Credit Series Chapter 1: MSME Secured Credit (LAP)

In our introduction to the Blume Credit Series, we laid out how India’s credit landscape is being reshaped; read the entire piece here — link. This chapter throws light on Loan Against Property (LAP) which has become a cornerstone of MSME secured credit in India. 

India has two things in abundance: a vast base of small businesses hungry for capital, and an enormous stock of property whose value sits idle on the sidelines. Loan Against Property is the instrument that connects them, turning a shopfront, a home, or a plot of land into working capital for the businesses that power the economy. In doing so, it has become one of the most consequential ways to deepen credit access in India.

The opportunity is large and still wide open. Nearly 45% of addressable MSME credit demand goes unmet, and LAP has emerged as the biggest secured product for small businesses, a market growing at ~18% a year. 

Underneath the headline growth sits a more interesting story: India has roughly 62 million unique MFI borrowers across key states, most of whom entered the formal system through ₹1 lakh group loans. As they build repayment histories and their businesses outgrow micro finance tickets, they will graduate, first to small unsecured and individual loans, and then to borrowing against the property they own which is the entry point into micro-LAP loans. This graduation is what’s driving Micro LAP (tickets under ₹10 lakh) to compound at ~23%, faster than the larger-ticket segment. 

Each category of lender has played a distinct role in LAP’s expansion. Large banks built the product for the top of the pyramid. Small finance banks and mid-NBFCs pushed it into tier 2+ cities with assessed-income underwriting and feet-on-street origination. Fintechs then introduced speed and cost efficiency through digital origination and due diligence. The next phase will be AI-led, removing the last pockets of manual friction, expanding access, and personalising the customer journey, all riding on India’s public digital rails. This chapter maps LAP end to end on how the product works across the value chain, who the players are and the regulatory and macro shifts shaping the next wave of opportunities.

Read the entire piece here https://​doc​send​.com/​v​i​e​w​/​z​g​w​n​n​4​r​5​j​5​j​cbdti and stay tuned as we will continue mapping India’s various credit verticals in the chapters ahead!