KOCHI: The state government’s aggressive drive to promote entrepreneurship through micro, small, and medium enterprises (MSME) is yielding desired results, with bank lending to the sector set to cross Rs 1 trillion (Rs 1 lakh crore) this fiscal.
Total loans outstanding to the MSME sector in Kerala stood at Rs 92,175.63 crore as on December 31, 2024, a robust growth of 38% from Rs 66,876 crore in December 31, 2022, as per the data released last week.
The growth is significant as it indicates that credit is more accessible to the sector now.
Lending to the MSME sector had shown an anaemic growth of just 1.22%, from Rs 60,880 crore to Rs 61,623 crore, in a year until December 2020 and 2021, respectively. “We expect the advances to MSMEs to cross Rs 1 lakh crore by the end of this financial year. Earlier, it was very difficult to get bank loans. We have now seen a big difference in the banks’ approach towards the sector in recent years,” said A Nizarudeen, state president, Kerala State Small Industries Association.
Rs 54.2 lakh crore MSME loans sanctioned nationally in 2023-24
MSMEs are considered the engines of employment generation and provide livelihood opportunities to a large section of the population.
The state government launched the ‘Year of Enterprises’ in 2022-23 to promote entrepreneurship, recognising the important role MSMEs play in socio-economic growth and in creating job opportunities.
“We can say this has yielded results. However, most new units have come up in the retail and services sectors. We need to ensure more units come up in manufacturing sector,” he said.
This is validated in the State Level Bankers Committee (SLBC) data. Of the total 10.7 lakh MSME accounts at the end of 2024 calendar, manufacturing constitutes just 2.64 lakh accounts. In comparison, there are nearly 5 lakh accounts in the services sector and 3.12 lakh accounts in retail trade.
However, the total MSME loan exposure in Kerala pales in comparison to the national data. MSME loans to the tune of Rs 54.2 trillion were sanctioned in the country in 2023-24, a 19.3% growth from the year before.
P M Mathew, senior fellow and director, Institute of Small Enterprises & Development (ISED), said the Kerala data should be taken with a pinch of salt. “What we are seeing here is sole ownership businesses, which means most of the new MSMEs are single-owner ventures. These ventures do not contribute much to economic linkages, neither do they generate jobs,” he said.
While lending is robust, small traders and retailers said the entry of big supermarkets and e-commerce giants has immensely affected their businesses in recent years. “E-commerce giants are able to provide lower prices to customers as they get concessions from manufacturers. Similarly, the entry of supermarket chains even in small towns has affected neighbourhood grocery shops,” said Raju Apsara, state president of Kerala Vyapari Vyavasayi Ekopana Samithi, adding, “We want the government to impose a small cess on e-commerce giants to ensure a level playing field,” he said.