· MSME sector is the nursery of entrepreneurship contributing substantially to the GDP, manufacturing output, exports as also is the highest generator of employment. However, this vital sector is at the crossroads in India facing numerous challenges primary being access to credit, said Mr K H Muniyappa, Minister of State (Independent Charge) for MSMEs, Government of India, while addressing the Conference on MSME Funding – Opportunities & Challengesorganized by Confederation of Indian Industry at New Delhi.
Mr Muniyappa shared that to ensure better flow of credit to MSEs by minimizing the risk perception of banks / financial institutions in lending without collateral security, the Government is implementing the “Credit Guarantee Scheme”which provides guarantee cover of up to 85% on collateral-free credit facility extended by lending institutions to new and existing MSEs for loans up to Rs.100 lakh and has provided guarantee cover for total sanctioned loan amount of Rs. 54,322 crore till April 2013. He further stated that the capital markets can play a crucial role in helping MSMEs improve their visibility and raise capital for their growth and expansion offering an effective way to improve financial inclusion.
The minister shared details of various schemes aimed at technology up-gradation, setting up of mini tool rooms under PPP mode, creating market linkages, entrepreneurship development, etc. initiated by the Ministry to enhance competitiveness of the MSME sector.
· “A strengthened and revitalised MSME sector can play pivotal role in bolstering the Indian economy” said Mr R K Dubey, Chairman & Managing Director, Canara Bank, while addressing the representatives of the MSME fraternity from various parts of the region.
· “The Banks, Financial Institutions (FIs) and Non Banking Financial Corporations (NBFCs) should come forward and take the responsibility to help the MSMEs with easy and cheap credit within strict timelines and enabling schemes for the growth of MSMEs”, he added while announcing the launch of Term Loan for Risk Capital Assistance (Quasi Equity) for MSMEs.
· “MSMEs are the locomotives of growth for any economy and forms the bottom of the pyramid of the Indian economy. The sector needs to be nurtured and supported with favourable policies of the government and the regulatory bodies, backed by sound infrastructure and transportation facilities, easy and cheap credit and given awareness about latest processes and technologies in order to help them revitalise and sustain themselves and the whole economy in turn” iterated Mr Deep Kapuria, Chairman, CII National MSME Council.
Mr Kapuria further opined that enactment of the Factoring Regulation Act 2011 and subsequent allocation of Rs 500 crore to SIDBI (in the Union Budget 2013-14) to set up a Credit Guarantee Fund for factoring are certain milestones which are expected to change the way the MSMEs finance their receivables.
· “Dedicted SME exchanges have been established to facilitate the MSME sector, but these have not received desired response and hence there is a need to refine our efforts primarily in terms of criteria of listing, transaction costs, etc.”,said Mr H P Kumar, Chairman & Managing Director, National Small Industries Corporation. He also advocated for fast-track consideration of proposals received from MSMEs as the same has also been recommended by all the committees and commissions constituted to take care of the needs of the MSME sector particularly with respect access to credit.
· To tackle the challenges being faced by MSMEs, there is a need to establish a potential strategy in order to improve linkages and coordination between the Government, Industry and Academia. Dedicated stock exchanges established as per the recommendations of the Prime Minister’s Task Force though has created alternate sources of funding for SMEs, however, there is a need to considerably bring down the threshold limit and cost of transaction enabling the MSME fraternity to leverage its benefits optimally, said Mr Jyoti Prakash Gadia, Convener, CII Delhi State Council. He further shared that traditional financial channels such as commercial banks hesitate to consider financing SMEs to keep their loan accounts in good health and away from litigations.
· “The social contribution made by SMEs is even more significant than its economic contribution. Within the SME sector, the small sector serves as a seed-bed for nurturing entrepreneurial talent and originating units to eventually grow into medium and large enterprises. Also, lack of access to finance and timely credit as well as escalating cost are the primary reasons for under-utilisation of the manufacturing capabilities of SMEs. The promotion of SMEs, therefore, becomes a major area for policy focus, stressed Mr Naveen Munjal, Chairman, CII Delhi State Council while welcoming the dignitaries and delegates.
· “CII believes that MSMEs are the backbone of the Indian economy and we are very committed to the growth and development of this vital sector. CII assists its MSME members through a vast plethora of services and platforms and today’s conference was one such initiative”, shared Mr Pikender Pal Singh, Regional Director, CII Northern Region.bbHe further shared that CII Northern Region is working on institutionalizing a regional MSME help desk which would cater consultancy services on various aspects such as finance, taxation, emerging trends in technology, etc.
MSMEs not only promote economic development but also lead to equitable development. They account for generating the highest rate of employment. They also account for a major share of industrial production and exports.
The sector is traditionally dependent upon debt financing. Despite several directives by Government of India to boost MSME lending, Banks / Financial Institutions are selective and have remained extremely cautious in lending to them. The existing structure of capital markets in India makes it difficult for MSMEs to raise capital due to higher cost.
It is in this context, CII organized MSME funding - Opportunities & Challenges on 23 May, 2013 at New Delhi which strived to understand the evolving trends in MSME Funding focusing on credit appraisal, good governance, receivable financing, and alternative funding opportunities like acquisition financing, mezzanine funding, equity financing and many more issues.
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