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Lack of awareness of credit schemes biggest challenge in solving credit issue for MSMEs, says expert

Credit and Finance for MSMEs: “There are lot of schemes announced by the Reserve Bank of India (RBI), banks, SIDBI, MSME Ministry, others for public procurement, credit, etc., but the biggest problem is around lack of awareness,” said Mukesh Mohan Gupta, President, CIMSME.

Lack of awareness of credit schemes biggest challenge in solving credit issue for MSMEs, says expert
According to the UK Sinha Committee in June 2019, the overall credit gap in the MSME sector stood at Rs 20-25 lakh crore. (Image: pexels)

By Parvathy Pillai

Credit and Finance for MSMEs: The biggest challenge in bridging the credit gap in the MSME sector or enabling credit access to micro, small and medium enterprises is their lack of awareness about various credit schemes by the government, Mukesh Mohan Gupta, President at MSME association Chamber of Indian Micro, Small & Medium Enterprises (CIMSME) told FE Aspire.

“There are lot of schemes announced by the Reserve Bank of India (RBI), banks, SIDBI, MSME Ministry, others for public procurement, credit, etc., but the biggest problem is around lack of awareness,” he said on the sidelines of the MSME Business Conclave organised by FE Aspire in June. According to the UK Sinha Committee in June 2019, the overall credit gap in the MSME sector stood at Rs 20-25 lakh crore.

The other challenge has been around the ease of access to different credit schemes by the government. To promote digital access to the schemes on a common platform, the government had launched the JanSamarth portal in June this year to provide access to 13 different credit-linked schemes for MSMEs, agriculture, education, and other segments. As a one-stop digital portal, JanSamarth allows for online application of loans and digital approval as well.

“MSMEs, particularly the micro enterprises, were not able to even approach the branch manager earlier. They were not able to even submit their loan applications. With JanSamarth portal, MSMEs can check their eligibility for a loan and track the status of their loan application as well,” said Gupta.

Delayed payments from government and private buyers is another challenge MSMEs face leading to working capital complications and impacting business competitiveness. According to a report released by the non-profit organisation for promoting entrepreneurship, Global Alliance for Mass Entrepreneurship (GAME) and analytics company Dun & Bradstreet (D&B), the issue of delayed payments is estimated to have Rs 10.7 lakh crore, amounting to 5.9 per cent of India’s gross value added (GVA), locked up annually.

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Gupta said buyers should be educated on prompt payment so that small businesses can become medium enterprises and then evolve into large corporates.

“There are provisions in the Micro, Small and Medium Enterprises Development Act, 2006 and under the Insolvency and Bankruptcy Code, 2016 that aid MSMEs with timely payments,” said Gupta. He further called for MSMEs to register themselves on the Udyam Portal and get their Goods and Services Tax Identification Number (GSTIN) printed on their invoices along with their Udyam registration numbers to charge interest on payments made after 45 days under the law.

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