A Study on MSME – Availability of Finance and Way Forward in India

Abstract

Objective: The research aims to assess the Credit Gap to MSME and also to measure the impact of Digital Finance to MSME. The research also aims to suggest measures to increase Finance to MSME in India.

Methodology: The Study was based on both Primary and Secondary Data. The secondary data was obtained from several credible sources of data, research literature, industry publications. The primary data was obtained by conducting primary interviews for evaluating size of the MSME finance market and the results validated with various stakeholders.

Findings: The overall finance demand by MSME is 69.30 trillion, with 70% of the requirement attributed to meeting working capital requirements. It is imperative to address huge credit gap that exists in meeting urgent fund requirements. Non availability of MSME - focused products.  FinTech’s are using technology to eliminate market inefficiencies, making lending more accessible, affordable, and contextual for MSMEs. The shift brought about by digital lending is changing the optics of MSME lending. What was once an onerous and time-consuming task is becoming an easily accessible business decision with the synergy of new age players, banks and government regulations.

Conclusion: Regulated entities (RE) are to provide a Key Fact Statement (KFS) to the borrower before the execution of the contract • RE’s must disclose all inclusive costs of digital loans in form of annual percent rate (APR). Loan disbursals and repayments are required to be executed only between the bank accounts of the borrower and the regulated entity without any passthrough/pool account of the loan service provider or any third party. RE’s must ensure that all loan service providers engaged by them have a suitable nodal grievance redressal officer to deal with digital lending-related complaints • Any complaint must be dealt within 30 days, borrowers have option to escalate it to the Ombudsman.