Arka Fincap Launches ‘Uday’: A New Loan Service for MSMEs in Smaller Cities
Introduction to Uday Loan Service
Arka Fincap Limited, a subsidiary of Kirloskar Oil Engines Limited (KOEL), has introduced a new loan product named ‘Uday.’ This initiative focuses on offering Small Ticket Loans Against Property (STLAP) to micro, small, and medium enterprises (MSMEs). The loan amounts range from ₹10 lakh to ₹30 lakh, aiming to bridge the financial gap faced by businesses in Tier II, III, and IV cities.
Meeting the Growing Credit Demands of MSMEs
India’s MSME sector is grappling with a $530 million credit gap, as many small businesses struggle to access formal credit due to a lack of adequate documentation or collateral. Arka’s Uday loan product is designed to address this issue by providing structured credit solutions to MSMEs that own property but have difficulty securing formal loans.
Navin Saini, Chief Business Officer for Retail & MSME Lending at Arka Fincap, explains, “Many MSMEs seek unsecured loans, and we already offer products in that space. However, Uday is tailored for MSMEs that own property but lack structured credit access. By offering loans against property, we can provide lower interest rates and longer tenures, enabling more sustainable growth.”
Challenges Faced by MSMEs in Tier II, III, and IV Cities
In smaller cities, many MSMEs resort to informal lending sources, such as local moneylenders or personal networks, often at unregulated, high-interest rates. These options may provide quick access to funds, but they lack transparency, structured repayment plans, and formal financial support.
Saini emphasizes, “Uday offers formal credit with predictable repayment schedules and better terms. This helps MSMEs manage their growth sustainably and provides them an opportunity to enter the formal credit system.”
Pan-India Expansion of Uday Loan Service
The initial launch of Uday will take place in five key cities in Tamil Nadu: Salem, Vellore, Tirupur, Porur, and Coimbatore. However, Arka Fincap has ambitious plans to expand this offering to MSMEs across India. This broader rollout is part of a larger effort to deepen financial inclusion in underserved regions of the country.
Empowering MSMEs: A Step Towards Financial Inclusion
Vimal Bhandari, Executive Vice Chairman and CEO of Arka Fincap, highlights the company’s commitment to empowering small businesses: “Our foray into the STLAP product segment with Uday is part of our constant effort to support MSMEs in underserved regions. By providing quick and reliable access to credit, we aim to drive growth from the grassroots level, supporting the backbone of India’s economy—the MSMEs.”
Current Market Reach and Future Plans
Arka Fincap’s total assets under management (AUM) stood at ₹5,768 crore as of June 2024, with 53% of this contributed by the SME sector. While the Uday product has been initially launched in the southern market, Arka plans to expand its reach across India soon, ensuring more MSMEs can benefit from this accessible and flexible credit solution.
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