While different funding avenues are available for MSMEs, a lack of awareness and a gap in proper handholding for entrepreneurs are the key reasons behind the sector’s existing financial woes, concluded industry leaders while deliberating on the roadmap for MSMEs’ financial inclusion, as part of CII’s Regional Conference on MSME Financing.
Speaking on the occasion, Sanjay Goyal, General Manager, Small Industries Development Bank of India (SIDBI), said, “There certainly exists a gap between an ‘an aspirant borrower’ and ‘a ready, bankable one’. If MSME stakeholders, who are part of the ecosystem, could bridge this gap, a lot of financial misery of the segment could be avoided.”
Calling the Government’s 59-minute loan scheme, a “giant step” in this direction, he said, SIDBI offers many digitally-enabled tools that facilitate a faceless financial decision making by lenders, enabling a loan decision to be entirely taken on the merit of a borrower’s business plan, instead of his/her face. This, in a way, is the spirit of the observation made by the Minister for MSME Giriraj Singh when he said, policy and intent need to go hand in hand to help address MSMEs funding woes, he added.
According to Goyal, one thing that stands out in the Govt’s ambitious ‘Stand Up India’ plan is that it duly acknowledges that the nation’s entrepreneurial ecosystem is not just built by the lenders and borrowers, but also by knowledge partners, handholding agencies and the skill training institutions -and that’s the holistic view, needed to be promoted in coming times.
Stressing on the critical role of MSMEs in the country’s economic growth story, Kiran Pal Singh, General Manager, Bank of Baroda (BoB), said that today’s household brands – Tata and Birla were once MSMEs too, and a developing economy such as that of India cannot grow holistically without addressing the aspirations of its SMEs.
And, with this guiding philosophy, the public sector lender, has tied up with Trade Receivables Discounting System (TReDS) platforms to offer many MSME centric schemes, informed the BoB chief.
“Today, the main issue for an MSME’s is timely access to credit. Under our Supply chain and value chain finance-based solutions being offered via TReDS, the rate on loans are not decided on the basis of the rating of an MSME but on the basis of the company it is supplying goods to,” he said.
On the same note, Ramesh Bisht, Chief Financial Officer, M1Exchange, a TReDS platform, spoke about how the online exchange, with 25 banks onboard, facilitates discounting of invoices and Bills of exchange on a pan India basis. “Many MSMEs told us that they could accelerate their turnover by up to three-four times, if they could secure liquidity on time. So, by collecting MSME’s receivables faster, facilitating bidding by multiple banks, we, thereby, actualise competitive financing for MSMEs, said Bisht. He added that since the platform’s inception in April 2017, approximately Rs 2000 crore of funds, has been disbursed to the MSMEs.
The Government’s recent announcement that all corporates having a turnover of more than Rs 500 crore, need to mandatorily register themselves on TreDS, has resulted in a lot of traction for such platforms, he added.
Rajiv Siwach, General Manager, National Bank for Agriculture & Rural Development (NABARD) talked about the broad mandate of the apex development financial institution, and how its various schemes such as Dairy Entrepreneurship Development Scheme (DEDS), and those focused on Providing loans for construction of warehouses, cold chain infrastructure, agri-marketing tools and agri-clinics are playing an enabler for the rural-based MSMEs.
Concluding the session, Ramesh Babu, Group Executive Vice president, Yes Bank Ltdmentioned various industry-specific, and credit exposure specific MSME schemes currently on offer by YES Bank. “We believe, a company with a Rs 25 crore turnover, would largely exhibit a few common characteristics. Such firms might struggle with current ratio, a mismatch in long-term – short financial needs etc. “For such firms, making use of our digitally enabled solutions, we can assess their credit worthiness and credit exposure value upto Rs 5 crore, in a couple of hours.”
Apart from MSME sector representatives, the event saw the presence of a large number of government officials, regulatory authorities, financial Institutions and insurance agencies. The key partners for the conference included the Ministry of MSME, NSIC and the National SCST Hub- a Ministry of MSME Initiative.