Government Initiatives and Support for MSME Financing in India
Micro, Small, and Medium Enterprises (MSMEs) are the foundation of the Indian economy. However, they face several challenges around working capital, employment generation, lack of awareness, quality manufacturing, access to credit, etc. To overcome these challenges, the Indian government has launched various initiatives that help new companies get off the ground. This article provides a brief of MSME financing in India, the available schemes, and their prominent measures.
Credit Guarantee Scheme for Micro and Small Enterprises (CGTMSE)
The CGTMSE scheme is an important initiative by the Indian government, providing collateral-free financing to MSMEs for over two decades. It gives a guarantee cover of up to 85% for financing up to Rs. 5 Crore, and up to 75% for loans above Rs. 5 lakh and up to Rs. 2 crore to start-up aspirants. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is the trust handling this scheme for both start-ups and existing enterprises. Approach an eligible financial institution eligible to apply for financing under this scheme. You may also opt for inventory financing that provides loans against your inventory in stock.
Government e-Marketplace (GeM)
The Ministry of Commerce and Industry launched GeM in 2016. It is a digital public procurement portal that urges government ministries, departments, and Central Public Sector Enterprises (CPSEs) to procure products and services digitally. Under the Public Procurement Policy Order 2012, these departments must procure at least 25% of their supplies from MSMEs annually. That includes 4% from SC and ST-owned MSMEs and 3% from women-owned businesses. As of June 2023, the GeM platform lists around 8.25 lakh MSMEs, having processed orders for above Rs. 4.41 lakh crore since its inception.
PM Employment Generation Program (PMEGP)
The Ministry of MSME implemented the Prime Minister Employment Generation Program in 2008 as a central scheme for MSME financing in India. It is a credit-linked guarantee scheme providing finance up to Rs. 25 lakh to aspiring MSME owners for establishing new manufacturing units and up to Rs. 10 lakh for establishing new service units.
Zero Defect, Zero Effect (ZED) Scheme
Introduced in 2016, the ZED scheme aims to enhance competitiveness among MSMEs in the manufacturing industry. The ultimate goal is to create awareness, certification, and assessment of businesses, promoting ZED practices to incorporate “Zero Defect, Zero Effect”. With a focus on the sustainable production of high-quality products, the Zed scheme has over 67,147 certified MSMEs across the Bronze, Silver, and Gold categories.
Raising and Accelerating MSME Performance (RAMP) Scheme
Launched in July 2022, the RAMP scheme is a central sector scheme launched by the Ministry of MSMEs. Its primary aim is to scale up the coverage and capacity of MSMEs in various states. Moreover, it fosters innovation, enhances market access, improves practices, implements technological methods, and develops quality standards among new and existing businesses. With a total outlay of Rs. 6,062.45 Crore, the scheme will source Rs. 3,750 Crore from the World Bank and the remaining Rs. 2,312.45 Crore from India.
Udyam Portal
The government launched the Udyam portal in 2020 to formalise more MSMEs. The MSME Ministry maintains this portal, providing free and paperless registration facilities. Moreover, the platform is linked to the GST Network and Central Board of Direct Taxes data, helping business growth seamlessly. Currently, more than 2 Crore businesses have registered on the portal, including micro and small enterprises.
Mudra Yojana
The government launched the Mudra Yojana in April 2015 to provide unsecured loans of up to Rs. 10 lakh to non-corporate, non-farming SMEs. The scheme categorises loans into three parts: Shishu loans up to Rs. 50,000, Kishor loans from Rs. 50,000 to Rs. 5 lakh, and Tarun loans from Rs. 5 lakh to Rs. 10 lakh.
Stand-Up India
The Stand-Up India scheme provides loans from Rs. 10 lakh to Rs. 1 crore to SC, ST, and female entrepreneurs. Companies working in the manufacturing, trading, and services sectors with at least one owner in these categories can borrow these loans to handle their operations. The primary aim of the scheme is to encourage entrepreneurship among such communities by making finance easily accessible. To date, 2,33,009 entrepreneurs have applied for a loan under this scheme, out of which 2,11,319 are approved with a total sanctioned amount of Rs. 47,581.13 Crore.
Now that you are aware of the various government schemes for MSME financing in India, assess your eligibility and take advantage of the available chances to amplify your small business expansion. A collateral-free Business Loan under these schemes provides easy credit access for various purposes, including purchasing equipment, building working capital, improving business space, buying raw materials, restocking inventory, etc.