Omidyar sees opportunity in digital lending to SMEs

MUMBAI:

Omidyar Network

, a leading investor in the segment of digital lending to micro, small, and medium enterprises (

MSMEs

), expects

online loans

to

small businesses

grow 10-15 times to Rs 6-7 lakh crore by 2023.


The self-styled “philanthropic investment firm” has published a study along with Boston Consultancy Group, according to which around Rs 20 lakh crore of credit requirement for MSMEs is being met through the informal sector, including by friends as well as family.

“The introduction of goods and services tax (GST) has resulted in greater formalisation of the economy and availability of real-time data to all players, including banks and finance companies. We see a large part of this informal lending moving to formal lending,” said

Omidyar India

partner and managing director

Roopa Kudva

.

There are 55-60 million MSMEs. Of these, those with turnover of Rs 10 lakh to Rs 1 crore are rapidly formalising and digitising. This trend is boosted by the introduction of the GST, which requires even small businesses to improve their management information systems. Secondly, the drop in the cost of mobile data has made even small entrepreneurs use digital platforms to improve ease of doing business.

Explaining the group’s decision to invest in digital lenders, Kudva said, “We saw that whether microfinance or affordable housing were well served. At that time, we got into SME lending in unique areas,” said Kudva.

The digital lenders in Omidyar’s portfolio include Vistaar (a rural MSME credit provider), NeoGrowth (a leading finance company that has lent to over 13,000 MSMEs in India), IntelleGrow (a debt-financing firm which aims to be the first lender to rapidly scaling enterprises), Varthana (which lends to over 3,000 schools in India, reaching around 2 million students) and Indifi (a full-stack digital lender catering to over 10,000 customers in India).

According to Kudva, the Supreme Court decision restricting the use of Aadhaar will not have a major impact on digital lending to small businesses. “We believe that a greater impact of the Aadhaar judgment is more on digital consumer lending as opposed to digital SME lending. In SME lending, the Aadhaar plays a small part of authenticating the proprietor and there is a lot of identification which is not linked to the eKYC of the individual. We do expect that the processing time has come down to a couple of days and less than a day in some cases,” she said. Reports have said that regulators can boost digital MSME lending by continuing to facilitate data-sharing with consent and by instituting incentives for further MSME formalisation.


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