MSME lender U GRO Capital eyes Rs 20,000 crore AUM by 2025 to address small business credit gap

Credit and Finance for MSMEs: Owing to the pandemic, banks have become averse to issuing credit card facilities to MSMEs even as there is a need by such enterprises for credit cards to pay for employee salaries, buy goods, manage working capital, etc., according to Shachindra Nath, Executive Chairman and Managing Director at small business lending fintech platform U GRO Capital. The company on Thursday had announced an MSME-focused co-branded credit card solution in partnership with SBM Bank India, a step-down subsidiary of SBM Holdings (erstwhile State Bank of Mauritius), powered by RuPay and EnKash.

“As per our internal study, U GRO Capital’s 50 per cent SME customers possessed credit cards offered by the banks while the remainder never had a credit card. Promoters utilized personal credit cards for business-related transactions, which needed to be segregated from personal transactions,” Nath told Financial Express Online. U GRO is looking to acquire a 1 per cent market share of the SME lending market by 2025 which translates to around Rs 20,000 crore asset under management. With this collaboration, Nath now seeks a contribution of an incremental around 5 per cent of the AUM target. According to the World Bank estimates, the MSME credit gap is at $380 billion (around Rs 28.34 lakh crore).

India has always had a low penetration of credit cards. The number of credit card users in India stood at 52 million in 2019 but there were only about 3 credit cards for every 100 people in India vis-à-vis 32 cards in the USA, according to a study by ResearchAndMarkets. Corporate credit cards are likely tools for SMEs and startups to boost their working capital requirements along with having the flexibility to pay the bank at a later date. This also helps in expediting supplier payment and early payment discounts. “The objective behind the launch of the product is to provide a bundled offering to the customers looking for instant card facility along with a business loan. The initiative also assists the businesses to create a long-term asset in the form of a Fixed Deposit, at an attractive rate of return,” said Nath.

The credit card can be availed by the U GRO Capital borrowers against a fixed deposit with SBM Bank India. The facility would be available for self-proprietors looking for secured business loans, unsecured business loans, and machinery loans from U GRO Capital. There is no turnover limit to avail this facility. It would be extended to other types of firms as well such as like partnerships, private limited, among others, in near future.