Mumbai, 3 September 2024

 

“A  joint approach is required by the financial sector to address the challenges faced by MSMEs so that the financial needs of the sector are dealt with more efficiently,” Shri Ashwani Bhatia, Whole-Time Member, Securities and Exchange Board of India (SEBI), stated this in his special address at the two-day ‘Financing 3.0 Summit: Preparing for Viksit Bharat’ in Mumbai on 2nd September 2024. Shri Bhatia in his address about ‘Unlocking the True Potential of MSMEs: Financing Options,’ highlighted that MSME financing depends on multiple sources ranging from traditional banking to alternative financing avenues such as equity.

Talking about how finance and technology have emerged as twin engines for providing timely and affordable finance to MSMEs, Joint Secretary, Ministry of Micro, Small and Medium Enterprises (MSME), Government of India, Shri Ateesh Singh said that both would help unlock the true potential of the sector. The credit gap in the sector is a major issue that needs to be analysed through a cluster approach along with the creation of new risk assessment models.

Chief Executive Officer, Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), Sandeep Varma, emphasized that the number of people approaching banks for credit is much higher vis-à-vis the number of entrepreneurs who are able to secure credit, primarily due to the lack of collateral. He further highlighted the importance of credit guarantee schemes like CGTMSE, which are crucial to providing essential support to MSMEs, especially those without collateral.

Highlighting the changes brought about by the adoption of technology and the availability of new and large sources of data, Chairman, Mastercard India, Rajnish Kumar, mentioned that these new developments have brought significant improvement in financial institutions’ ability to predict default through much improved assessment of the borrowers’ ‘Intention to Pay’ and ‘Capability to Pay’ metrics.

Managing Director and CEO, Receivable Exchange of India Pvt Ltd (RXIL), Ketan Gaikwad, highlighted the growth seen by trade invoice discounting platforms and mentioned that not only have these platforms improved access to finance for MSMEs, but they are also being increasingly adopted by corporate as they see cost benefits in using these platforms. He also emphasized that the default rate through these platforms is minuscule compared to the traditional financial system.

CEO and Executive Director, Nucleus Software, Parag Bhise, emphasized the role played by technology in recent developments like new financing models for MSMEs and the Trade Receivables electronic Discounting System. He added that technological development has lowered the cost for smaller players and startups, thereby allowing credit access to a large number of MSMEs.

Global Leader – Fintech & India Leader – Financial Institutions, Boston Consulting Group, Yashraj Erande, moderated the session and put into context the huge gap in the formal credit accessed by MSMEs.

 

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PIB Mumbai | DL/ DR

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