COVID-19 pandemic and its aftereffects has significantly impacted educational institutions globally. The resulting stress and financial strain faced by these educational institutions have led to stressed repayment in loan accounts and school-based education loans. As a response to these challenges, many companies have made the strategic decision to transition their products from school-based education loans to MSME (Micro, Small, and Medium Enterprises) and micro loans. This shift in focus is driven by various market trends and opportunities, aligning with the long-term goals and vision of these companies.
There has been a growing recognition of the potential in supporting MSMEs and micro enterprises. These businesses play a crucial role in driving economic growth, employment generation, and innovation in many countries. However, they often face difficulties accessing affordable credit due to limited collateral or credit history. By shifting their focus towards MSME and micro loans, companies can tap into a market segment with significant potential for growth and endorse a meaningful and sustainable shift towards performing fundamental roles in a socially responsible manner.
Furthermore, market trends indicate an increasing demand for financing options tailored specifically for MSMEs and micro enterprises. These businesses require smaller loan amounts compared to larger corporations but still need access to capital for various purposes such as working capital, equipment purchase, or expansion plans. By offering specialized loan products like Secured Business loans, Loan against property, Micro loans to women entrepreneurs and Households designed to meet the unique needs of these businesses, companies can cater to an underserved market segment while diversifying their product portfolio.
The decision to transition from school-based education loans to MSME and micro loans also aligns with the long-term goals and vision of companies. It allows them to adapt to changing market dynamics and mitigate risks associated with the education sector’s uncertainties. By diversifying their loan portfolio, companies can reduce their exposure to a single industry and spread their risk across multiple sectors. This strategic move enhances the company’s resilience and sustainability, ensuring continued growth even in challenging times.
Moreover, supporting MSMEs and micro enterprises aligns with broader socioeconomic objectives. These businesses are often key drivers of employment, particularly in developing economies. By providing them with access to affordable credit, they can contribute to job creation, poverty reduction, and economic development. This aligns with the company’s long-term vision of making a positive impact on society while achieving financial success. It is interesting that forecast of Indian Loan Against Property (LAP) market indicates substantial growth in the coming years. The Compound Annual Growth Rate (CAGR) of the Indian LAP market is projected to be over 14%.
Shiksha Finance proudly capitalised on these avenues and launched Small Ticket – Loan against property for MSME’s and other deserving class of customers.
The construct of microfinance industry, as well as that of the digital lending industry, is for-profit with a positive social impact. This could be a game-changer in making microfinance a digitally enabled community-banking solution. Every player in the microfinance sector plays a distinct role in the development and growth of financial inclusion within the country and Shiksha Finance has partnered with Federal Bank as Business Correspondent since 2022 for increasing its banking outreach and ensuring greater financial inclusion.