SME Artha 2022 | Video: With surety bonds, MSMEs won’t need collateral for bank credit, says expert | The Financial Express

SME Artha 2022 | Video: With surety bonds, MSMEs won’t need collateral for bank credit, says expert

Credit and finance for MSMEs: According to the budget speech by finance minister Nirmala Sitharaman this year, the use of surety bonds as a substitute for bank guarantee will be made acceptable in government procurements to reduce indirect costs for suppliers and work contractors.

Eqaro Surety's Vikash Khandelwal on Role of Surety Bonds in MSME Credit, Underwriting Model, More

Credit and finance for MSMEs: Traditionally lending has been collateral-backed wherein MSMEs pledge assets as a guarantee to secure the credit, and so the underwriting followed by lenders has by-and-large been collateral-based. However, over the years, the landscape has evolved with the change in how business is done. As collaterals have been depleting with joint families breaking into nuclear families, banks have relooked at the need of putting up a large amount of collateral. Coupled with digitisation and cash flow-based type of lending, surety bonds are coming up as an alternative to underwrite MSME loans.

Subscribe to Financial Express SME newsletter now: Your weekly dose of news, views, and updates from the world of micro, small, and medium enterprises 

According to the budget speech by finance minister Nirmala Sitharaman this year, the use of surety bonds as a substitute for bank guarantee will be made acceptable in government procurements to reduce indirect costs for suppliers and work contractors.

Vikash Khandelwal who runs surety company Eqaro Surety has been involved in the endeavour to introduce the concept of sureties in the country over the last 6 years and has led the advocacy efforts towards surety guarantees being approved as accepted security for infrastructure projects. Khandelwal told FE Aspire at the SME Artha event recently about the opportunity at large in the surety guarantees market, its role in easing MSME credit access, and more.

Also read: SME Artha 2022 | Video: MSMEs are unhappy with the way banks have treated them, says FISME

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.

First published on: 30-10-2022 at 01:25:38 pm
Photos
8 Photos
Miss Universe 2023: USA’s R’Bonne Gabriel crowned in a glittering ceremony: See Stunning Photos
7 Photos
Nepal plane crash: Flight with 72 onboard crashes near Pokhara International Airport – Images
7 Photos
Business heads run at Mumbai Marathon, more than 50,000 people participate in event – See pictures here