The MSME sector is the powerhouse of the Indian economy and is rightly called the ‘engine of growth’. Among the many problems plaguing the sector, financing is among the prominent ones. The government is taking steps to address the issue and bring funds easily to small businesses.
MSME, which stands for Micro, Small & Medium Enterprises, form the foundation of the developing or developed countries around the world. MSMEs are the bulwark of any economy and MSME finance is vital to their growth and sustainability. According to the Confederation of Indian Industry (CII), the MSME accounts for a substantial 33.4% of India’s manufacturing output, and is also responsible for 45% of overall exports.
That’s not all, MSMEs also contribute 6.11% to the manufacturing GDP and 24.63% to the GDP from service activities. They are also a major source of employment for job seekers and provide a living to around 120 million people all over the country. The MSME industry is critical to the growth of the economy and its role is only set to grow, with a report by CII predicting the contribution of this sector to increase to 50% by 2024.
Problems facing MSMEs
The MSME sector contributes significantly to the Indian economy, despite that, they do not receive the kind of support that they should. They are largely unorganised and are marred by issues such as poor infrastructure, power cuts, unclear government regulations and low access to the latest technological advancements. These problems severely hamper the growth of this industry, but access to credit or MSME Loan is probably the biggest hurdle that MSMEs need to clear.
The finance problem
Finance or working capital is extremely crucial for the working of any business model. It is also sometimes referred to as ‘the lifeblood of business’; even with the dominance of MSME sector in the Indian economy, it is surprising that financing is hard to come by for these businesses.
The problem stems from the fact that most of these businesses run on cash transactions and therefore, they have low credit exposure, making them seem as a high-risk proposition to banks and other financial institutions. Apart from this, they also have low-quality bookkeeping practices that diminish their creditworthiness in front of lending institutions. NBFCs offers MSME finance in the form of business loans that are designed specifically to cater to the unique needs of small businesses.
MSME finance is the need of the hour and the government is taking steps to improve credit accessibility to small businesses. There have been special schemes rolled out by the Centre that promote financing for fledgling businesses such as Pradhan Mantri Mudra Yojana, Startup India and Stand Up India.
These schemes have helped businesses secure crucial funding for their day-to-day operations, and there are plans afoot to make the latest technology easily accessible to them as well. The recent demonetisation move also has forced these businesses to move away from their cash dealings, thereby nudging them towards better accounting practices. This, in turn, will help financial institutions gain a fair understanding of their creditworthiness.
These loans can be used for any purpose, be it for upgrading infrastructure, expanding operations, updating machinery or even increasing working capital. Enjoy a large amount (up to Rs. 30 lakh) at competitive interest rates with flexible tenors.
Availing finance is easy with minimal documents required for MSME loan. These loans are also collateral-free and can be easily opted for, with quick disbursal, especially vital during emergencies. NBFCs also offers Flexi Loan facility that allows for easy and convenient repayment by accepting only the interest component as EMIs and the principal at the end of the tenor.
Furthermore, avail pre-approved offers on business loans and other finance solutions that small businesses can turn to, when in need of emergency funds in the fastest manner possible. All you have to do is submit a few details here to check the offer available for you.