11 Sep 2025 : Leading digital payments platform PhonePe has announced a strategic partnership with the Small Industries Development Bank of India (SIDBI) and the Ministry of Micro, Small and Medium Enterprises (MSME Ministry) to accelerate small business formalisation and enhance credit access for entrepreneurs.
This collaboration is aimed at empowering India’s 60+ million MSMEs, many of which struggle to access formal credit due to lack of documentation and limited credit history. By leveraging PhonePe’s digital ecosystem, the partnership seeks to bring more businesses under the formal economy and create a data trail that lenders can use to offer affordable loans.
How the Partnership Works
Under the initiative, MSMEs using PhonePe for digital transactions will be able to share their transaction data with SIDBI-approved financial institutions through a secure framework. This data will act as an alternative credit score, helping lenders assess the creditworthiness of small merchants, traders, and service providers who are traditionally underserved.
PhonePe will also integrate tools to help businesses adopt digital bookkeeping, maintain invoices, and track payments — key steps toward formalisation. The MSME Ministry will provide policy support, while SIDBI will coordinate with partner banks and NBFCs to roll out tailor-made loan products.
Benefits for Small Businesses
This move is expected to:
- Reduce dependence on informal moneylenders.
- Provide quick, collateral-free credit at competitive rates.
- Improve business documentation and compliance.
- Enable growth and expansion by giving access to working capital.
Statements from Stakeholders
Speaking about the partnership, a PhonePe spokesperson said, “This initiative aligns with our vision of building a financially inclusive India. By working with SIDBI and the MSME Ministry, we aim to empower small businesses with credit that fuels growth.”
SIDBI officials added that the collaboration would help meet the government’s target of significantly increasing MSME credit penetration over the next five years.
Industry Impact
Experts believe this partnership could be a game-changer for MSME financing. According to a recent report, the credit gap for MSMEs in India stands at over ₹20 lakh crore. Formalising transactions and leveraging fintech platforms like PhonePe could bridge a significant portion of this gap.
Way Forward
The pilot phase of the initiative will roll out in key MSME hubs such as Surat, Ludhiana, Tirupur, and Moradabad, followed by a nationwide launch. Training workshops and awareness campaigns will also be conducted to help small businesses understand the benefits of formalisation.
Summary:
PhonePe partners with SIDBI and MSME Ministry to boost small business formalisation, enabling merchants to access affordable credit through digital transaction data, empowering India’s MSMEs to grow and thrive in the formal economy.