Credit and Finance for MSMEs: Loan disbursements on MSME-focused digital lending platform Lendingkart in the financial year 2021-22 have crossed the pre-Covid levels after registering a degrowth of 54 per cent in FY21 amid the pandemic from FY20. According to the data shared with Financial Express Online, Lendingkart had enabled the disbursement of Rs 2,747-crore unsecured loans in the last financial year, up 150 per cent from Rs 1,098 crore loans disbursed in FY21, and 16 per cent from Rs 2,365 crore loans in FY20. The total disbursements, since the launch of the company in FY15, stood at around Rs 9,108 crore to around 1.70 lakh MSMEs from over 15 lakh loan applications received in eight years. Moreover, Lendingkart’s gross revenues jumped 32 per cent to Rs 675 crore in FY22 from Rs 511 crore in FY21 and 39 per cent from Rs 485 crore in FY20.
“For the longest time, MSMEs have remained capital-starved, unlike large businesses and corporates. India would have to further ease access to affordable credit to MSMEs if it has to achieve the $5 trillion economy vision. The focus on MSMEs by the government is already visible and hence we are seeing such growth in credit to MSMEs on our platform. Also, lending digitally has bridged a significant gap in credit availability to small businesses,” Harshvardhan Lunia, Co-founder and CEO, Lendingkart told Financial Express Online.
Credit gap is essentially the difference between the total supply of credit from formal channels in the country vis-a-vis the addressable demand which is currently massive in the country’s MSME sector. International Finance Corporation (IFC) had estimated the addressable MSME credit gap to be around Rs 25.8 lakh crore in November 2018. Another report in June 2019 by the Reserve Bank of India’s (RBI) UK Sinha Committee had noted the credit gap to be approximately Rs 20-25 lakh crore.
Among the total disbursements in FY22, the co-lending model, adopted by the company in FY20, had a decent share. According to Lunia, over Rs 1,000-crore (36 per cent) loans were disbursed to MSMEs under co-lending in comparison to Rs 260 crore in FY21, and Rs 160 crore loans in FY20. The company already has sanctioned loans amounting to Rs 3,000 crore in the current financial year. The volume of MSME loans under co-lending had also jumped from around 5,000 in FY21 to approximately 20,000 in FY22 out of the total volume of around 30,000 loans since FY20.
“Co-lending has picked up as lending in collaboration also helps lenders to accelerate the lending process. While banks can digitally connect with borrowers, underwrite them and manage customer engagement and experience for all kinds of loans, it still takes time. Also, RBI wants the co-lending model to be adopted,” added Lunia.
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The RBI had announced the co-origination framework for loans in November 2018 by banks and non-banking financial companies (NBFCs) for priority sector lending which was rechristened as the co-lending model in November 2020. Under co-lending, the risk is shared in a ratio of 80:20, 80 per cent loan with the bank and at least 20 per cent with NBFC.
Lendingkart had launched its co-lending software-as-a-service (SaaS) platform Lendingkart 2gthr in November 2020 for lenders to onboard the platform. The company had partnered with lenders including Bank of Maharashtra, Punjab National Bank, Canara Bank, and others under the co-lending model. It has total 21 lending partners so far, of which 15 are live on the platform.
Lunia said the company adds 6,000-7,000 new MSMEs per month with disbursements of around Rs 300 crore loans every month. “The month-on-month growth in overall disbursements is around 27 per cent while growth in customer base is around 10 per cent,” he added.
Lendingkart’s 70 per cent customers come from Tier-II cities and beyond. The platform enables credit up to Rs 1 crore with an average loan size of Rs 6-7 lakh through its cash-flow based underwriting model cred8. In terms of loan default rate, Lunia said less than 0.02 per cent of borrowers fail to repay loans.
In FY23, Lendingkart expects to disburse 60,000-70,000 loans amounting to Rs 4,000-5,000 crore.Another focus for Lunia would be to enhance the adoption of its co-lending SaaS platform among lenders. Lendingkart has so far raised around Rs 1,050 crore in equity funding from international investors including Fullerton Financial Holding (subsidiary of Singapore Sovereign Fund Temasek Holdings), Bertelsmann, Mayfield India, Saama Capital, Sistema Asia, India Quotient, and others. “We have plans for funding in the second half of the year as well,” added Lunia.
