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India MSME Finance Market Outlook to 2020

Driven by Governments Financial Inclusion Agenda and Newfound Profitability in Segment

Region:Asia

Product Code:KR375

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Published On

March 2016

Total pages

170

About the Report

Ken Research announced its latest publication on "India MSME Finance Market Outlook to 2020 – Driven by Government's Financial Inclusion Agenda and Newfound Profitability in Segment" which provides a comprehensive analysis of the MSME Finance Market in India. The report covers various aspects such as market size of MSME finance market, demand-supply gap in MSME Finance and market share of various banks, NBFCs and Micro Finance Institutions. The report also provides competitive landscape and profile of major players operating in India's MSME Finance Market. The future analysis of overall MSME market has also been discussed in each of the sub segment under base case scenario, aggressive case scenario and conservative case scenario. The report is useful for various banking and financial services institutions including new entrants operating in or planning to enter the market to align their market centric strategies according to ongoing and expected trends in the future.
MSME sector has become an important growth driver for the overall economy in India. The number of MSMEs has contributed to more than ~ % of the total industrial enterprises in FY'2015. The total credit outstanding from MSMEs was recorded at INR ~billion in FY'2015. The demand of credit has however grown significantly at a CAGR of ~% during FY'2010-FY'2015. The outstanding amount was observed the highest for micro enterprises in the year FY'2015. The demand supply gap as percentage of demand reduced from ~% in FY 2010 to ~ % in FY 2015. The report also provides competitive landscape and profile of major players operating in MSME Finance Market of India. The future growth has been discussed under base case scenario, aggressive case scenario and conservative case scenario using scenario analysis. The report is useful for various banking and non-banking financial institutions including Fintechs operating in or planning to enter the market to align their market centric strategies according to ongoing and expected trends in the future.
Banks have been the major source of finance for the MSMEs and amongst them the Public sector banks (PSBs) play pivotal role. State Bank of India & its Associates has been leader in the PSBS for disbursing finance to MSEM followed by Punjab National Bank and Others. However, in case of private sector banks, ICICI Banks, HDFC bank and Axis Bank were the major players in the India MSME market. The market for MSME finance in India has also witnessed presence of various NBFCs, who have actively participated in market during FY'2015. Bajaj Finserv led the market in terms of total finance outstanding with ~% share, followed by Religare Finvest and Reliance Capital. However, in case of loans or finance from MFIs, Bandhan Bank emerged as the leading player in the market followed by SKS Microfinance, Annapurna Microfinance and others.
In the coming future, private sector financial institutions such as private banks, NBFCs and MFIs will look forward to provide more digitization of credit facilities. Penetration of digitization in India has already witnessed improvement in regular banking facilities and will likely result in more efficient systems to avail loans. During the period FY'2016-FY'2020, the market for MSME is projected to grow at CAGR of ~% and reach INR ~ million in FY'20 under conservative case scenario with 70.0% probability. In the conservative case, the negative outlook of the economy will hamper the MSME finance market in India will likely witness loans outstanding up to INR ~ billion by the year FY'2020 whereas the 
aggressive case will result in outstanding loans at INR ~ billion in FY'2020.
Online India MSME Finance Providers
The market of financial technology companies is at a very nascent stage. There are only a handful number of players in the online MSME finance space which provide MSME credit. The online MSME finance service providers collectively have disbursed loans worth INR ~ million in 2015. Some companies launched their operations in 2015. More companies are expected to join the bandwagon next year onwards. Investors have been showing an interest in these startups. As of FY'2015, the online market for MSME finance in India has seen presence of players such as Faircent, Indifi Technologies, LendingKart, SMECorner, Capital Float, Mandii.com and others.
 
