CredRight today announced to lend INR 200 Crores to Indian micro, small, and medium enterprises MSMEs in the following three years. Touted to be one of the first FinTech start-up focused on chit fund sector, CredRight is expanding rapidly in providing loans to MSMEs in the country.
The data-driven lending platform has now partnered with chit funds and is using a reverse auction to distribute pooled funds across India for acquiring customers.
In the coming financial year 2019-20, the company plans for making additional investments in technology to roughly triple the strength from 13 to 35. It further aims of lending INR 50 crores to MSMEs by December 2019.
The Indian chit fund business is estimated to be approximately INR 70,000 crores with around 75-80 lakh customers. As per Ministry of MSME, Govt. of India 2017-18 report, there are nearly 1.6 million registered MSMEs in India. That being said, getting adequate credit for the expansion of business activities is a significant problem for them.
Going through the report, the MSMEs received only 17.4% of the total credit outstanding. Also, only 33-34% of firms from MSME sector have access to banks and institutional financing channels while rest of them rely on informal channels like friends, family and other personal channels for raising loans, says ASSOCHAM report. Most banks hesitate to give loans to small scale units noticing the growth of non-performing assets in past. This often discourages such unserved & undeserved enterprises and even leads to shut down in utmost cases.
“There are around 50 million registered and unregistered MSME businesses in India that face a nearly $300 billion credit gap. The lack of adequate finance due to the shortage of organized lending from banks and other formal institutes along with the absence of transparency poses severe challenges in front of MSMEs to obtain loans”, said Neeraj Bansal, Co-founder & CEO of CredRight.
He further added, “We are looking to provide loans of above INR 5 lakh to retailers/small businesses like chicken or barber shops and above INR 10 lakh to SMEs. In the last year, the loan band ranged from INR 1 lakh to a maximum of INR 35 lakh with an average of INR 9.5 lakh.”