Money makes the world go round and it causes the world of MSMEs to spin even faster. Finance is a quintessential requirement of any business and the need for the same for a micro or a small enterprise cannot be stressed enough. On one hand an uninhibited source of finance can make a business blossom while a constrained one can make a business struggle. Many a promising business has failed to get of the ground because of the lack of finance, which is a big disappointment. According to Mr Uday Kumar Varma Secretary, Ministry of MSME “bankers have maintained that MSME lending is growing 20-22% year-on-year, even though the overall demand for credit appears to far outstrip the credit flow” on the flip side authorities seem to be working overtime to get the situation better for all concerned.
One though must understand as to why MSMEs have to struggle with finances considering that there are many sources available for availing finance. Sources include banks, large organisations and small merchants amongst others. MSMEs generally have no or very little track record which acts as a bottleneck in their way to getting reasonable access to credit. The banks while looking to lend to MSMEs are looking for collaterals to safeguard against a possibility of Non Performing Assets (NPA), which is not always possible for MSMEs to provide.
Even the finance that the organisations are able to get is charged at exorbitant rates which are not always rational. In fact Mohd Yunus lead Grameen bank which won Nobel Prize in 2006 for peace has charged rates close to 20% for microfinance. It is not as if someone does not want to help organisations in the sector but sometimes the system is such that one cannot do much even if one tries. One thing that can help in getting the cost of credit down is the credit ratings. Good credit ratings can separate grain from chaff and would provide lenders confidence in their lending. In fact an ‘Expert Committee on Small Enterprises’ was constituted under the chairmanship of Shri Abid Hussian which has recommended that SIDBI in co-operation with national credit rating agencies should promote the establishment of local credit rating agencies in the identified SSE clusters.
People in the sector sometimes get emotional and blame Government for their perils. One though cannot blame the Government for the lack of effort. Over the last few years the authorities have taken steps designed to help MSMEs. The Government of India at the national level has set up institutions which will help MSMEs come out stronger financially.
The authorities recognize that there exist a problem and have taken measures to solve the problem at various levels. The Prime Minister’s task force set up under the chairmanship of Mr T.K.A Nair has also recommended many steps which would encourage many MSMEs. The task force has pointed out the following recommendations.