COVID-19 impact | Grappling with cash crunch, MSMEs look at private sources of funding
Since banks are also hesitant to lend, the alternate is to look at trust funds and other private sources to raise working capital.
May 06, 2020 / 03:55 PM IST
The lockdown has adversely impacted small businesses across India, with most of them facing acute shortage of working capital. While MSME Minister has hinted that there may be a relief package for MSMEs, businesses are now looking at alternative sources of funding.
"MSMEs lack reserves. Since banks are also hesitant to lend, the alternate is to look at trust funds and other private sources to raise working capital. However, the interest obligations would be extremely high," said Anil Bhardwaj, Secretary General, Forum for Indian Micro, Small and Medium Enterprises (FISME).
The government has issued a three-month moratorium over MSME loans. However, industry experts believe it may take more than 6 months for MSMEs to get back on track.
Track this blog for latest updates on the coronavirus outbreak
With around 63.4 million units across India, MSMEs contribute around 6.11 percent of the manufacturing GDP and 24.63 percent of the GDP from service activities as well as 33.4 percent of India's manufacturing output.
Meanwhile, Small Industries Development Bank of India (SIDBI) plans to lend Rs. 50 lakh to 1 crore at an interest rate of 5%, without guarantee or mortgage for MSMEs involved in producing essential goods.
FISME and other SME associations have also sought a Rs. 3 lakh crore relief package for MSMEs from the government. This includes payment of Salaries, fund of funds, credit guarantee scheme, etc.Follow our full coverage of the coronavirus outbreak here