Lending to MSMEs has been significant to propel the Indian economy as they play a crucial role being the small player of financial ecosystem. NBFCs have remained key lender for this sector in the last few years providing a range of ticket size loans.
Their business was supported significantly by the additional government support through credit guarantee schemes. The government had brought the credit guarantee scheme during the Covid times to support the small businesses which were extended in the last two Union Budgets.
This year’s extension is likely to see an infusion of around Rs 9,000 crore into the corpus.
A report card of MSME business
As per a recent SIDBI-CIBIL Pulse report, the credit demand of MSMEs has increased by about 1.6x times the pre-Covid phase.
The digital lending market for MSMEs has estimated potential between $80 billion to $100 billion by 2023. There are a few factors that remain a matter of concern for the lenders in the MSME sector. These are – long loan processing time, lack of transparency, lengthy documentation and high cost.
According to IFC estimates in 2021, the total addressable credit gap in the MSME segment is Rs 25.8 trillion. Out of 63.3 million existing MSMEs across India, only around 15% had access to credit from formal financial institutions.
As per the official data for Financial Year 2023, number of Udyam-registered MSMEs closed has jumped from 2,870 as of mid-July. The number spiked from 8000 in the first week of December to 10,729 till February first week.
A total of 10,067 MSMEs were shut between 2016 and 2022. Interestingly, as per UAM and Udyam portal data, out of these 10,067 MSMEs, 9,667 were shut between 2019 and 2022.
The data further said 6,222 Udyam MSMEs were shut in FY22 with 42,662 people losing their jobs. From July 1, 2020 till March 31, 2021, 175 units were closed with 724 jobs lost.
A steep loss for women entrepreneurs
Post-Covid, as many as 3,057 MSMEs led by women entrepreneurs have shut down between July 1, 2020 and February 2, 2023.
It is to be noted that during the same period, 25.71 lakh MSMEs registered on the Udyam portal were led by women entrepreneurs. Total of 1.38 crore MSMEs were registered on the portal in that tenure.
Women leaders in MSMEs have a huge chunk as according to the MSME Ministry’s 2021-22 annual report, out of 6.33 crore MSMEs 20.37% were owned by women.
Recently in Rajya Sabha, Minister of State (MoS) in the MSME ministry Bhanu Pratap Singh Verma said wef December 1, 2022, the concession of a 10% guarantee fee and enhanced guarantee coverage of 85% against 75% in other cases has been introduced in respect of loans given to women entrepreneurs under Credit Guarantee Scheme for Micro and Small Enterprises (CGTMSE).
Women want to do jobs, but there are no jobs: Chetna Gala Sinha
Earlier in an exclusive interaction with ETBFSI, Chetna Gala Sinha, Founder and Chairperson of Mann Deshi Bank had discussed the challenges faced by the women entrepreneurs.
“A lot of women have started their businesses or have become an entrepreneur because they have no choice. They may want to do jobs but jobs are not available in rural India particularly,” she said.
“When you see a huge number of women coming in this sector, it is very important to see how much is the drop out rate. Why they drop out, what are the issues and challenges around it are important to understand.”
“Number one, are they getting enough capital at the rate and time they want? If they don't get credit or capital on time, it is not going to help. That is one big challenge they face.”
“Second challenge came out post-Covid, and women found its solutions also, is that where will they market the product because villages are fragmented and how do they aggregate the product, how do they provide the market and create those platforms? For this, women have been using digital platform.”
Talking about supply-side, she said, “Women want to expand and flourish their business but again the supply side do not have enough information on how to cater the product to these women who are on the remote locations.”
Read More at https://bfsi.economictimes.indiatimes.com/amp/news/industry/women-entrepreneurs-in-msmes-report-card-and-expert-take/98174709