Digital literacy has been crucial to financial inclusion. If a borrower from the MSME sector does not have a strong digital footprint and does not have the ability to adapt to digital methods, he or she might not be as visible to the banks as tech-savvy applicants.
With more than 120 million working in the industry, MSMEs are responsible for a huge portion of employment and entrepreneurship in India. Their contribution makes up 30% of the nation’s GDP and 40% of its exports. Despite these exciting digits and percentages, the MSME sector faces major financial challenges at present. Reportedly, as of 2023, the credit cap for the industry was estimated at $380 billion. A prime cause for this hindrance is MSMEs’ lack of accurate knowledge and adequate awareness of the technology and the finance front. As digital financing and banking services take the lead, MSMEs have yet to realise and fully adopt the new systems.
The solution can be described in simple words: the MSME sector needs to upskill and successfully leverage the available financial products and services, taking advantage of the impressively developing BFSI sector. The execution of the same may not be that simple. It will be a two-part action plan involving understanding the skill gaps and then bridging them precisely.
Financing is a crucial operating power for businesses of any size. While banks, NBFCs, digital banks, and fintech companies, in collaboration with mobile banking and online financing, make borrowing easier than ever, MSMEs still struggle for credit. The key reasons are the absence of a strong credit history, poor collateral, inadequate awareness about government schemes, and high interest rates. That’s not all!
Digital literacy has been crucial to financial inclusion. If a borrower from the MSME sector does not have a strong digital footprint and does not have the ability to adapt to digital methods, he or she might not be as visible to the banks as tech-savvy applicants.
Without a sturdy hold on digital systems and an understanding of how they work, any entity will lose the easily available access to digital data that allows better and quicker credit risk assessment.