MSME Growth Conclave. MSMEs call for better financing alternatives, reduction in escalating interest rates to boost sector

A unanimous call for enhancements to the CGTMSE scheme, improved financing alternatives, and a reduction in escalating interest rates was made during a panel discussion focused on the impact of interest rates on the development of micro, small, and medium enterprises (MSMEs).

These measures were deemed essential for fostering the much-needed support and sustainable growth of the MSME industries, according to the participants.

The panel discussion, which was on the topic ‘Interest Rates and Growth of MSMEs’, was conducted by businessline, as part of the MSME Growth Conclave on June 27 in Bengaluru to commemorate International MSME Day.

The speakers included Aiswarya Ravi, Chief Financial Officer (CFO) of fintech Kinara Capital; Shashidhar Shetty, President, KASSIA; JR Bangera, National MSME Board; and Sudhanshu Suman, General Manager, MSME Wing, Canara Bank.

SK Lokeshwarri, Data Editor, businessline, Aiswarya Ravi, CFO, Kinara Capital, Shashidhar Shetty, President, KASSIA, JR Bangera, National MSME Board Member, former President, FKCCI, and Sudhanshu Suman, General Manager, MSME Wing, Canara Bank, Bengaluru, at a panel discussion on `Interest rates and growth of MSMEs’ | Photo Credit: BIJOY GHOSH

Today, MSMEs are operating at the 3-5 per cent of margins, and in contrast to that, the input prices have gone up by 70 per cent. Similarly, interest rates have gone up by 2 per cent. We work on agreements, with large industries, but large industries do not consider input price rises. We are suffering because of surging interest rates,” said Shashidhar Shetty, President KASSIA.

Adding to the president’s points, JR Bangera, National MSME Board, said that raw material costs, overhead costs, processing costs, and power costs have gone up...financing institutions need to work in mission mode to help in the expansion of capacity and technology upgradation to ensure the survival of MSMEs.

In addition to the increase in interest rates, limited access to finances remains another critical challenge.

According to Aiswarya Ravi, Chief Financial Officer (CFO) of fintech Kinara Capital, the lack of land or property as collateral remains a triggering factor for financing challenges, as traditional financial channels still adhere to collateral requirements for accessing significant financing solutions.

Furthermore, she said that MSMEs are spread across Tier 1, 2, and 3 cities while the bank’s capacity to underwrite different varieties of MSMEs is still a challenge, and hence they remain largely excluded from access to finance.

Sudhanshu Suman, General Manager, MSME Wing, Canara Bank, Bengaluru, said both the public sector and private banks are doing their best to support small businesses. While there are various schemes to support the industry at large, catering to different needs, he added, “Yes, capacity expansion is adversely affected by the increase in interest rates; however, we remain optimistic that these obstacles will be overcome in the near future.”

The one-day conclave, in association with Bank of Baroda Credit Cards, Canara Bank and Aashirvaad as associate partners, was powered by the State Partner - the Government of West Bengal, Department of Micro, Small, and Medium Enterprises, and Textiles. Mahindra was the electric mobility partner and newsX was the broadcast partner.

The panel discussion was moderated by Lokeshwarri SK, Data Editor, businessline.