Why lending to MSMEs makes business sense

A large section of MSMEs is creditworthy and micro retail borrowers' cash flow allows them to repay bank loans fast

Everyone and her aunt is concerned about the impact of Covid-19 on micro, small and medium enterprises (MSMEs) — the second-biggest employer in the country with a 31 per cent share in India’s GDP. Section 7 of the Micro, Small and Medium Enterprises Development Act, 2006 specifies the size of the MSMEs on the basis of investment. Among manufacturing units, micro enterprises are those that have invested up to Rs 25 lakh in plant and machinery. The comparable figure for small units is Rs 25 lakh-Rs 5 crore and for medium units, Rs 5 crore-Rs 10 crore. For services, the