MSME credit demand at pre-covid levels; metros lag

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Small businesses in smaller cities borrow after three coronavirus pandemic waves, but not in metropolises. Micro, small, and medium-sized enterprise (MSMEs) credit demand was back to 99 per cent of pre-pandemic levels in non-metro cities by March 2022 but just 81 per cent in metros. Bengaluru and Chennai saw loan demand of 124% and 102% of pre-covid levels, respectively.

NeoGrowth’s MSME customers were surveyed between March 2020 and March 2022. In March 2020, 16,087 MSMEs from 25 locations and 88 sectors were observed in the Indian market. The study measured credit demand as the number of loan enquiries NeoGrowth received from MSME customers. It may not reflect trends in loan ticket size. The report demonstrated how companies negotiated the pandemic and business disruption tendencies.

Since the Omicron pandemic wave early this year, India’s credit demand has not recovered. Infrastructure led the recovery with loan demand at 114% of early 2020 levels, followed by FMCG and retail with 103%. Other sectors haven’t recovered, the poll showed. When the epidemic arrived two years ago, small businesses, especially contact-intensive ones, were hit harder. The poll indicated that MSMEs emerged from the crisis by using digital tools and employing financial aid.

Nearly half of NeoGrowth’s small business customers in Pune and Mumbai used a financial incentive programme, indicating a more substantial epidemic impact. The two cities had the most covid cases in the first two waves. 59% of spa and salon firms used the lender’s support, followed by fashion, lifestyle (55%), and food and beverages (43%). (54 per cent).

Small enterprises were given access to additional credit through the Emergency Credit Line Guarantee Scheme (ECLGS), which went into effect in March 2020 and reached a total of $2.36 trillion by February 2022. According to a survey conducted by TransUnion CIBIL on 756 micro, small, and medium-sized enterprises (MSMEs), 41 per cent of respondents utilised additional cash to commence operations, and 40 per cent used those funds to pay vendor dues. Sixty-eight per cent of people who participated in the poll stated that ECLGS benefited their company.

72% of NeoGrowth’s MSME customers have grown since March 2020, and 29% have expanded. 95% wanted to expand their business, indicating optimism. In the early days of the pandemic, 60% of the sample did not have enough cash to survive more than three months, 50% felt comfortable repaying debt, and 97% were worried about their credit scores, the study revealed.

“With timely support and coaching, MSMEs have emerged with newfound vigour and tools.” “report: Certain industries may need particular help while MSMEs recover overall. The last two years have shown where MSMEs require help.”

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