Entrepreneurs require capital to start up and to grow. Limited access to capital at reasonable cost is a major deterrent to entrepreneurship and the growth of MSMEs.
Micro and Small enterprises are invariably exploited by larger buyers – both governments and large firms – when it comes to prompt payments. Delays of 6 months have become the norm. This amounts to about $200 billion – and this has become worse during the pandemic, adding to the woes of small firms as delays are inversely proportional to firm size. (for more about delayed payments, read our report)
Various government schemes (such as Emergency Credit Line Guarantee Scheme ECLGS) to support MSMEs hit by Covid, has led to deeper penetration of credit to firms that already had access to formal credit rather than the new to credit segment; and only about 10% of firms were able to avail them. (report)
Breaking through these twin challenges (delayed payments, access to credit for first time borrowers) is the focus of our GAME plan for supporting entrepreneurs.
Identifying financing gaps in the ecosystem and addressing them through the creation of schemes favouring MSMEs.
Improving access to low-cost formal finance through creation and adoption of financing schemes/programs, strengthening the ‘middle mile’ of NBFCs /FinTechs, and providing thought leadership around policy.
Delayed receivables are an existential risk to MSMEs and have system-wide implications. Estimates suggest that at least INR 15 lakh crore is stuck in delayed receivables, with average delays ranging from 3 to 6 months beyond the stipulated 45 days under the MSMED Act. A group of interested partners came together for a working session to build a common understanding of different initiatives and the support required for scale, Identify opportunities for collaboration, brainstorm and prioritise product pilots.