Hyderabad: In a downturn when tighter monetary conditions affect governments and companies, small and medium sized businesses bear brunt as the resultant delay in bill payments squeezes these enterprises financially. Though several measures were taken by the government and the Reserve Bank of India, micro, small and medium scale enterprises (MSMEs) are perennially starved of institutional credit.
According to an estimate by the International Finance Corporation, MSMEs in India face a credit gap of $400 billion as lenders shudder to underwrite due to paucity of data. Though the Open Credit Enablement Network (OCEN), which provides a framework for the democratisation of lending as against the current lender preference for large companies, was launched in 2020, it did not see a success along the expected lines similar to Unified Payments Interface (UPI).
While bankers were said to be worried about sharing their turf with others, a survey conducted by IIT Delhi graduates led by Aghamarsh Chetluru and Lohith Kumar Alladi shows that awareness about OCEN is pathetically low, with 96 per cent of them being ignorant about it.Though the government has been encouraging MSMEs to graduate to the higher level of efficiency to compete in the global market, the survey revealed that only 36 per cent of them have either applied for capital loans such as term loan or equipment loan. The largest percentage of MSMEs — 40 per cent — have no outstanding loans.
According to the survey, the second largest number of them — 37.5 per cent — have availed loans to address their working capital requirements.The total number of MSMEs in India is 6.34 crore and together are the largest employer in the country. It is most important for the survival of the country’s economic as well as social fabric because the bar for employment at MSMEs is not high, which allows even average skilled youth to gain employment and upgrade his skills.
The survey shows that 23 per cent of the MSMEs who availed credit had a loan size of Rs 10 lakh and Rs 50 lakh, which hints that the small and medium scale enterprises have got most of the loans. The micro enterprises, which don’t have long credit history, languishing at the bottom.Another factor that suggests a difficult credit scenario among MSMEs is that 55 per cent of them are dictated by convenience in choosing their banking partner, even if the interest rate is a few notches higher than others.
