Credit and Finance for MSMEs: Asian Development Bank (ADB) is likely to provide further support to aid India's economic recovery including industrial support particularly to MSMEs.
Credit and Finance for MSMEs: Asian Development Bank (ADB), which has approved $1.5-billion loan to India to help tackle the Covid menace, is likely to provide further support to aid economic recovery including industrial support particularly to MSMEs. According to a statement by the Finance Ministry, the possible relief will be part of the ADB’s existing COVID-19 Active Response and Expenditure Support (CARES) programme offered to India. The support will be facilitated in terms of small businesses’ “access to finance through credit guarantee schemes, MSME integration into global and national value chains through enterprise development centres, and a credit enhancement facility for infrastructure projects,” the ministry said.
“This will be a great move but I doubt if micro and small enterprises would seek benefit from such schemes. Fundamentally, it is a complication for them. They are happy with the loans they are able to secure through collaterals from banks,” Vishwanath, Co-chairman, Industry Committee, PHD Chamber of Commerce and Industry told Financial Express Online.
The government has taken multiple steps in the past few weeks amid lockdown to support small businesses sustain the current period with ease in liquidity and access to credit. For instance, SIDBI had recently announced 90-day term loans to NBFCs, MFIs, scheduled commercial banks, and small finance banks for offering loans to small businesses. The loans to be offered are out of the Rs 15,000 ‘special liquidity facility’ that SIDBI received from the RBI to support MSMEs with their credit needs. The government is also looking at enhancing the credit guarantee limit to MSMEs to Rs 5 lakh crore from around Rs 1 lakh crore currently. 75 per cent of the credit is guaranteed under this scheme.
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“Medium enterprises may still seek benefit from it because they have some financial backup, have required teams and some understanding towards such measures by the government. Micro and small businesses not just have a lack of understanding but they aren’t too keen as well,” added Vishwanath. However, the Corona impact is likely to leave MSMEs bruised and battered as a staggering 74 per cent small businesses, as well as startups, are expected to either shut down or scale down their operations in the next six months, said a survey with 13,970 responses from startups and SMEs on LocalCircles. Only 13 per cent of such businesses were hoping to grow ahead. ADB had earlier approved the loan to provide budget support to the government to tackle the adverse health and socio-economic impact of the pandemic. “We will continue to engage with the government to strengthen the implementation framework and capacities,” said Kenichi Yokoyama, Country Director, ADB.