PolicyNext MSME summit: Access to finance an issue despite several schemes for MSMEs: FISME's Anil Bhardwaj

The government has taken measures for easing access to credit for MSMEs, a release by the ministry in March this year points out.

Access to finance is an issue despite several MSME schemes that have been floated by the government, said FISME Secretary General Anil Bhardwaj.

“The Reserve Bank of India's report in 2019 said credit requirement was Rs 37 lakh crore; out of that all institutions combined provide up to Rs 21 lakh crore, which leaves us with a huge credit gap,” Bhardwaj added.

He was speaking at Moneycontrol PolicyNext MSME summit in Delhi on June 28.

The government has taken measures for easing access to credit for MSMEs, a release by the ministry in March this year points out.

Some of the measures taken by the RBI for improving the flow of credit to the MSME sector include Priority Sector Lending Guidelines, Collateral requirements of MSME units, Trade Receivables Discounting System (TReDS) and other special frameworks, introduced since 2019 to enable banks to restructure their MSME exposures, the release added.

While a number of schemes have been issued, it is the documentation processes and unawareness of schemes that become the hassle, the expert panel discussing scaling up MSMEs pointed out.

“Standard prescription is there should be literacy, financial awareness about credit schemes… Almost 80-90 percent of MSMEs operate from unauthorised spaces. Because of this they find it difficult to access finance from financial institutions, and are unable to access schemes,” Bhardwaj observed.

Giving a banking perspective, Ambikanand Jha, GM & Zonal Head, New Delhi, UCO Bank said, “For bankers, MSMEs are one of the core areas. If MSMEs make bankable proposals, credit access will be made available.”

However, documentation poses the biggest issue.

“It is impossible for people in India to get their names and addresses same in all documentation for the KYC process. Thus 22 percent of loan applications by MSMEs get rejected at the KYC level itself. It is improper documentation or improper filing that rejects applications,” points out Jyoti Prakash Gadia, MD, Resurgent India.

There is a clear gap between eligibility of funds and capability of MSMEs to access them, said Amit Kumar, Founder and CEO at MSMEx.

Asking for a loan is not a right. The applicants need to find out the right way to go about it. Financial literacy is important, he added.