MSME Credit Health Index measurement model to provide credit risk management

TransUnion CIBIL in collaboration with the Ministry of Statistics & Programme Implementation has launched MSME Credit Health Index. It will provide the government, policy makers, and lenders a numeric indicator for benchmarking the health of the MSME sector.

Sources said this measurement model will provide better MSME credit risk management, formulation of strategies and policies to support the revival and resurgence of the sector and the economy as a whole. Kshatrapati Shivaji, Secretary MoSPI said the MSME Sector comprises of over six crore enterprises, and contributes nearly 29 per cent of India’s Gross Domestic Product (GDP) and provides employment to over 11 crore workers. Shivaji said it is important to continuously monitor and measure the strength, growth and progress of the micro-small and medium enterprises, so that policies can be aligned and timely interventions taken. Rajesh Kumar, MD and CEO TransUnion CIBIL, in a statement said the Index is available at national level and granularly across micro-small and medium enterprises segments, lender categories and geographies. “The ongoing monitoring of the index will provide insights for aligning strategies and policies towards efficient implementation of funds and resources for sustained development of the secto,” he said.

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The first version of the Index is based on data from March 2018 to June 2020. Its analysis reflects muted growth in June 2020 which is attributed to limited credit activity, an aftermath to the containment measures implemented by the Center to stem the spread of COVID-19 pandemic. In the last two years, the micro-small and medium enterprises has witnessed a rise in NPAs because of a slower rate of economic growth.

The sector’s cash flows have taken the hit over a period of time, limiting the ability to service debts, and this has resulted in the Strength Index reflecting a decreasing trend. The analysis of the Index at a sub-segment level shows the momentum of growth when compared to the standard for each sub-segment of the sector is highest for the micro segment. On the other hand, NBFCs and Private Banks have shown a higher growth momentum. The latter has contributed to over 50 per cent of incremental credit to the sector in the last two years.