Credit is the lifeblood of small business and when it comes to improve the credit scenario for Small, Medium and Small Enterprise (MSME) sector, increased awareness and usage of government schemes can make a considerable difference. A recent survey points to this fact again, along with some other important aspects, including a key role being played by NBFCs as a source of credit to small firms. These findings deserve attention.

According to the NCARE Business Expectations Survey, conducted among some 500 firms across six cities, covering industries that are adequately represented in terms of ownership type, industry sector and size based on annual turnover, the share of firms taking credit has been going up for the last few months, with large firms showing sharper recovery and 80 percent of the surveyed firms taking loans for working capital.

The survey also views that increased awareness and usage of government schemes may be partly responsible for this uptick in credit, adding that while in December 2020 nearly three-fourth firms were unaware of credit guarantee schemes, in September 2021, this proportion fell down to only 5.9 percent. In a similar way, under Emergency Credit Line Guarantee Scheme, credit uptake increased to 13.4 percent in September 2021 from only 7.8 percent in March 2021.

It is also worth notable that 80 percent of firms approach public sector banks for their credit needs. In terms of use of digital lenders/fintech companies to avail credit, 12.5 percent of firms go for the digital mode. Also, NBFCs play a large role as a source of credit for small firms, especially firms with annual turnover less than Rs 10 crore. A deeper analysis of these trends is crucial to enhance credit flow to our MSME sector.