on the rise. The heightened consumer activity is expected to translate into a surge in MSME credit demand,” said Arun Nayyar, managing director and CEO of NeoGrowth. The platform has seen loan demand for financing working capital, growth and expansion remaining resilient so far this year.
In the first six months of this financial year, NeoGrowth has disbursed loans worth nearly Rs 1,300 crore, compared with Rs 1,900 crore it had disbursed for the full financial year 2022-23. Similar trends were seen by alternative financing platform GetVantage, which has witnessed higher loan applications so far this year, compared to the entire last year.
“Over the last quarter, we have seen loan applications increase over 400% and we expect that to easily double in Q3,” said Karun Arya, chief growth officer at GetVantage. The company offers equity-free funding of between Rs 20 lakh and Rs 20 crore to businesses.
Echoing a similar sentiment, CredAble expects to see MSME loan applications to hit 1 million in coming months. “Given how the auto and consumer durables sectors are witnessing extraordinary sales, we are looking forward to a 50% spike in MSME loan applications and a two-fold growth in disbursals this festive season,” said Nirav Choksi, CEO and co-founder.
During the festive season, diwali sales such as Flipkart’s Big Billion Day and Amazon’s Great Indian Festival also boost demand for small-scale sellers and increase their working capital needs. “The need for additional funds to ramp up inventory and invest in marketing efforts is more pronounced than ever, given the heightened consumer demand during the festive season,” noted Harshvardhan Lunia, CEO and founder of LendingKart.
The platform, which offers collateral-free loans of up to Rs 2 crore, sees an average ticket size of around Rs 7 lakh with an average tenure of three years. The company has recently expanded product offerings to include personal loans and gold loans. It plans to launch credit cards tailored for SMEs.
Most digital lenders are primed to benefit from the consumption-driven demand that small businesses are riding on. “MSMEs are likely to maintain their need for credit, regardless of inflation, because they still need to manage their cash flow, invest in inventory and modernisation, and adapt to changing market conditions,” said Siddharth Mahanot, co-founder and chief operating officer of Indifi.
The platform, which has recorded a 120% year-on-year growth in new loan disbursals so far this year, predominantly caters to small businesses that are in consumption-linked segments such as food, e-commerce, travel and retail.