In a study on the need for financial support for MSMEs, the Confederation of Indian Industry (CII) has emphasised that conventional methods of financing need to be supplemented by non-conventional measures as well, pointing out that the government itself believes in the need for non-conventional ways of providing finance.
The study quotes the Secretary in the ministry of MSME, Uday Kumar Varma, as saying, “Conventional financing is not enough to help the MSME sector and there is need for out-of-the-box thinking.”
Varma adds, “Perhaps capital gains tax exemption could be extended to those re-investing their wealth in MSMEs. This might bring in substantial funds into the sector in the backdrop of the buoyancy in the real estate sector.”
The study describes efforts by other countries to bring MSMEs on a par with other organisations. In Singapore, for example, under a programme called Micro Loan, the authorities provide loans of up to S$50,000 per enterprise (in enterprises having 10 or fewer employees) to fund daily business operations.
The Japanese government provides affordable funding through institutions such as Japan Finance Corporation for Small Business, National Life Finance Corporation and Shoko Chukin Bank. South Korea has a specialised agency, the Small and Medium Business Administration, to provide a boost to the country’s SME sector.
In Hungary the financial system offers a full range of financial and support services to SMEs through commercial banks and development finance institutions, while South Africa has established the Micro Finance Apex Fund to facilitate the provision of affordable access to finance on the part of SMEs.
The study notes that in a bid to help MSMEs, the government has launched ‘UDYAMI’, a helpline to satisfy the long-felt need for a single-point facility through which to provide MSMEs with a wide spectrum of information and accessibility to banks.
CII favours tax benefits to companies to source from MSMEs and pay the latter promptly, as well as efforts to encourage foreign direct investment (FDI) in MSMEs through such measures as automatic approval for 100 per cent FDI from NRIs and single-window clearance across all sub-sectors of MSMEs.
