Despite continuing efforts of the government to channelise the formal financing to small businesses, a survey shows though credit availability has improved, the quantum is much lower than what they need.
This segment saw Rs 33.6 lakh crore in bank credit under the Mudra scheme over the past one decade. However, more than 40% of such businesses feel the segment need more fund inflow. In an interview to a business daily, Prime Minister Narendra Modi has said as much as `33.65 lakh crore of credit was extended to 52.37 crore loan accounts under the scheme, launched in April 2015. This he said, “celebrates 10 glorious years of empowering small and micro-entrepreneurs across India.”
However, the ground level reality and the high number seems to be not in synch if a survey by the sectoral lender Sidbi is any indication.
“Though 80% of the 1,200 respondents of the survey have reported credit availability, the adequacy of the credit being given continues to be a concern, with 40% of manufacturing and 41% of services companies stating that the finance availability doesn’t meet their needs,” the Small Industries Development Bank of India (Sidbi) said on Tuesday in its MSME outlook survey for March quarter.
Majority of the survey participants are optimistic about improved credit access in the year ahead, with only nearly 20% continuing to express concerns.
The cost of finance remains a pressing issue, with 40% of MSMEs across sectors reporting higher borrowing costs during the survey.
The survey consists of two indices — the MSME business conditions index and the business expectations index, which help policymakers and stakeholders track the evolving business environment and expectations of the sector. The survey reflects a broadly optimistic sentiment among participants, underpinned by improved business conditions and forward-looking growth plans.
The business conditions index for Q4 stands at 60.82, up from the previous quarter’s 58.30, indicating a sustained healthy business environment across the manufacturing, services, and trading sectors.