Key Challenges for MSMEs
A study by ASSOCHAM and Egrow Foundation highlights significant obstacles faced by Micro, Small, and Medium Enterprises (MSMEs). These include compliance with complex regulations, difficulties in obtaining business registrations, restricted access to credit, and limited market reach. These challenges hamper the growth and formalisation of MSMEs, which are critical to India’s development aspirations for 2047.
Access to Credit: A Persistent Hurdle
MSMEs struggle to secure financing due to opaque loan approval processes and limited banking innovations tailored to their needs. The study calls for a more transparent and inclusive banking system to address these gaps. Expanding Small Finance Banks and introducing MSME-specific bonds could increase credit availability and reduce dependency on traditional financial institutions.
Market Access and Formalisation
Accessing broader markets remains a daunting task for MSMEs due to infrastructural and logistical challenges. The report emphasizes the need for policy interventions to integrate MSMEs into formal economic systems. Simplified tax structures and streamlined business registration processes are recommended to lower entry barriers and incentivize formalisation.
Recommendations for Policy Support
The study suggests creating financial instruments like MSME bonds to attract investment and provide stable funding. Expanding the reach of Small Finance Banks can cater to underserved MSME sectors. Furthermore, simplifying tax and compliance procedures would encourage micro-enterprises to join the formal economy, fostering innovation and growth.
