The digital lending landscape is being revolutionized by the growing adoption of embedded finance solutions by India’s Micro, Small, and Medium-Sized Enterprises. MSMEs can easily obtain credit by incorporating financial services into non-financial platforms, which improves their financial agility and operational effectiveness.
The embedded finance sector in India is experiencing rapid growth. According to a report by Research And Markets, the industry’s revenues are projected to surge from US$5.75 billion in 2024 to US$28.6 billion by 2029, reflecting a CAGR of 37.8%. This expansion is driven by technological advancements, increased digital adoption, and a favorable regulatory environment.
Fueling India’s Growth
More than 63 million MSMEs employ over 111 million people, accounting for about 45% of India’s total exports, making them essential to the nation’s economy. Historically, MSMEs have had difficulty obtaining formal credit, despite their importance. Embedded finance seamlessly integrates tailored financial solutions into the platforms MSMEs use daily, effectively bridging this gap. According to recent data, MSME lending is on the rise. By March 2024, the MSME loan portfolio in India had grown by 17.8% annually to ₹64.1 trillion. This expansion highlights the growing dependence on embedded and digital lending solutions.
Furthermore, a study by PYMNTS Intelligence reveals that 37% of micro and small businesses (MSBs) in India have recently utilized embedded lending services. Notably, over two-thirds of these businesses are likely to switch to providers that offer embedded lending options, highlighting the growing preference for integrated financial services.
Empowering MSMEs: The Role of Government Programs
The goal of the Indian government’s programs, like the Unified Lending Interface (ULI), is to make it easier for small and rural borrowers to obtain credit. Further encouraging the use of embedded finance solutions, ULI speeds up consent-based digital information flow and credit appraisal. Finally, the MSME lending environment in India is changing as a result of embedded finance. By enabling MSMEs to get past conventional credit barriers, it promotes growth and advances the nation’s overall economic development by offering smooth, integrated financial services.
To conclude, embedded finance is quickly establishing itself as a major player in the MSME lending market in India. MSMEs are experiencing unprecedented access and efficiency as a result of the removal of conventional credit barriers and the smooth integration of customized financial solutions into the digital ecosystems for their daily operations.