Key Topics Covered in the Report
  • MSME Finance Market Size by outstanding credit
  • MSME Finance Market Segmentation by Source of Finance in Formal and Informal
  • Formal Finance sub segmentation into Finance from Banks, MFIs and NBFCs
  • Informal Finance sub segmentation into Family and Friends, Moneylenders and Chit Funds
  • MSME Finance Market Segmentation by Region into Northern, North Eastern, Eastern, Central, Western and Southern Region
  • MSME Finance Market Segmentation in Registered and Unregistered Enterprises
  • MSME Finance Market Segmentation in Manufacturing and Service Enterprises
  • Trends and Development in MSME Finance Market in India
  • Value Chain for MSME Finance Market from the perspective of Borrower and Financial Institution
  • Competitive landscape and profile of major Public sector Banks, Private Sector Banks, Micro Finance Institutions (MFIs) in MSME Finance Market.
  • Growth Drivers of MSME Finance Market in India.
  • Issues and Challenges MSME sector is facing in Financing
  • Working Models and Revenue Models of Financial Technology companies such as Faircent, Capital Float, SMECorner, NTREES, Mandii
  • Future Outlook using scenario analysis, projecting the future growth considering Base Case Scenario, Conservative Case
  • Scenario, Aggressive Case Scenario
  • Macro Economic Parameters

Products

SME Financing, Assest under Management, Loan Book, Borrower, Chit Funds, Money Lenders, MSME Registered, Credit Rating, Loan Against Property, Loan against securities, Business Loan, Professional Loan, SME cross sell, Loans to Value Ratio, Ticket Size, Duration/ Tenure, Yields Range

Companies

Faircent, Capital Float, SMECorner, NTREES, Mandii, State Bank of India & its Associates, Punjab National Bank, Bank of Baroda, Canara Bank, Bank of India, Bandhan Bank, SKS Microfinance, Annapurna Microfinance, Janalakshmi, Ujjavan, Bajaj Finserv, Religare Finvest

