How can P2P lending disrupt the MSME sector in India?

P2P Landing Platform

According to clearias, the MSME sector in India is responsible for about 45% of manufacturing output, 40% of total exports, and providing employment for a staggering 69 million people throughout the country. This shows the significance of the MSME sector in India and why we need to snowball it further.

Micro, Small, and Medium Enterprises (MSMEs) are the ones that function on a relatively smaller scale and require fewer funds to operate. These enterprises could be local or even hyperlocal in their nature and empowers individuals and communities with growth and development opportunities. 

However, due to their small capacities, their growth is slower compared to other enterprises higher up on the food chain. If enough funds are provided to these enterprises, they could elevate their potential and thrive, making their mark in the economy. 

So, how does P2P lending help MSMEs?

Peer-to-peer lending is a type of lending process that lets borrowers connect with investors directly, without the need for the middlemen or financial institutions. With the removal of gatekeepers and nullifying the intermediary margin, the interest rates considerably reduced.

MSMEs are usually spurned by established financial institutions because of the lower creditworthiness of these enterprises. This puts them in a spot where it’s difficult to grow because the funds aren’t enough to make the required changes, whether in machinery, innovation, or building plants. 

P2P lending platforms, enabled by the smartphone penetration into these demographics, have been able to not just provide these MSMEs with microloans but also do so with convenience and ease. All borrowers need to do is login into the portal and they will be open to newer and better opportunities and a host of possibilities.

Borrowers can look into the various plans or offers available based on their requirements and accept the ones they feel are the most rewarding for them. The rate of interest depends on their creditworthiness and their financial standing. What’s more, they can check status of their loans, their credit scores, and their repayment cycles on their smartphones.

Helping the First timers and Entrepreneurs

P2P lending has also enabled first-time borrowers, without a credit history, to take loans as per their requirements and repayment capabilities. The entrepreneurs taking risks in starting their businesses are another group of beneficiaries from these platforms that are considered too risky by traditional banks and other financial institutions.

This revolutionary approach promises to open new doors for all who were on the outside of the credit border, including them into the financial structure and helping contribute to their potential and development is the development of the entire economy and giving them a solid landing to stand tall.

VolkSoft is empowering microlending institutions by digitalizing their processes and increasing their penetration in even the remotest areas by providing services like offline mode, mobility, and access in regional languages. For more information on how you can incorporate these at your micro-lending firm, contact us here.

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