Currently, there are more than 43 million micro, small and medium sized business enterprises (MSMEs) in India, employing about 40% of the total population. With its contribution to GDP of around 8%, these MSMEs are not only helping in financial development of the country, but also in improving the socio-economic status of the people.
However, at the same time, they are also struggling to flourish owing to certain challenges such as lack of accessibility to information and knowledge, inadequate intellectual property protection, insufficient training for employees, and lack of access to alternating funding avenues which can lead to shortage of working capital and under-developed business infrastructure.
To help the MSMEs overcome these challenges and actively contribute to the economic growth of India, the government along with many private financial institutions have decided to support them through MSME loan. Read more to know about few such initiatives in detail and how it’s helping the MSMEs to grow their business:
Easy collateral-free credits
Restricted access to financial services was amongst the top challenges faced by MSMEs in India. However, the situation has vastly improved in recent times with many government schemes like MUDRA loans, Stand Up India, NSIC Subsidies etc. offering hassle-free MSME loans at affordable interest rates. Also, the Credit Guarantee Scheme will ensure the losses incurred by the lender will be covered, in case the borrower is unable to repay the loans.
Also, with many private lending institutions providing collateral-free financing at competitive interest rates, the road has become much smoother. For example, Bajaj Finserv Business Loan allows you to borrow financing of up to Rs. 30 lakhs in as quick as 24 hours. You can use these funds to invest in infrastructure, procure inventory, upgrade the machines, and expand your business operations.
To aid the MSMEs with their technological upgradation, the government has launched ‘Credit Linked Capacity Subsidy Scheme (CLCSS)’ to provide subsidized finance to small business houses. Under the scheme, eligible business owners are provided with 15% subsidy on business loan up to a maximum of Rs. 15 lakh.
Additionally, another government initiative called ‘The Technology and Quality Upgradation Support (TEQUP) scheme’ offers 25% subsidized capital to MSMEs, encouraging them to adopt energy efficient technology. It will bring down the overall production costs for them by reducing their power bills.
The government has been supporting innovative ventures and accelerating business launches by setting up business incubators. These incubators provide financial assistance which cover up to 85% of the project costs (maximum Rs. 8 lakh per idea/unit). To help MSMEs manufacture quality products and improve their production process, the Ministry of MSMEs also offer tool rooms equipped with modern state-of-the-art machinery and equipment.
Intellectual property rights
To raise awareness about the intellectual property rights among the MSMEs, the government has launched various schemes under ‘National Manufacturing Competitiveness Programme (NMCP)’. This will ensure that all business houses are taking essential measures to ensure that their ideas and business strategies remain free from copyright issues.
Skill development programmes
To enhance the productivity and marketing capabilities of the MSMEs, the government has introduced the ‘Micro and Small Enterprises Cluster Development Programme (MSE-CDP)’. It organizes skill development and employee training programmes to inculcate general awareness, motivation, trust building, marketing and entrepreneurial skills etc. through counselling sessions, seminars, workshops and training projects.
MSME credit ratings
In order to access credit easily and at cheaper rates, MSMEs need to lend assurance about their capabilities and creditworthiness. The ‘Performance & Credit Rating Scheme’ implemented by the government provides a trusted third-party opinion for the same, through rating agencies like Credit Rating Information Services of India Limited (CRISIL), Credit Analysis & Research Limited (CARE) etc.
These agencies provide suitable credit ratings to MSMEs by analysing their credit history, loan repayment behaviour, and current debt utilisation ratio etc.