MSME Funding : Banks need to design client-specific products

摘要

Micro, small and medium enterprises (MSMEs), apart from playing a significant role in meeting national objectives of balanced growth, poverty alleviation and equity promotion, serve as nurseries for corporate enterprises of future. Thus, MSME financing is the latest buzzword in the financial sector in India. Though financing to MSMEs is on high priority, it is also highly risky. Banks face difficulties in extending credit to MSMEs mainly due to asymmetric information system and lack of reliable credit history. As a result, banks rely heavily on collateral-based lending rather than cash-flow analysis while dealing with small-scale sector borrowers.