MSMEs Favor Daily EMIs, Ease of Repayment Process through Automatic Deduction for Credit Repayment

The survey measured credit and repayment needs of small and medium businesses to help address credit gap in MSME segment.
MSMEs Favour Daily EMIs, Ease of Repayment Process through Automatic Deduction for Credit Repayment

The majority of MSMEs today favor daily EMIs, automatic deduction from bank accounts for credit repayment, according to a survey conducted by Solv, a B2B e-commerce platform for micro, small and medium enterprises (MSMEs),

Credit Demand

In terms of demand for credit, the survey found that 90 percent of retailer touchpoints 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 percent 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 percent of retailers and wholesalers said they are willing to pay in 7-15 days' installments. More than 95 percent 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 2,000 daily to ease their repayment burden and help them get better access to revolving credit. Interestingly, more than 50 percent 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. More than 90 percent of small and micro businesses have a UPI QR code, while only 20 percent have a PO machine for debit/credit card acceptance in their shops.

Online B2B Platforms

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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