MSMEs are one of the strongest drivers of economic development for India, contributing 30% of the country’s GDP and 45% of total exported goods but they often have difficulty accessing credit, with a credit gap estimated at $530B.^1,2

The sector is also the nation’s largest employer, generating more than 110 million jobs through more than 40 million enterprises.^3,4

A major barrier to MSME growth is access to affordable, adequate, and timely credit.⁵ Banks are often unable to finance these businesses, as they rely on traditional documents such as income tax returns and credit scores to assess the credit quality of borrowers. Small businesses and entrepreneurs do not typically have past credit records and have limited documented financial information, given their high dependency on cash transactions.⁶ Further, a lack of collateral can be a significant barrier to credit access and 36% of MSMEs in India say they do not have any collateral to offer to banks.⁷ Alternative MSME credit sources, like unofficial moneylenders, often charge exorbitantly high interest rates.

In addition to stalling economic progress, a lack of MSME credit is also holding up the sector’s transition to renewable energy. While MSMEs account for 48% of the energy demand in the industrial sector, the high upfront cost of rooftop solar projects is a barrier for small businesses with inconsistent cashflow.⁸

Electronica Finance is a pioneer in MSME lending, supporting 43,000 customers to expand operations, increase revenue and create jobs.

The company specialises in machinery loans and, with a deep track record of serving customers over the past 30 years, is uniquely equipped to provide credit to the growing MSME sector. While many banks and formal finance providers require lengthy documentation and high collateral, Electronica’s knowledge of manufacturing allows it underwrite loans based on non-traditional data sources, including an assessment of machine quality, personal discussion with customers, and analysis of the customer’s cash flow.

Customers report that the additional investment allowed them to increase their business channels, including opening access to export markets, while also increasing scale, operational efficiency and jobs created. The impact of just one loan can last as much as 10 years based on the average lifespan of a machine and more than half of Electronica’s customers are repeat customers. While 71% of its loans are to enterprises with less than 10 employees, Electronica has supported the transformation of long-term customers into much larger enterprises.

Electronica also provides micro- loans against property to previously excluded emerging consumers. 95% of these loans are disbursed to customers in Tier III and IV cities. These loans have a ticket size of $3,000-6,000, and enable the customers to unlock liquidity for home renovation, weddings, medical emergencies, and other purposes.

The company employs 1,878 staff directly, and through its loans to MSMEs supports a wider 64,400 jobs across 16 states. 88% of jobs are for emerging consumers, earning less than $11.20 a day.

Electronica is also working to support MSMEs to transition to renewable energy. It offers rooftop solar finance products for the manufacturing industry and in 2022-23 the company supported the installation of 23MW of solar capacity. It also supports its customers to transition their machinery to more energy efficient alternatives and – more than half of new machinery purchases supported by Electronica’s finance are energy efficient, with higher productivity and higher quality outputs at lower energy intensity and manpower.