Navigating Credit Trends in MSMEs: Report Highlights Growing Challenges and Opportunities

Credit growth for micro and small businesses slowed to 10.1% in November 2024 from 15.5% in May, while large business credit growth remained stable. For medium-sized firms, it rose to 20% in November. Despite challenges in long-term planning, 54% of MSMEs reported over 10% growth year-on-year post-pandemic.

Credit growth for micro and small businesses has decelerated from 15.5% in May 2024 to 10.1% in November, according to a recent survey. In contrast, medium-sized firms saw a rise in credit growth, reaching 20% in November from 12.6% earlier in the year.

Analyzing over 45,000 enterprises across seven sectors, the bi-annual MSME Sampark Report, conducted by Ugro Capital and Dun & Bradstreet, highlighted that light engineering, electrical equipment, food processing, and chemical sectors were the largest borrowers. Notably, B2C businesses have shown a decline in obtaining new debt compared to B2B enterprises, except in the auto components and hospitality sectors.

The report also indicates a slowdown in loan disbursements in 2024 and an increased penchant for working capital loans, suggesting a shift towards short-term financing. Despite this, 64% of MSMEs have resumed operations post-pandemic, with a significant percentage reporting robust growth. Expert Shachindra Nath underscores this moderation as both a challenge and an opportunity for strategic lending by non-banking financial companies.

(With inputs from agencies.)