Future-Ready Firms Turn to Tier 2 and Tier 3 Cities for Growth

Author: Capri Global

Even as a developing nation, economic growth, and opportunities across the major cities are now well on their way towards being saturated. And, what happens when the fastest growing cities in India aren’t developing as fast anymore? No. This doesn’t mean the end of development or progress but rather a chance to go beyond Tier 1 and into Tier 2 and Tier 3 cities that have the potential to make a real difference. Future-ready businesses have not failed to see and seize this opportunity.

It’s time to shift focus from the 300 million that are already aware, to the 500 million that have been ignored all these years. India has the second-largest number of internet users with the numbers reaching a staggering 563 million. Retail, IT and housing finance organizations are among the pioneers to capture these untapped markets.

Why MSMEs are turning to Tier 3 and Tier 3 cities

The MSME sector contributes to over 45% of the industrial output and 40% of the country’s exports. The entrance of these players in these under-served markets will back the urbanization of rural India. Here’s why the sector has shifted their focus to these cities:

  • Lower land cost and rent charged- Investment necessary to set up shop in a smaller city is generally significantly less, when compared to metros. There’s more land and rental space available at a lower cost.
  • Availability of talent- Gone are the days when the cream of the crop needed to leave their home towns in search of better education, better jobs or a better life. Today, thanks to the connectivity that technology has brought in, millennials have started returning to their home-towns upon completion of their formal education. Talent is presently easily available in these cities with lower salary slabs.
  • Widen customer base- Many MSMEs address problems that are geographically agnostic. Entering these markets serves as a way to create networks, feel the pulse of the cities and produce goods and solutions that meet their needs.

Loans- The Foundation for Growth

MSMEs today contribute to over 25% of the country’s GDP and this number is only set to rise. They create an abundance of opportunities for growth and employment in the nation but need the funds to do so. Loans help these organization meet their capital and day-to-day expenses. Banks are presently able to meet only 40-70% of the MSME sectors financial requirements that account for $55 bn in the present.

So where should they turn to bridge this gap?

NBFCs are the answer. Non-banking financial institution in India are an optimal source for MSME loans because they have tailored offers for the sector with certain allowances that make them a more flexible, viable option. The terms of interest and repayment NBFCs offer are also personalized to serve the underserved and ensure the flow of credit in the economy.

In the long- run the progress of a nation depends on the well-being of the whole and not just a few parts. For India to continue on the path towards being a developed nation, organizations must go beyond the big cities and execute change across the country.

How Capri Global is Capitalizing these markets

As a leading NBFC in India with a focus on urban development, Capri Global Capital Limited hopes to lend over Rs 7,000 crore by providing home loans and MSME loans in these smaller cities. The company sees the need to create a network of branches across and plans to expand its operations from 84 to 232 branches in the next five years.

Although the liquidity crisis of 2018 sent the NBFC sector into a bit of a slump, Capri Global managed to achieve a growth of 45% and has confidence that the books this year will also reflect a similar level of progress. During an interview with ET Now, Rajesh Sharma, Managing Director of the firm addressed the fact that each city is different, and an understanding of these variations is what will give them an edge in Tier 2 and Tier 3 markets.

Source:https://www.linkedin.com/pulse/future-ready-firms-turn-tier-2-3-cities-growth-capri-global