Experts lay out various modules in addressing credit gap

CII Visakhapatnam organized a Seminar on MSMEs Financing with the theme of Enhancing MSME Competitiveness through Bridging the Financial Gap in Visakhapatnam recently.

Giving the Keynote Address Dr Rajendra Sinha, Founder, MSMEadvisor.com addressed some of the difficulties faced by Indian MSMEs in getting finance.

He spoke about the RBI-appointed UK Sinha Expert Committee on MSMEs, which cited three causes for the big credit gap in its 2019 report. The Committee recommended that the Banks should develop customised products to assess the financing requirements based on expected cash flows.

Dr Sinha added that banks need to build their ability to capture cash flows of MSME borrowers on a regular basis, for which tie-ups with Industry Majors / Aggregators / Online platforms to be done by the Banks.

He said banks have since started giving focus on the Cash flow lending, which helps them to well understand the repayment capacity of the MSMEs and schedule the repayments suitably. 

For small businesses QR code basis capturing of cash flow has been getting importance. Also, Banks are extending their reach out which needs further speeding up.

RBI’s Trade Receivables Discounting System (TReDS) has been helping out not only the big businesses but as well the MSMEs. 

Bill Discounting is an important tool for working capital financing for MSMEs as the seller on registering on Receivable Exchange of India (RXIL) gets the payment immediately when their invoices are purchased by the Banks/FIs on the online TReDS platform.

Mr G Srinivasa Sarma, AGM & Branch In-Charge, SIDBI Visakhapatnam during his address said being able to effectively assess the SME’s ability and willingness to pay is the biggest challenge for the majority of lending institutions. 

From a technological perspective Mr Sarma said there should be a small credit assessment-based SME lending procedure that is both flexible and affordable enough to accommodate the various SME business models.

He mentioned that SIDBI has tailor made products such as express loans, ARISE, STHAPAN, 4E and green finance schemes to address the issue of financing of MSMEs and SIDBI would like to continue to play an important role in strengthening the ecosystem for strengthening MSME resilience. 

Going forward, more can be done to unlock the potential of partnership of SIDBI and MSMEs for an inclusive future where no one will be left behind.

Dr PP Lal Krishna, Chairman, CII Visakhapatnam said with around 6.5 lakhs MSMEs, this sector contributes to nearly 30 percent of the Indian GDP and said that the MSME sector in India has exhibited a strong performance and protected the economy from global adversities and shocks in the past.