By Sameer Gupta
The MSME sector accounts for 30% of GDP and 45% of manufacturing output but access to credit remains a hurdle. Raising the limit for collateral-free loans in the coming Budget along with a credit rating system based on GST & bank records could help address this, says Sameer Gupta.
Challenges in accessing funds
Micro small and medium enterprises (MSMEs) face difficulties in obtaining loans due to high collateral norms, lack of credit history, and slow approvals. The government has launched the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) which enables collateral-free loans up to Rs 5 crore with guarantee coverage up to 85%, the Pradhan Mantri Mudra Yojana under which loans up to Rs 20 lakh (earlier Rs 10 lakh) are provided, Emergency Credit Line Guarantee Scheme (ECLGS) for emergency working capital, and Trade Receivables Discounting System (TreDS) for invoice financing. But more support is needed. The Credit Guarantee Scheme for manufacturing MSMEs to facilitate term loans up to Rs 100 crore per applicant is yet to be implemented. Raising the CGTMSE limit to Rs 10 crore and implementing AI-based credit score for faster approvals can improve funding access. Collaboration with fintechs and NBFCs for quicker loans and tax incentives for timely repayments is necessary. A dedicated MSME credit rating system based on goods and service tax (GST) and bank records will reduce reliance on collateral, ensuring reliable funding.
Need to adopt technology and cybersecurity tools
Limited awareness, affordability issues and cybersecurity risks hinder MSMEs from adopting digital tools. Government schemes like Digital MSME (cloud computing, automation) and production linked incentives (tech incentives) help, but further action is needed. Tax benefits and low-interest loans for tech adoption can ease affordability. MSMEs should integrate affordable cybersecurity solutions via partnerships with tech firms. A cybersecurity certification programme can help build trust and compliance. Large corporations should integrate MSMEs into secure digital supply chains while providing mentorship on best practices. Strengthening awareness, financial support, and cybersecurity adoption will help MSMEs become more competitive and resilient.
Reducing compliance burden
MSMEs must navigate multiple licenses, GST regulations, labour laws and environmental norms, making compliance complex. The government should implement a single-window clearance system integrating GST, Udyam registration for MSME units, labour laws and approvals to reduce compliance burden. AI-driven tax filing and compliance tools can reduce errors and delays. Policy changes should come with a transition period to allow MSMEs time to adapt. Export documentation and trademark approvals should be further digitised and fast-tracked through dedicated MSME help-desks. CII provides legal advisory support and training to help MSMEs navigate compliance. Large companies can mentor MSMEs and integrate them into structured supply chains. Fintech firms should develop affordable digital solutions to ease tax filings and documentation. By simplifying policies, leveraging digital tools, and offering industry mentorship, the compliance burden on MSMEs can be reduced, making them more competitive.
Bridging the gap in skilled workforce
MSMEs struggle to find skilled professionals in engineering, design, marketing and digital skills. The Skill India Mission and the Pradhan Mantri Kaushal Vikash Yojana, under which the government helps train youth in industry relevant skills, should expand sector-specific training programmes aligned with the needs of MSMEs. The government can offer tax incentives to MSMEs that provide apprenticeships and on-the-job training, making workforce development more viable.
MSMEs should collaborate with Industrial Training Institutes and skill centres to build a steady pipeline of trained talent. Encouraging digital learning through platforms like Coursera, Udemy, and LinkedIn Learning will help employees stay updated. A national MSME Skill Registry can connect MSMEs with trained professionals, ensuring a more skilled and stable workforce.
Market access and exports
Many MSMEs struggle with limited branding, marketing, and global market access. The ‘One District One Product’ scheme promotes unique MSME products, and platforms like Open Network for Digital Commerce should be expanded to help MSMEs reach out to a wider market. To facilitate exports by MSMEs, the Market Development Assistance scheme should provide financial aid for international trade shows, and customs procedures should be further digitised to speed up documentation and clearances. MSMEs should also have access to subsidised freight rates and dedicated export hubs to reduce logistics costs. Partnerships with e-commerce majors such as Amazon Global Selling and Alibaba can help them tap international markets. Forming MSME export clusters can also lower costs as they can share logistics and warehousing.
The writer is CMD, Jakson Group.
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