BRIDGING THE MSME CREDIT GAP

Expanding financial access for MSMEs through innovation, policy support, and technology- driven solutions is crucial to unlocking their growth potential, boosting employment, and strengthening India's economic resilience.

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Micro, Small, and Medium Enterprises (MSMEs) are the backbone of India’s economy, playing a crucial role in employment generation, industrial output, and exports. Despite their importance, MSMEs face significant hurdles in accessing formal financial support.

According to the International Finance Corporation (IFC), India’s MSME sector faces a credit gap of approximately $530 billion, highlighting the urgent need for solutions to improve financial accessibility.

THE IMPORTANCE OF MSMES IN INDIA'S ECONOMY

MSMEs employ over 120 million people, making them the second-largest employer in India after agriculture. The sector contributes nearly 30% to India’s GDP, underscoring its significance in economic development. MSMEs contribute about 48% of India’s total exports, strengthening the country’s presence in global markets.

MSMEs are at the forefront of innovation, fostering entrepreneurship and technology-driven solutions.

THE EXISTING CREDIT GAP

Only 14% of the 63 million MSMEs in India have access to formal credit, while the majority rely on informal financing sources. The credit penetration in India’s MSME sector is 14%, compared to 37% in China and 50% in the U.S., indicating significant room for improvement.

The demand for credit among MSMEs far exceeds the supply, with many businesses struggling to meet eligibility criteria for loans.

CHALLENGES IN SECURING CREDIT

Many MSMEs struggle with credit access due to a lack of formal financial records, making it difficult for banks to assess their creditworthiness. Stringent collateral requirements further limit borrowing options, while high-interest rates, often exceeding 10%, make loans unaffordable.