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2013-03-07

Financial institutions meet only 1/4 of MSME finance need: IFC

IFC, a member of the World Bank Group, has released a new study that finds financial institutions meet only one-fourth of the financing demand of micro, small and medium enterprises (MSMEs) in India, noting that a sizeable part of this unfulfilled opportu

IFC, a member of the World Bank Group, has released a new study that finds financial institutions meet only one-fourth of the financing demand of micro, small and medium enterprises (MSMEs) in India, noting that a sizeable part of this unfulfilled opportunity is viable.

The study jointly undertaken by IFC with the government of Japan estimates the overall finance shortfall for MSMEs to be over $400 billion. Formal sources are able to channel only $140 billion. Banks can address the sector’s debt and equity financing requirement of over $70 billion, it estimates.

The study recommends a mix of well-rounded fiscal support, strong policy framework and incentives promoting innovation to significantly expand formal financing to these enterprises.

 “MSME sector has the potential to stimulate growth,” said Sushil Muhnot, Chairman and Managing Director, SIDBI. “With adequate financial resources and specialized skill development, the sector can grow manifold and contribute to the economy,” he added.

“The study provides a framework for the financial sector and policy makers to develop appropriate and innovative products and services that will ensure easier flow of capital to these smaller businesses,” said Anil Sinha, IFC’s General Manager for Advisory Services in South Asia.

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