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Digitisation to Encourage Online Applications for MSME Loan

07-11-2022 09:29 AM CET | Business, Economy, Finances, Banking & Insurance

Press release from: Kinara Capital

According to recent studies, digital lending to MSMEs will witness a 15x growth by 2023, attributed by digitization and influx of last-mile lenders such as digital lending companies and NBFCs. The MSME sector in India is highly underserviced and doesn't have access to formal credit. Over 60% of the MSME sector resort to some sort of informal credit on unfavourable terms and very high interest rates. The advent of fintech NBFCs and digital lending companies is however changing the MSME lending landscape in India and with positive regulatory initiatives, small business entrepreneurs will get easy access to funds to expand their businesses.

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Revolutionising Lending

Fintech NBFCs, especially during the COVID-19 pandemic, have begun transitioning to an online or digital banking method which makes loan distribution a much smoother process. As smartphone access in India continues to grow, many consumers have preferred the ease that the fast-tracked online banking provides which eliminates the hassle of the paperwork-heavy process that requires physical transport to the local bank. Digital loan distribution also allows for a multitude of benefits like simple comprehension of application material, remote accessibility to rural regions, and a speedy turnaround time that provide a simple yet secure online loan application and loan disbursement method. The turnaround time for loans for digital applications is usually about a day, but can get as low as a couple of minutes.

The Digital Lending Advantage

The amendment of the Reserve Bank of India (Amendment) Act, in 1997, increased the scope of operations for NBFCs and sped up led to their technological transformation. The past 20 years have witnessed NBFCs become a prominent part of the Indian financial services landscape, notably after the union cabinet opened the doors for foreign direct investment into regulated NBFCs in August 2016.

Fintech companies make up 50% of the digital lending landscape in India. According to a report by Fintech Association for Consumer Empowerment, fintechs companies doubled disbursements in the financial year 2021-22, disbursing a total of 2.66 crore loans worth ₹18,000 crores. Of these, 16% disbursals were made in Maharashtra, while the southern Indian states collectively accounted for 44% of the uptake. Kinara Capital, with its presence in 6 states and a union territory, including Maharashtra, Karnataka, Tamil Nadu and Andhra Pradesh, is perfectly poised to cater to this burgeoning market. With a huge increase in uptake of digital transactions across the board, accelerated by the COVID-19 pandemic, this promising position is beneficial for both the fintech lender and last-mile borrowers.

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This heightened access to formal credit is driving financial inclusivity throughout India. The digital loan market is said to increase from $100 billion in 2019 to $350 billion in 2023. NBFC partnership with Fintech companies is crafting the online banking future and is, in the process, serving India's underserved customers and MSMEs. In this way, by offering loans to smaller borrowers they are able to provide for bank-excluded customers with supportive and efficient digital financial services and bolster India's economy.

About Kinara Capital

Kinara Capital is a fast-growing fintech propelling financial inclusion of small business owners in India. Led by a women-majority management team, Kinara Capital is globally recognized for its innovations in MSME financial inclusion. Headquartered in Bengaluru, Kinara Capital operates 125 branches across 90+ cities in India. Visit us at for more information and follow us on Twitter @KinaraCapital

50, Second Floor, 100 Feet Road, HAL II Stage, Indiranagar, Bengaluru, Karnataka 560038
Contact Name: Sayantoni Das for Kinara Capital
Reach us at:
Call us at: 9989334826

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