KINARA CAPITAL MSME INSIGHTS REVEAL THAT TRADING SECTOR MSMES LEAD IN BUSINESS OPTIMISM; 88% PLANNING BUSINESS EXPANSION

Boosting Inventory Levels for Business Expansion is the Top Reason for Trading MSMEs to Access Business Loans

Bengaluru, June 27, 2024: Kinara Capital, a fast-growing fintech driving financial inclusion of the micro-small-medium enterprise (MSME) sector, today released its 3rd edition of MSME Insights, a detailed data analysis highlighting sector trends. According to MSME Insights, immediate plans for business expansion is the primary reason for MSMEs to seek access to formal credit.

The 3rd edition of MSME Insights analyzed data of 23,682 MSMEs across 100+ cities from the states of Andhra Pradesh, Gujarat, Karnataka, Maharashtra, Tamil Nadu, and Telangana, and the Union Territory of Puducherry.

Below are some key findings:

MSMEs are upbeat about their business; seeking funds for expansion:

Business confidence emerged strongly among MSMEs across all three sectors of Manufacturing, Trading, and Service. This confidence is translating into growing demand for credit specifically for business expansion. In fact, more than 89% of the MSMEs have indicated investing in growth initiatives as the reason for seeking business loans. Trading MSMEs at 88% demonstrate the most optimism regarding their plan for business expansion compared to Manufacturing MSMEs at 83%, and Services MSMEs at 78%.

Trading MSMEs topmost reasons for seeking business loans are to improve unit economics and to offer a wider product variety:

Over 84% of Trading MSMEs claimed boosting their inventory levels was the topmost reason for them to seek business loans. Purchasing inventory in bulk leads to quick improvement in their unit economics and they can provide their customers with a wider variety of products. They also gain a competitive edge with their ability to fulfill customer orders quickly with available stock. Boosting Inventory was followed by Product/Market Expansion and Business Premises Renovation as the main reasons for Trading MSMEs to seek loans for business expansion.

Trading MSMEs lead credit demand surge with 45% YoY rise in FY24:

Demand for credit continues to be on an upward trajectory. In FY24, the credit demand grew by 35% compared to the previous year. While all three MSME sectors of Manufacturing, Trading and Services exhibited demand, the Trading sector is leading with a 45% increase in credit demand, followed by the Services sector at 31% and Manufacturing at 18%.

Trading MSME B2B sub-sectors took most number of loans in FY24, signal meeting the rising domestic demand of urban development:

B2B sub-sectors of Trading MSMEs experienced a significant increase in business loans in the last financial year. The key 5 B2B sub-sectors to have flourished were Electrical & Electronics, Houseware Goods, Industrial Products, Construction & Building Materials, and Paints & Varnishes. Notably, in FY24, the Houseware Goods sub-sector experienced a 150% YoY growth in the number of loans disbursed, followed by the Industrial Products sector at 138% and Paints & Varnishes at 120%. The Trading sector also saw a 106% growth in Construction & Building Materials, an indication of rapidly evolving urban development in Tier 2 and Tier 3 metros as well.

MSME Insights demonstrates that the MSME sector serves much of the domestic consumer demand and plays a significant role in moving India forward as it heads towards becoming the world’s third-largest consumer market by 2026.