CII President bats for DFI-style fund to ease MSME credit woes
The collateral and documentation issues are significant challenges for MSME finance and need a faster resolution, said Rajiv Memani, President, Confederation of Indian Industry (CII), on Thursday.Responding to a question by ET Digital on credit availability, Memani proposed an idea to create a Development Finance Institution (DFI)-style fund for MSMEs that could alleviate credit issues, providing essential funding and support for small businesses.For the uninitiated, Development Finance Institutions (DFIs) provide funding and support for projects that drive economic development. They focus on high-impact, long-term initiatives, accepting higher risks for developmental gains, unlike commercial banks that prioritise profitability.However, Memani noted that credit growth for MSMEs has recently shown an uptick. 'I think SIDBI has played a crucial role in mitigating risk and facilitating credit access for MSMEs by absorbing the initial risk, which enables banks to lend further. As a result, MSME credit growth is now gaining momentum,' he said.Addressing his first press conference after taking over as the CII president, Memani emphasised the need to ease compliance and regulatory burdens on MSMEs to foster their growth. 'The central government, I think, is not happy with the underutilisation of the National Single Window System ,' said Memani. The CII is advocating for uniformity between central and state-level single window clearances, he added.Additionally, Memani proposed policy measures to boost India's manufacturing ecosystem, including scaling up MSME financing and introducing a ' Capital Support Scheme for MSMEs' for projects with investments between Rs 50 crore and Rs 1,000 crore.He suggested providing direct support to MSMEs in the form of an interest-free loan, covering 50% of the capital investment, repayable in 5 equal instalments after a 10-year period. Additionally, he proposed launching a fund similar to the Self-Reliant Fund (SRI) to support hi-tech manufacturing initiatives.Notably, there are over 63.38 million MSMEs in India. In 2023-24, MSME-related products accounted for 45.73% of India's total exports, reinforcing their role in positioning the country as a global manufacturing hub.According to government data, MSME exports have witnessed robust growth, rising from Rs 3.95 lakh crore in the financial year 2020-21 to Rs 12.39 lakh crore in the financial year 2024-25. The number of MSME exporters has also seen a significant increase, expanding from 52,849 in 2020-21 to 1,73,350 in 2024-25.CII's new initiatives include CII MSME Export Helpdesk to resolve export queries and connect MSMEs with buyers and a Centre for Artificial Intelligence (AI) to drive digital transformation among MSMEs and promote Responsible AI adoption.Memani also focused on the need to raise awareness about available land for MSMEs and seek a longer transition period for MSMEs to comply with the EU's Carbon Border Adjustment Mechanism (CBAM) under Free Trade Agreement (FTA) provisions.Meanwhile, Memani said that the Indian economy is projected to grow between 6.4% to 6.7% in the current financial year, driven by robust domestic demand, even as geopolitical uncertainty poses downside risks. He highlighted that growth risks are evenly balanced, with "geopolitical uncertainty" posing a downside risk and "strong domestic demand" serving as a positive factor.
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