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A delegation of Karnataka Small Scale Industries Association, led by its president Basvaraj Javali met Veerappa Moily, Chairman of the Parliamentary Standing Committee on Finance, and expressed concern over the current status of finance availablity to MSMEs.
Micro, Small & Medium Enterprises (MSMEs) want the government to provide alternative sources of finance.
Interest subvention
Kassia suggested to Moily to provide interest subvention to MSMEs so that they can get credit at competitive rates. There could be specialised banks on the lines of micro-finance institutions to cater to the sector.
Javali said, “We apprised Moily of the hardship faced by MSMEs. Complex collateral requirements make it hard to access credit. The procedures are cumbersome and disbursement is delayed. Procedural delays and high interest rates on term loans and working capital make it tough for MSMEs. Alternative sources of funding for these enterprises are the solution to these problems.”
Giving an example, Javali said taking the Credit Guarantee Scheme (CGS), it is found that 71 per cent of the micro and small enterprises are unaware of the scheme. Of the 20 per cent that are aware, 99 per cent feel that the scheme is of little help to them as it is very difficult to get information and co-operation from the banks and the other financial institutions to derive any benefit from the scheme.
“Under the Credit Guarantee Scheme, the processing fee of 0.75 per cent has to be paid every year for renewing the facility. We request that this may be collected once in five years instead of charging annually for renewal,” Javali said.
Kassia also suggested the following for improvement like making necessary simplifications in procedures for easy access to finance and tailor the instruments exclusively for the SMEs making things time bound.
Monitor implementation of the schemes at the highest level. Make credit available without complex collateral requirements. Reduce interest rates on term loans to micro and small enterprises. Encourage cluster financing by encouraging the development of targeted clusters through efficiency improvements in the supply of public goods aimed at enterprises.
‘Like farm sector’
Talking on interest rates, Javali said, “Like agriculture, the MSME sector is labour-intensive. The operational problems and risk exposure are also identical. The contribution of the small-scale sector is equally significant as that of agriculture. The labour intensity is comparable in the two segments. The contributions of the two segments are equally significant.”
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