When Raghuram Rajan published Fault Lines: How Hidden Fractures Still Threaten the World Economy, he offered a sobering reminder: financial crises are rarely sudden accidents. They build quietly, through deep structural inequalities, policy misalignments, and unchecked credit growth.

Rajan warned that when credit is pushed too aggressively without accountability, it doesn’t empower—it destabilizes.
‍

Though written with a global lens, Rajan’s insights resonate powerfully in India’s lending ecosystem, especially in MSME finance. For millions of small businesses, credit is a lifeline. Yet this lifeline often balances precariously between empowerment and exploitation.

The lesson is clear: credit cannot be seen only as a growth lever—it must be managed as a tool of stability and inclusion. When lenders chase profitability without discipline, societies create fault lines that eventually lead to crises. When they ignore inclusion, economies stagnate. True resilience lies in balancing both.
‍

Credit as a Bridge, Not a Fault Line
‍

One of Rajan’s recurring themes is that inequality fuels demand for easy credit. In the U.S., subprime mortgages were the political answer to stagnant middle-class incomes, but they created the 2008 financial crisis. In India, the equivalent danger lies in high-cost, poorly structured loans extended to MSMEs under the guise of financial inclusion.
‍

The challenge is not whether to lend, but how to lend responsibly. An MSME loan that ignores repayment capacity, seasonal cashflows, or regulatory headwinds does not create growth—it creates distress. Every misstep widens the trust gap between lenders and borrowers, turning credit from a bridge of progress into a fault line of instability.
‍

Rajan reminds us: short-term fixes to deep structural problems eventually fail. For India’s MSMEs, that means lenders must go beyond loan disbursals. They must understand the rhythms of small businesses, the unpredictability of cash cycles, and the risks of over-leverage. Only then can credit function as a genuine bridge to growth.
‍

‍

Technology as a Stabilizer
‍

Rajan does not dismiss credit growth; he argues that it must be sustainable. For modern lenders, technology is the stabilizer that can make this possible. Digital platforms today enable:
‍

• Richer underwriting by integrating GST data, payments histories, and alternative digital footprints.
• Dynamic risk models that adapt to shifting macroeconomic realities rather than relying only on historical repayment records.
• Ethical collections that use respectful digital nudges and borrower segmentation instead of coercive, one-size-fits-all tactics.
  ‍

When technology is deployed not just for automation but as a guardrail against reckless expansion, inclusion shifts from being a slogan to becoming a sustainable business model.