Are Small and Micro Enterprises Feeling the Pinch of Slowdown? Private lenders who focus on lending to micro and small enterprises are witnessing strong loan demand from tier 2 and tier 3 cities

Finance Minister Nirmala Sitharaman last week indicated that the economy will start looking up in the coming months, after holding meetings with several private lenders and financial institutions. Private lenders have categorically stated that there is no liquidity crisis and there is enough demand for loans, Sitharaman said.

Fintech companies who focus on lending to small and micro enterprises reiterate the same sentiment. "We did not feel the slowdown at all. Loan demand from micro enterprises in the last few months has not faltered on our platform," says Sanjay Sharma, co-founder, Aye Finance. Harsh Lunia, co-founder and CEO, Lendingkart concurs. "While medium and small businesses have been slightly hit by the slowdown, micro businesses largely remain untouched. We track monthly revenues of businesses who take loans from us and we don't see a significant change."

Ahead of the festive season, these companies are expecting loan demand to increase further. The government's initiative of "Loan Melas', a credit outreach programme, is also set to take off today across 250 districts. This outreach programme is aimed at providing credit to medium, small and micro enterprises (MSMEs) and retail borrowers in the wake of the economic slowdown.

Maximum demand from retail and services sector

While the manufacturing sector, especially auto parts businesses, has been hit hard by the slowdown, services and retail sectors are showing high appetite for credit. "Fashion apparels and accessories, computer hardware and electronics, personal care products and home decors are the prominent categories we are getting demand from on a daily basis. The concentration is high in retailer, trader and services segment, which have strong cash flows via their banking or GST records," says Mainsh Lunia, co-founder, FlexiLoans.com. He adds that credit demand grew manifold ahead of the online festive sales. "Demand of loans from e-commerce sellers on our platform increased by 300% in Aug-Sep compared to the last six months."