Monsoons, mandis & microloans: Rethinking India’s credit story

Guru L

Senior Vice President, Lending – Product Management.

A few weeks ago, I was at Delhi’s Azadpur Mandi, one of Asia’s largest wholesale markets. Trucks rolled in at dawn, workers shouted prices across crowded lanes, and the smell of wet earth mixed with coriander leaves hung in the air. Watching the chaos, I scribbled a thought: “Every sack of produce here carries more than vegetables. It carries the weight of credit.”

Because behind each farmer, trader, or small shop owner is the same struggle: access to capital.

India’s growth story has long been powered by its small businesses. According to the Ministry of MSMEs, the sector contributes nearly 30% to GDP and employs over 110 million people. Yet, the credit gap is estimated at $350–400 billion. That’s not just a number, it’s millions of livelihoods slowed down because the system wasn’t designed to serve them.

Why credit still feels like a mirage

Traditional lending still relies heavily on collateral, paperwork, and face-to-face approvals. If you own land in Bihar, you might wait months for a loan; if you run a mobile shop in Lucknow, your cash flow doesn’t count as “formal” data.

The irony? India is one of the fastest digitizing economies in the world. UPI transactions crossed 14 billion in a single month in 2025. GST filings, digital wallets, e-commerce footprints, the data is already here. But most of it still sits outside lending decisions.

The turning point: digital credit for SMEs

This is where digital lending changes the game. Instead of waiting for collateral, banks and fintechs can now look at alternative data: purchase histories, mobile payments, even electricity bills. The World Bank recently noted that digital credit can reduce processing times by 60% and lower customer acquisition costs drastically.

I met a ceramic artisan in Hassan who lived this shift. Rejected by a bank that wanted property documents he didn’t have, he got a microloan through a digital platform using his GST filings. The ₹10 lakh he borrowed was enough to expand production. Today, his pottery sells not just in Kochi, but in Dubai and Singapore.

Stories like this remind me of why digital credit isn’t just a technology play, it’s about dignity.

What’s next: rethinking lending in India

For India’s next chapter of growth, SME lending needs to stand on three pillars:

1. Trust the data we already have. From UPI trails to GST filings, we don’t need to reinvent the wheel, we just need to use it.
2. Embed credit into daily life. A kirana owner shouldn’t need to apply for a loan separately. Credit should appear in the same app where she orders stock or settles payments.
3. Design for resilience, not just speed. The monsoon doesn’t ask for permission before disrupting supply chains. Lending systems must factor in local realities, whether that’s seasonal cash flows or regional risks.

The bigger picture

India is targeting a $5 trillion economy. That ambition rests on millions of SMEs finding ways to grow, hire, and expand. Credit is the bloodstream of that ambition, and digital lending is the heart pumping it forward.

As Alan Watts once said, “The only way to make sense out of change is to plunge into it, move with it, and join the dance.” India’s SMEs are already on the floor. It’s time for lenders, policymakers, and technologists to join them.

Guru L

Senior Vice President, Lending – Product Management.