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Large Funding Gap in Indian MSME Small Loan Credit Sector Widens Potential Market for Non-banking Financial Corporations Finds Frost & Sullivan - Introduction of new business models will add to growth opportunities for NBFCs
Large Funding Gap in Indian MSME Small Loan Credit Sector Widens Potential Market for Non-banking Financial Corporations Finds Frost & Sullivan

 

PRZOOM - /newswire/ - Mumbai, India, 2013/07/26 - Introduction of new business models will add to growth opportunities for NBFCs.

   
 
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Micro, small, and medium enterprises (MSMEs) are the key drivers of the Indian economy. As per the 4th Annual Census of MSME Market, it provides employment to about 60 crore people and accounting for 45 percent of the country’s manufacturing output as well as 40 percent of its exports. Despite their obvious importance, only around 5 percent of unregistered and 10 percent of registered MSMEs have access to finance from banks and financial institutions. This has opened up substantial opportunities for non-banking financial corporations (NBFCs) in the lucrative MSME lending market. As a result, the small loan MSME credit market for NBFCs is expected to grow five times its size from 2012 to 2020.

According to the new Analysis from Frost & Sullivan, the MSME Small Loan Credit Market for NBFCs in India (financialservices.frost.com) finds that market size stood at ₹7,203 crore in FY 2012 and estimates this to reach ₹38,417 crore in FY 2020 at a compound annual growth rate of 23.3 percent.

According to the industry sources, MSMEs in India have a total finance demand of ₹32.5 trillion, of which the addressable market for financial institutions is ₹11.8 trillion. However, only ₹7 trillion is currently provided by the financial institutions. "This demand-supply gap of close to ₹4.8 trillion has broadened the potential market for NBFCs in the country, which they need to capitalize on through innovative business models," said the analyst, Frost & Sullivan.

NBFCs will face intense competition from public, commercial and private banks in the Indian MSME segment, as these organizations offer loans at lower interest rates and are backed by a government credit guarantee scheme. In addition, funding costs are higher for NBFCs as they rely on banks, mutual funds and public deposits for financing. This compels them to operate with low interest margins to maintain the balance between higher cost of funds and interest rates.

To counter this challenge, NBFCs must lobby with the government for access to cheaper international credit and alternative modes of financing. It will be critical for them to focus on lending to a particular industry, along with enhancing credit underwriting and loan sanctioning mechanisms to improve asset quality.

"Decreasing operating costs by refining collection mechanisms, maintaining strict control over overheads and effective risk management will be the key strategies for the growth of NBFCs in India," observed the analyst. "Moreover, NBFCs need to foster brand equity based on customer needs, reduce paperwork for MSMEs and limit reliance on leverage to cultivate customer loyalty and thrive in the market."

If you are interested in a virtual brochure, which provides a brief synopsis of the research and a table of contents, then send an email to Priya George / Akshata Mhatre, Corporate Communications, at priyag[.]frost.com / akshatam[.]frost.com, with your full name, company name, title, telephone number, company email address, company website, city, state and country. Upon receipt of the above information, a brochure will be sent to you by email.

Analysis of the MSME Small Loan Credit Market for NBFCs in India is part of subscription. Frost & Sullivan’s related research services include: Merger and Acquisition Trends in the Global Airline Industry, Financial Assessment of the Global Automotive OEM Industry and Private Equity and Venture Capital Investment Trends in Global Chemicals and Materials Industry. All research services included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants.

Frost & Sullivan's Business and Financial Services group serves clients around the world in all aspects of financial analysis, market research and monitoring, due diligence, idea generation, opportunity analysis, investment valuation, and other proprietary research.

About Frost & Sullivan
Frost & Sullivan (frost.com), the Growth Partnership Company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today's market participants.

Our "Growth Partnership" supports clients by addressing these opportunities and incorporating two key elements driving visionary innovation: The Integrated Value Proposition and The Partnership Infrastructure.

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Analysis of the MSME Small Loan Credit Market for NBFCs in India / P759-F1

Media Contact:
Nimisha Iyer - Corporate Communications South Asia, Middle East & North Africa
M: +91 98200 50519 / P: +91 22 6607 2004 - E: niyer[.]frost.com.

 
 
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Large Funding Gap in Indian MSME Small Loan Credit Sector Widens Potential Market for Non-banking Financial Corporations Finds Frost & Sullivan

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Small Loan Credit | Frost & Sullivan
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