Table of Contents

1.Executive Summary
2. Research Methodology
2.1.Market Definitions
2.2.Abbreviations
2.3.Market Size and Modeling
Approach
Variables (Dependent and Independent)
Data Collection Methods
Final Conclusion
3.MSME Sector – The Backbone of Indian Economy
3.1.MSME Sector Landscape
Definition of MSME
Major Constituents of MSME Sector
GDP Contribution by MSME Sector, FY'2015
Employment Generation by MSME Sector
3.2.Issues and Challenges in MSME Sector
3.3.Financial Sector Landscape in India
4.Value Chain for MSME Finance Market
4.1.Financial Institution Perspective
Credit Worthiness
4.1.1.Character
4.1.2.Cause
4.1.3.Capital
4.1.4.Capacity
4.1.5. Conditions
4.1.6.Collateral Security
4.2.Borrower Perspective
4.2.1.Need for Funds
4.2.2.Search and Evaluation of Alternatives
4.2.3.Application for Credit
4.2.4.Procurement, Securitization and Utilization
4.2.5.Closure
4.3.Factors for Lending
4.3.1.Importance of SME as a profitable segment
5.India MSME Finance Market Introduction and Size, FY'2010-FY'2015
5.1.By Total Outstanding Credit, FY'2010-FY'2015
5.2.By Total Demand for Credit, FY'2010-FY'2015
6.India MSME Finance Market Segmentation
6.1.By Enterprise Size, FY'2015
6.2.By Registered and Unregistered Enterprises, FY'2015
6.3.By Manufacturing and Services Sector, FY'2015
6.4.By Formal and Informal Source of Finance, FY'2015
6.4.1.By Formal Institution Financing (Banks, MFIs and NBFCs), FY'2010-FY'2015
6.4.2.By Supply from Informal Sector (Family and Friends, Moneylenders and Chit Funds), FY'2015
6.5.By Regional Credit Distribution from Formal Sector, FY'2010-FY'2015
6.6.By Finance Form (Working Capital and Term Loan Finance), FY'2015
6.6.1.By Term of the Loan, FY'2015
7.Competitive Landscape of Major Players in India MSME Finance Market
8.Market Share of Major Players in India MSME Finance Market
8.1.Market Share of Major Banks in India MSME Finance Market, FY'2010–FY'2015
8.2.Market Share of Major MFIs in India MSME Finance Market, FY'2015
8.3.Market Share of Major NBFCs in India MSME Finance Market, FY'2015
9.Company Profiles of Major Financial Institutions in India MSME Finance Market
9.1.1.State Bank of India
Business Overview
Financials and Key Performance Indicators
Branches
9.1.2.Punjab National Bank
Business Overview
Financial Indicators
MSME focused initiatives
9.1.3.Bank of Baroda
Business overview
Financials and Key Performance Indicators
9.1.4.Canara Bank
Business overview
Financials and Key Performance Indicators
9.1.5.Bank of India
Business overview
Financials and Key Performance Indicators
9.2.NBFCs
9.2.1.Bajaj Finserv Ltd.
9.2.2.Religare Finvest Limited (RFL)
Loans against Property (LAP) and Working Capital Loans (WCL) for SME
9.2.3.Reliance Capital
9.2.4.Intec Capital
9.3.MFIs
Credit Disbursed by MFIs
Portfolio at Risk
9.3.1.Bandhan Financial Services
9.3.2.SKS Microfinance
9.3.3.Janalakshmi Financial Services
9.3.4.Ujjivan Financial Services
9.3.5.Equitas Microfinance Pvt Ltd.
10.Snapshot on Online MSME Finance Providers
10.1.India Online MSME Finance Market Size, FY'2015
10.2.Business Model of Online MSME Finance Providers
Working Model and Business model of Faircent
Working Model and Business Model of Indifi Technologies
Working Model and Business Model of LendingKart
Working Model and Business Model of SMEcorner
Working Model and Business Model of Capital Float
Working Model and Business Model of Mandii.com
Working Model and business model of
NeoGrowth
Working Model of NTREES
Competitive Snapshot of India Online MSME Finance Providers
11.Issues and Challenges in India MSME Finance Market
11.1.Issues and Challenges – Borrower Perspective
11.1.1.Non-availability of Adequate and Timely Finance
Inadequate Finance
Untimely Finance
11.1.2.Inadequate Penetration of Formal Finance
11.1.3.Collateral Requirements
11.1.4.Poor Registration System
11.1.5.High Cost of Credit
11.1.6.Limited Access to Equity Capital
11.1.7.Lack of Exit Policy
12.Developments in India MSME Finance Market
12.1.Policy Reforms and Government Initiatives
12.2.Active Role of SIDBI
12.3.Use of Technology
12.4.Encouragement from E-commerce Companies
13.Role of SIDBI
13.1.Direct Finance
Risk/Equity Capital
Sustainable Finance
Receivables & Service Sector Finance
Other Direct Finance
13.2.Indirect Finance or Refinance
13.3.Promotion and Development Functions
14.Trends in India MSME Finance Market
Preference towards Bank Finance
Refusal of Sanctioned Finance
15.Causes of Default by MSMEs
15.1.1.Measures to Overcome NPAs
Effective and Regular Follow-up
Holistic Assessment
Healthy Relationship
Asset Reconstruction Mechanism
16.Role of the Government
16.1.Schemes of 'Ministry of MSME'
16.2.Schemes of Ministry of Finance, India
16.2.1.Collateral-free Loans to Entrepreneurs
16.2.2.Venture Capital Fund
16.2.3.India Aspiration Fund and SIDBI Make in India Loan for Enterprises
16.2.4.MUDRA Bank Yojna
16.2.5.Pradhan Mantri Jan Dhan Yojna (PMJDY)
16.2.6.Government Regulation and Guidelines
17.Financial Infrastructure Support in MSME Sector
17.1.Credit Bureau
17.2.Collateral Registry
17.3.Asset Reconstruction Company for SMEs
17.4.SME Stock Exchange
17.5.Trade Receivables Discounting
17.5.1.NTREES
17.5.2.TReDS
18.India MSME Finance Market Future Projections and Outlook, FY'2016-FY'2020
18.1.Variables that will Impact Future Growth
Financial Inclusion Measures
Administrative Reforms
Focus on Skill Development
18.2. Base Case Scenario, Probability 70%
18.3.Conservative Case Scenario, Probability 15%
18.4.Aggressive Case Scenario, Probability 15%
18.5.Cause and Effect Relationship Analysis of India MSME Finance Market
18.6.Recommendations Based on Study of Relevant Global Models
18.6.1.Creation of Apex Authority
18.6.2.Creation of Guarantee Funds and Refinance to Community Lenders
18.6.3.Increase Focus on Applied Technical R&D, Skilling & Innovation, BMO
18.6.4.Create Facilities based on OSS, NAFIN & Credit Guarantee
18.6.5.Improve Accountability of Staff in Banks
18.6.6.Increase Awareness of Entrepreneurs
18.6.7.Business Process Re-engineering by Banks
18.6.8.Mandate Investment in Technology
18.6.9.Recommendation for Government
Disclaimer
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