Majority of MSMEs favour daily EMIs, automatic deduction from bank accounts for credit repayment, data from Solv reveals

Solv’s new survey measured credit and repayment needs of small and medium businesses to help address credit gap in MSME segment

Bengaluru, 9th June, 2021: Solv, a B2B e-commerce platform for micro, small and medium enterprises (MSMEs) conducted a survey of 1000+ MSMEs to understand their credit and repayment needs and preferences. The objective was to uncover insights to help various stakeholders address the USD 300 Billion+ credit gap in the MSME segment, especially considering the government’s recent guidelines bringing retail and wholesale trade under the MSME category. The new guidelines will potentially benefit crores of retail and wholesale traders, making them eligible for priority sector lending (PSL) benefits under RBI guidelines.

Credit Demand In terms of demand for credit, the survey found that 90% of retailer touch points across categories have seen higher sales in the last 3 months vis-a-vis 2020, implying a need for easy access to small ticket size collateral-free loans to improve working capital and sales. It also found that 90% of supply chain participants in high volume commodity segments are actively seeking collateral-free loans of up to Rs. 3 Lakh.

Repayment Preferences The survey also uncovered interesting insights about MSMEs’ preferences for repayment. More than 50% of retailers and wholesalers said they are willing to pay in 7-15 days instalments. More than 95% of respondents indicated they would pay back loans within 30 days if given the option of daily repayment or daily EMIs. Most small retailers willing to pay daily EMI are comfortable paying Rs. 500 or Rs. 2000 daily to ease their repayment burden and help them get better access to revolving credit. Interestingly more than 50% of micro and small businesses said they would like to ease the repayment process through automatic deduction from their bank accounts.

Collection of Payments On collection of payments from customers, the survey found that while cash is still the most preferred mode, there has been a sharp 3X rise in collections through UPI vis-à-vis debit and credit card payments. 90%+ of small and micro businesses have a UPI QR code, while only 20% have a PO machine for debit/credit card acceptance in their shops.

Online B2B Platforms Interestingly, more than 90% of small retailers, wholesalers and traders felt that online B2B e-commerce platforms customized for MSMEs would help them grow their business faster in terms of getting better rates to procure goods, accessing cheaper and faster credit, and increasing sales.

Solv has already launched Buy-Now-Pay-Later (BNPL) facility for the MSME sector. With the alternate data on its B2B e-commerce platform, Solv provides segment analysis to match financier and borrower requirements. New age fintechs and traditional lenders that are a part of Solv’s network of financial service providers, have been offering invoice financing through BNPL to small businesses via the platform. At a time when traditional lenders have been relatively risk-averse due to a weak economy, the BNPL facility has helped small businesses to service their immediate requirements without feeling severe financial strain, with more time at their disposal to make payments.

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