Only 16 per cent MSMEs in India receive formal credit: U GRO Capital

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By Ashish Mitra --
Tuesday, 02 Feb, 2021

Though the MSME sector is a significant driver of the Indian economy yet only 16 per cent of Micro, Small and Medium Enterprises (MSMEs) in India receive formal credit, said Shachindra Nath, Executive Chairman and Managing Director of U GRO Capital.

U GRO Capital, a BSE listed, small business lending fintech platform has filed an application with the Indian Patent Office for its distinguished methods and systems for modelling scorecards. This has allowed the company to penetrate in a highly unstructured segment which is driven by physical processes.

Commenting on the patent application, Nath said, “The MSME sector is a significant driver of the Indian economy, yet only 16 per cent of MSMEs in India receive formal credit. A major hindrance to the credit access is the limited availability of structured data pertinent to the MSME sector. We believe that MSME financing in India is at the verge of transformation with the combination of GST, Banking Data and emergence of digital infrastructure which is underpinning this transformation.''

''U GRO Capital’s scorecard based underwriting model lies at the centre of our mission to solve the unsolved credit gap of the SMEs. The underlying methods and system are the convergence of our deep sectoral knowledge base and our analytics capabilities. Our distinctive underwriting model compliments the digitalized processes, to provide a quick and convenient access of credit to our MSME customers,” he added.

The distinctive underwriting model generates credit score cards customised to suit the peculiarities and nuances of varied business enterprises. This is done by analysing the historical loan delinquency patterns and cash flow within each selected business segment. The model’s utility is not restricted to businesses, as it enables effective underwriting of individual borrowers, as well. Further, it facilitates trade financing by providing assessment of downstream and upstream counterparties. Also, it provides a basis for revenue sharing in co-lending arrangements and helps estimate first loss guarantees in securitization of transactions by providing an assessment of the underlying pool.

U GRO Capital has been using this model since its inception in 2018. The company has made disbursals of INR 1,700 crore in the form of secured and unsecured loans. This model is tested to predict superior predictable defaults and improve the GNPA and NNPA levels in comparison to the traditional underwriting model and also improve the bureau defined predictable defaults of different score levels. Going forward, the company aims to target 250,000 SME and MSMEs and extend loans amounting to Rs. 30,000+ crore in the coming 4 financial years.

Only 16 per cent MSMEs in India receive formal credit: U GRO Capital. Though the MSME sector is a significant driver of the Indian economy yet only 16 per cent of Micro, Small and Medium Enterprises (MSMEs) in India receive formal credit, said Shachindra Nath, Executive Chairman and Managing Director of U GRO Capital.

U GRO Capital, a BSE listed, small business lending fintech platform has filed an application with the Indian Patent Office for its distinguished methods and systems for modelling scorecards. This has allowed the company to penetrate in a highly unstructured segment which is driven by physical processes.

Commenting on the patent application, Nath said, “The MSME sector is a significant driver of the Indian economy, yet only 16 per cent of MSMEs in India receive formal credit. A major hindrance to the credit access is the limited availability of structured data pertinent to the MSME sector. We believe that MSME financing in India is at the verge of transformation with the combination of GST, Banking Data and emergence of digital infrastructure which is underpinning this transformation.''

''U GRO Capital’s scorecard based underwriting model lies at the centre of our mission to solve the unsolved credit gap of the SMEs. The underlying methods and system are the convergence of our deep sectoral knowledge base and our analytics capabilities. Our distinctive underwriting model compliments the digitalized processes, to provide a quick and convenient access of credit to our MSME customers,” he added.

The distinctive underwriting model generates credit score cards customised to suit the peculiarities and nuances of varied business enterprises. This is done by analysing the historical loan delinquency patterns and cash flow within each selected business segment. The model’s utility is not restricted to businesses, as it enables effective underwriting of individual borrowers, as well. Further, it facilitates trade financing by providing assessment of downstream and upstream counterparties. Also, it provides a basis for revenue sharing in co-lending arrangements and helps estimate first loss guarantees in securitization of transactions by providing an assessment of the underlying pool.

U GRO Capital has been using this model since its inception in 2018. The company has made disbursals of INR 1,700 crore in the form of secured and unsecured loans. This model is tested to predict superior predictable defaults and improve the GNPA and NNPA levels in comparison to the traditional underwriting model and also improve the bureau defined predictable defaults of different score levels. Going forward, the company aims to target 250,000 SME and MSMEs and extend loans amounting to Rs. 30,000+ crore in the coming 4 financial years.