The first phase of the (Account Aggregator) AA rollout (April 2022–January 2023) in India has resulted in early positive benefits to the MSME sector. Out of the total loans disbursed during the period, about 38% of the unsecured business loans were disbursed to MSMEs. The AA ecosystem has eased MSMEs’ access to credit by facilitating secure and consent-based data sharing of financial information between providers and users, states a recent report by ICRIER-ADB.
The AA network has lowered the cost of doing business, reduced paperwork, and enabled a quick turnaround with loans being available in 3–5 clicks in a completely digital process. As of December 2023, a total of 1.94 billion cumulative accounts were enabled for data sharing through the AA system with customer consent. The cumulative number of consents raised through Account Aggregators reached 148.50 million in December 2023 (starting from August 2021). Of this total, 40.08 million requests were successfully fulfilled.
Apart from enabling a simple and secure consent mechanism for credit-seeking MSMEs, the AA network is also likely to enhance competitiveness among regulated lenders. For instance, the framework levels the playing field between banks and nonbanking financial companies.
Lack of access to credit
The report also cites a recent survey of over 2,000 registered MSMEs in India which found that for 70% of surveyed MSMEs, the capital contributed by the owner of a business is the primary source of finance. Only a fifth of the surveyed MSMEs report using bank loans as the major source of finance for their business.
Significantly, the ability to access bank loans appears to be correlated to firm size. About 33% of small enterprises and 29% of medium-sized firms use bank loans as a source of finance, compared to 15.7% of microenterprises. A relatively higher percentage of micro firms rely on their own capital (75.1%) compared to small (60.6%) and medium-sized firms (63.4%).
