Page 35 - Banking Finance March 2023

ARTICLE

Digital lending for MSME Achieving a fine balance
In India, digital lending is changing the financial framework Digital lenders have played a key role in providing credit to
of the MSME and SME sector. Banks are moving fast to adopt traditionally under-banked sectors and segments, such as
the digital lending platform and automate back-end processes micro, small and medium enterprises and retail customers
to achieve the short and long-term benefits. The digital lending that may not have a strong credit history. It is important
is not only helping the MSMEs and SMEs in reducing the time for any new regulation to strike a balance between
taking the process of loan sanction but also reducing the protecting consumers and allowing digital lenders to
processing cost involved in lending to these units. innovate, partner with technology platforms that enable
wider access to credit and, most critically, access and
MSMEs, SMEs, and financial institutions are exploring some analyze data that result in customized financial solutions.
of the upgraded technologies like
Support from government
Robotics,
The government has given a massive push to the digital
Block chain,
lending sector through the introduction of initiatives including
Artificial intelligence, the setting up a working group to ensure a safer digital
lending ecosystem. The government is in favour of banks
Big data and analytics used in digital lending.
working closely with the non-banking financial companies
(NBFCs) and fintech companies for co-lending and also push
New Financial technologies have brought a revolution in the
forward the digital route. Digital lending innovation plays a
MSMEs and SMEs in India. The upgraded technologies are
major role in addressing the credit gap, especially among
allowing MSMEs and SMEs to move from traditional funding
MSMEs and the population living in under-banked areas.
methods based on advanced cash flow lending.
Creating transparency in the digital lending landscape will
provide a large part of the population access to formal
With the advancement of innovative digital lending
banking and sources of credit, eliminating the informal players.
platforms, smaller enterprises (MSMEs and SMEs) with less
financial records or credit history are getting some suitable
Conclusion
access to credit. The use of digital technologies such as
Artificial Intelligence, machine learning, and data analytics Digital lending is started to emerge as new alternative to
traditional lending due to its cost effective, less time
is helping MSMEs and SMEs to extend customized working
consuming and inclusive approaches. India's digital lending
capital solutions. Many new-age fintech companies and
sector has immense potential to transform the current state
startups are beating every challenge that becomes the
of credit starved population and drive financial inclusion
bottleneck of their development to further transform the
through last mile connectivity. Digital lending players have
market like never before. In not-so-distant future, lending
barely scratched the surface and have a long way to go. With
in general and especially retail and MSME lending through
the help of new age technology clubbed with human
physical mode may be rendered obsolete as is the case with
assistance, our country is on the right path to achieve our
operational banking today.
goal of digitally empowered Atmanirbhar Bharat.
Lending has seen a noteworthy evolution in the last few
years from Home, Auto and Personal loans to Consumer
loans for shopping, medical emergencies, Buy Now Pay Later
and short-term loans for an instant need to cover the last
10 days before salary credit. However, there is a massive
risk of gathering payments in digital lending solutions and
zero manual intervention in the application, disbursal, and
collection process. Digital lending will only continue to grow
in the coming years as fintech revolutionises industries.

Reference
Various Sources.

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