Banks reluctant to lend to MSMEs: CII-ISB study

Visakhapatnam: Micro, Small and Medium Enterprises in Andhra Pradesh are not able to grow significantly for want of access to finance, lack of skilled workforce and inability to scale up.

These were the findings of a study conducted over a period of nearly two years on status of MSMEs in the State jointly by Indian School of Business (ISB) and Confederation of Indian Industry. A report entitled 'CII-ISB report on MSMEs' challenges: Insights from Andhra Pradesh' on the study was released at the annual meeting of CII AP here on Thursday.

In a chat with Bizz Buzz later, ISB Senior Associate Dean and Practice Professor Dr Chandan Chowdhury said during the survey, they obtained data from 83 MSMEs-- 42 from manufacturing and 41 service sector on 67 parameters such as products, finance, marketing and plans to increase their manpower.

He said the shortage of skilled manpower was more in the service sector than the manufacturing. Access to funding was a Herculean task for the MSMEs due to reluctance by the banks to lend loans without collateral security despite getting mandated by the government as per the guidelines of RBI.

Chowdhury said only 4.2 per cent MSMEs are leveraging B2B online portals like MSME Global Mart. "Maybe there is a need to introduce separate e-commerce portals by the government," he opined adding access to funds is felt more in services sector than the manufacturing units.

Contribution to GDP by the MSMEs pan India has remained static at around 30 per cent for the past 10 years. The growth of value addition has also remained poor despite advancement of technologies. Chowdhury said the generation of jobs will go up significantly if the MSMEs are encouraged to use digital technologies to improve their performance.

The government's vision is to enhance the contribution to from 30 to 40 per cent. MSMEs currently contribute 48 per cent to India's exports and employ 111 million. The government intends to enhance their export contribution to 60 per cent and generate an additional 50 million jobs to increase the employment generation to 161 million by 2025.