78% of our borrowers are first-generation entrepreneurs accessing formal credit: UGRO Capital
, a data tech NBFC specialising in MSME lending, has highlighted a 48% credit gap in formal MSME financing in the country while emphasising the feasibility of creating a large MSME institution dedicated to MSME financing. The findings, released recently in the third edition of its Social Impact Report, also revealed that 75% of Indian MSMEs still rely on informal credit, despite the sector being the backbone of the country's economy.
UGRO Capital
, through its data-driven lending solutions, has supported over 135,000 MSMEs across diverse geographies. It has partnered up with 10 major banks and NBFCs to make lending solutions more accessible to the MSME sector.
According to the report, 78% of UGRO Capital's borrowers are
first-generation entrepreneurs
tapping formal credit for the first time. The report additionally revealed that the number of
women-led enterprises
had increased to 74% of the total portfolio. It further noted that businesses led by women have the potential to generate 150-170 million jobs and form a significant segment to tap.
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The report stated that the MSME sector in India is the second-largest employer and benefits from a majority of government policies. The sector contributes approximately 30% to the nation's GDP and provides employment to over 2 million people, which makes it a crucial pillar of the Indian economy.
The research report was based on a randomised sample of 508 borrowers, selected from different states and business categories. Speaking on the report findings, Irem Sayeed, Chief Credit Officer, UGRO Capital, said that it is particularly encouraging to note the participation of women-led businesses and borrowers adopting ESG initiatives. 'These are not just milestones; they are signals of a more resilient and equitable future being built through responsible financing. The 42% rise in women's employment within our borrower network is a testament to how capital, when directed thoughtfully, can deliver tangible social dividends,' Sayeed stated.
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The report also spoke of the whopping Rs 103 lakh crore shortfall in credit for the MSME sector, while highlighting that the government is looking to bolster the sector to increase financial inclusion. 'Due to the traditional player's inability to assess MSMEs creditworthiness, the credit gap of Rs 103 lakh crore exists. The MSME credit gap is a barrier to growth and inclusion in the MSME space. UGRO Capital is targeting the credit gap using an innovative mix of data and technology,' it said.
The report emphasised continued innovation in data analytics and alternative credit assessment models to improve risk profiling and unlock new lending opportunities, particularly for new-to-credit and women-led enterprises. 'Strengthening digital capabilities will not only enhance operational efficiency but also provide MSMEs with faster, more seamless access to capital,' it stated.
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