The financial sector needs a detailed and joint approach to address various challenges faced by MSMEs, Sebi Whole-Time Member Ashwani Bhatia said on Monday. In a special address on ‘Unlocking the True Potential of MSMEs: Financing Options’ session at the Financing Summit 3.0, hosted by CII here, Bhatia also said financial institutions and fintech companies can partner to deliver data-centric solutions for micro, small and medium enterprises (MSMEs).
A detailed and joint approach is required by the financial sector to address the challenges faced by MSMEs like high interest rates so that the financial needs of the sector are dealt with more efficiently, he noted.
During the last decade, over Rs 14,000 crore has been raised through SME listing and Rs 6,000 crore was raised in the last financial year, he said, adding that the funds raised through IPO have increased 12-fold over the last five years.
He, however, added that “a word of caution on SME listing would not be, of course, out of place”.
In recent years, the listing of MSME platforms has seen increased traction, he said.
Growth is very much there, and we are growing very fast, he said, adding that “if you try to take shortcuts, try to inflate balance sheets, I think the relationships between intermediaries and companies will be very short-one”.
Bhatia said that after the US and China, the startup eco-system in India is expected to witness a consistent annual growth rate of 12-15 per cent, and added that India now has five decacorn, more than 110 unicorns with a combined valuation of more than USD 350 billion.
“We would welcome these listings on exchanges,” he said.
Stating that checks and balances are not there in SME listings and nobody is saying no to SME clients, Bhatia said the market ecosystem needs to say no when required for SME listing.
“Nobody is actually saying no. I am a banker, and we were taught to say no when necessary,” he said, adding that due diligence is lacking from merchant bankers, chartered accountants, and exchanges.
“Be good doctors to these companies. Don’t give them steroids when they can survive on paracetamol,” Bhatia said.
According to him, new opportunities for credit access are emerging with the advent of data analytics and financial institutions and fintech companies can partner to deliver data-centric solutions for MSMEs.
Digital revolution and government policies are crucial to improving access to finance for MSMEs, he added.
Currently, there are 600 SME companies listed on both exchanges, with the market capitalisation of these companies exceeding Rs 2 lakh crore.
He said that alternative sources of funding, such as crowdfunding and venture capitalists, are available for MSMEs. They can consider alternative funding routes like angel or venture funds before going for IPOs.
Ateesh Singh, Joint Secretary, Ministry of Micro, Small and Medium Enterprises (MSME) said that finance and technology, which have emerged as twin engines for providing timely and affordable finance to MSMEs, would help unlock the true potential of the sector.
The credit gap in the sector is a major issue that needs to be analysed through a cluster approach, along with the creation of new risk assessment models.
Rajnish Kumar, Chairman, Mastercard India, said the changes brought about by the adoption of technology and the availability of new and large sources of data have brought significant improvement in financial institutions’ ability to predict default through much-improved assessment of the borrowers’ ‘Intention to Pay’ and ‘Capability to Pay’ metrics.
