CXOToday has engaged in an exclusive interview with Nishith Maheshwari, Head – Partnerships, SME Business Loans, InCred Finance

1. What changes in government benefits can boost the MSME culture in India and how MSME lenders can plug the finance related gaps?

MSMEs in India are confronted with critical challenges such as restricted access to finance, infrastructure limitations, and skill gaps. Addressing these issues necessitates government intervention through initiatives like credit guarantee schemes or collateral-free credit to enhance financial accessibility. The development of trade hubs for exports and easing import norms for machinery and equipment are essential. Furthermore, tailored skill development programs focusing on technological competencies are crucial for empowering MSMEs and fostering their growth.

Lenders can ease financial woes by offering loans customized for specific purposes like trade finance, supply chain financing, or machinery financing. Additionally, leveraging technology enables lenders to provide a streamlined digital experience and utilize advanced data analytics to evaluate creditworthiness using alternative data sources.

2. From lenders point of view – how subsidies on green energies and tax benefits to MSME’s can encourage the entrepreneurial culture In India?

Tax benefits have a straightforward impact: savings from reduced taxes can be redirected towards other critical areas of the business, such as technology and infrastructure investments, research and development (R&D), and marketing expenditures. This creates a conducive environment for entrepreneurship.

Subsidies reduce the upfront cost of adopting green tech like solar panels or energy-efficient machinery, enhancing the financial viability of green projects for smaller companies. As subsidies cover a portion of the investment, capex for green transitions is reduced, as is the financing that needs to be provided by the lender for these purposes.

3. Can budget 2024 pave the way for easier MSME loans?

The budget has already laid the groundwork for easier MSME loans through enhanced credit guarantee schemes, collateral-free equipment financing, and increased credit limits for Mudra loans, thereby opening the market to smaller businesses that are often restricted in their ability to provide collateral or third-party guarantees. The finance minister acknowledged the necessity of underwriting based on the digital footprint and alternative data of companies over the traditional asset and turnover-based evaluation, facilitating the inclusion of younger businesses into the financial system.

4. How can the convenience of loan disbursement benefit MSME’s?

Ease of disbursement is paramount to any loan process. We have an end-to-end digitized credit journey, both internally and for the customer, which helps achieve significantly lower TATs and ensures minimal documentation and transparency. Quick and efficient capital is essential for the smooth operation of MSMEs.

5. How can private lenders help in MSME funding needs for tech upgrades and green transitions?

Lenders can provide specialized loan products tailored for technology upgrades, such as digitization, automation, or advanced machinery, as well as for green practices like energy-efficient equipment or renewable energy installations. They should incorporate provisions for flexible repayment schedules that align with the cash flow patterns of the company. This is particularly crucial during the initial phases of technology adoption or green transitions, when returns on investment may not be immediate, ensuring that loan repayment remains manageable and sustainable over time.

6. How can private lenders support the skill development of entrepreneurs?

Lenders can collaborate with digital learning platforms to offer easy EMI or buy-now-pay-later solutions for online courses and resources tailored to meet the specific needs of entrepreneurs. Additionally, they can promote entrepreneurial ecosystems that include networking events, industry-specific conclaves, and business incubation centers that connect entrepreneurs with potential investors. Skill development should be an ongoing endeavor that entrepreneurs consistently pursue.

7. What key role can MSME’s play in Viksit Bharat?

MSMEs play a multifaceted role in realizing the vision of Viksit Bharat. They not only create substantial employment opportunities but also help spur economic growth and development in tier-2 and tier-3 cities, promoting inclusive regional growth. Moreover, MSMEs foster entrepreneurship and empower individuals to establish and expand businesses. They have the potential to leverage digital technologies to boost operational efficiency, expand into new markets, and strengthen their competitiveness, in line with Viksit Bharat’s agenda for digital transformation.