Time to create alternative funding source for MSMEs apart from banks: Assocham

New Delhi, Mar 10 (KNN) Industry body Assocham in its latest report has recommended for creating an alternative source for MSME funding except banks to bridge the credit gap which is estimated at Rs 20-25 trillion as per a report by the Standing Committee on Finance.

It has called for the formalization of the sector to support growth as nearly 60 per cent of MSMEs raise funds through informal sources.

Highlighting the significant role played by the MSME sector in India’s growth, Assocham said in the report that the sector holds immense potential in supporting India’s ambitious vision of a USD 40 trillion economy by 2047.

However, the real struggle for small businesses lies in fundraising for future growth. The report highlighted challenges faced by MSMEs in terms of fundraising and recommended ways to solve the problem.

“To this end, banks could fund working capital requirements against GST filings, which are more reliable quantitatively, as compared to collateralized loans. This would not only enable MSMEs easy access to funds but also spur formalization through GST registrations,” Assocham said.

Another suggestion is to come up with a similar structure of real estate investment trusts (REITs) and infrastructure investment trusts (InVITs). The industry body says that an investment trust that lends specifically to MSMEs via pooling – can be created.  (KNN Bureau)