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India's Cash-strapped MSMEs Key to India's $5 Tn Economy Goal: Experts

BW Online Bureau Aug 02, 2024

The cash-intensive sector has an estimated Rs 10.7 lakh crore which is 5.9 per cent of the gross value added (GVA) of Indian businesses is locked up annually as delayed payments from buyers to MSME suppliers, according to a report by D&B and Game

India's cash-strapped micro, small and medium enterprises (MSMEs) can help propel India's USD 5 trillion economy target, experts stated at the Rizing Equality Entrepreneurship Forum In New Delhi. According to a report by EY, compared to global averages—the MSME sector in India lags when it comes to formal credit penetration as they are currently facing major challenges with a credit gap of USD 530 billion.

With the MSME sector expected to grow from the current 630 to 750 lakh units, there is an emerging need for more players to provide credit options to these businesses to address the gap. While speaking at the event organised by Rizing in partnership with Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), experts emphasised how important MSMEs and startups are to India's growth, innovation and job creation as the hidden heroes of the sector.

Speaking about the importance of collateral-free financing by saying, Sandeep Varma, Chief Executive Officer (CEO), CGTMSE said, “Collateral unavailability has always been a problem for small-scale entrepreneurs. With the backing of CGTMSE, if any loans to MSEs become bad, then as a guarantee, CGTMSE would provide 75 to 85 per cent coverage of the loan to the lender in lieu of collateral security.”

Notably, the forum also addressed issues faced by women entrepreneurs in the MSME space. Although they make up 20 per cent of registered MSMEs in India, women-owned businesses face obstacles with funding, networking, skill development and technology access. The goal of the CGTMSE, which was established by the Central government's MSME Ministry in collaboration with Sidbi, is to improve credit delivery systems, increase access to financing for disadvantaged entrepreneurs and stimulate the flow of institutional credit to MSEs.

"The constraints related to finance, networking, skill development and access to technology seem to, also, impact women entrepreneurs in the MSME space, yet they constitute about 20 per cent of the total registered MSMEs in India. While that's a number that can drastically improve, with the CGTMSE, women-owned MSMEs could be further bolstered to contribute to India's employment and make their mark," said Shrija Agrawal, Founder, Rizing.