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10 Banking Innovations Can Transform MSME Credit Scenario

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There are many reasons which say that banking innovation is needed for the actual upliftment of MSMEs. The leadership in India has a proactive approach towards MSME development in the country.

Union Minister of MSMEs Mr Nitin Gadkari has categorically mentioned that his ministry is working towards increasing MSME’s contribution in the GDP to 40% in the next few years from somewhere close to the present day’s 30%. MSMEs are considered and acknowledged as the growth engines for the economy. India’s goal-setting of 5 Trillion Dollar Economy also considers MSMEs as the main contributor. So a lot has been designed and planned to bring reform for MSMEs. Credit availability remains a major criterion of this entire roadmap.

By looking at the existing scenario of Indian MSME focused banking and after speaking to hundreds of Bankers & entrepreneurs here are some points which may prove to be effective for bringing much-needed positivity to the Indian MSME credit scenario:

  1. Firstly the conventional creditworthiness parameters for any MSME/SME needs to be reconsidered.
  2. Innovation through Big Data Analytics can resolve many issues.
  3. Banking products such s MSME Credit should be redesigned which may encourage the entrepreneur to utilise MSME Credit schemes.
  4. Govt’s provision of Credit Guarantee should be made fast, wider and proactive towards MSMEs.
  5. A regional and local level approach is needed from Banks.
  6. Bank’s internal scrutiny towards MSME credit should be robust and must be proactive towards offering the credit to the entrepreneur rather than discouraging. Ceratin global micro-lending success stories can help us in understanding their success quotient and those points can be considered.
  7. The credit rating system should be more dynamic and affordable.
  8. Business-specific understanding is a must for bankers so that they can create Banking products according to the needs of the businesses.
  9. Innovation is badly needed, in synchronizing several govt schemes at the bank’s branch level because this is the place where entrepreneurs come to seek credit.
  10. That’s very important, banks should stop looking at entrepreneurs special small/micro-entrepreneurs from a negative perspective, there should be a proactive welcome for entrepreneurs because they are job creators.

These points came out as a conclusion from the MSME Banking Index in which we at SMEStreet reaches out to MSMEs to understand their banking experience. We all know that the economy is on its journey of recovery from the pandemic. And the government is also working hard to make MSMEs stronger. Aatmanirbhar Bharat Program and several other measures are all evidence of this commitment. But the above-mentioned points reflects the ground realities of MSMEs and the MSME entrepreneurs who wish to expand through banking credit support.

For any suggestion or feedback please comment below or write an email to me directly.

Faiz Askari

Faiz is a mediapreneur specialised in Small Business and Technology domain.

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