Economy
We are 99%, yet…
MSMEs deserve access to formal finance as big businesses get
99% of India’s businesses are micro businesses. Rest are small (.52%), medium (.01%) and big businesses (.47%). Only 25% of formal finance is available to MSME sector. Big businesses and start-ups get 75% of the funding and government support.
Micro businesses earn a revenue below INR 5cr. Small businesses’ annual revenue is upto INR 10cr. Medium businesses’ annual turnover is between INR 10cr and INR 50cr. There are about 6.3cr micro businesses, 3.3 lakh small businesses and 5000 medium businesses. There are equal number of micro businesses in rural and urban areas. Most small and medium businesses are in urban areas. Micro businesses employ 110cr people, second to agriculture. There are only 41000 startups in India, employing about 5 lakh people. 1200 startups raised about INR 80,000cr in 2020.
As per Economic Times: As per an RBI report, the total commercial lending exposure in India stood at USD 919.06 billion as of June’20 of which the MSME segment holds only 25.27% of the total lending amounting to USD 232 billion of credit exposure. Moreover, the estimated debt requirement for Indian MSMEs points to a colossal credit gap of over USD 219 billion, outstripping the available supply of finance from the formal sector.
Only 7% of MSMEs will benefit from government’s credit guarantee scheme. During the pandemic 10% of MSMEs shut down. About 65% of MSMEs borrowed money from friends and family or used their savings to survive. The average ticket for such borrowing was INR 1akh. 50% of the businesses could not avail the loans due to lack of basic paperwork. At the same time government owes MSMEs INR 5lakh crore (about $7bn) as receivables. On the contrary it helps big businesses such as Patanjali to acquire a $4bn business without investing any money of their own. Small business need the similar support.
As per MSME’s annual report females do not own less than 20% of the small businesses. In urban areas even lesser number of women own businesses. MSMEs employ three times more males than women. They make up only 25% of the MSME workforce. More working women mean more prosperity. Bangladesh surpassed India in per capita GDP, as they have higher percentage of working women than India.
Every business starts small. Formal finance is one of many things businesses require to grow. Government have encouraged big businesses, and neglect small businesses. Numbers make a case to shift the focus for the economic revival and growth. Ease of doing business should be for micro and small businesses as well. Building a vibrant small business ecosystem will uplift the entire country and its citizens.
Worth your time: Ministry of MSME annual report Link
