MSME Finance Week focuses on solutions to challenges around MSME financing

"We believe that we have an immense opportunity in enabling our MSMEs sector to grow a lot more, and to create a larger pipeline of healthy enterprises that create many jobs," said Mekin Maheshwari, Co-founder, GAMEas he kickstarted the MSME Finance Week hosted by Mass Entrepreneurship (GAME) on December 12 -16, 2020. The event brought together government and industry leaders , investors, and fintech startups from all over India to deliberate, ideate and collaborate on key financing solutions for MSMEs.

Identifying challenges in MSME Financing

The MSME sector had challenges pre-COVID, and the pandemic has only aggravated them. To set the context, Anjuly Chib Duggal, Chair, GAME Finance Task Force and former DFS Secretary, Govt. of India said, "This convening is part of a larger effort to enable the MSME segment to grow faster, to generate additional employment opportunities and to contribute more to the GDP.”

The event began with the keynote address by Shri Amitabh Kant, CEO, Niti Aayog. He said that the financial sector is undergoing a massive change with shifts in the credit economy. "There is a growing need for our industry to be supplied with the necessary liquidity, particularly MSMEs. Going forward, innovative models in the credit industry, exemplified by new age NBFCs, will be crucial in bridging the credit gap in the economy."

Madan Padaki, Co-founder, GAME moderated a session where entrepreneurs discussed their financing challenges, which included a difficulty in getting loans from banks without collateral, credit cards having higher interest rates, retailers not being qualified under MSME, among many others. The aim was to listen to their struggles and come up with creative solutions in the next four days.

The session was followed by an insightful panel discussion on how the fintech sector can support the recovery of MSMEs and help them sail past the challenges brought about by COVID-19. The panelists included Dinesh Kumar Khara, Chairman, State Bank of India; Dilip Asbe, MD & CEO, NPCI; Abhijit Bose, CEO, WhatsApp India; Ashish Agrawal, Principal, Sequoia Capital India; Geeta Goel, Country Director, Michael & Susan Dell Foundation and moderated by Mekin Maheshwari, Co-Founder, GAME. They spoke about the enablement of faster financing, what a VC looks for in an MSME, what makes for a good relationship between a bank and NBFC to work with MSMEs, and the innovations they foresee in the next one year.

Innovations in MSME financing

On the second day, Sanjay Thakur, Head-Product and Strategy, SME at Kotak Mahindra Bank spoke about innovations in disbursing credit to MSMEs. At GAME, he said they've identified gaps in areas such as product, enterprise, access, awareness, skill and psychology that need immediate attention to enable efficient lending to MSMEs.

A fireside chat moderated by Shantanu Ghosh, Country Head, Social Finance India delved on the innovations to bridge these gaps. The panelists included Ketki Bhagwati, Board Member, Axis Bank; Pranay Bhargava, Founder, Impact Micro Ventures; Akhil Handa, Head, FinTech, Mobility, Digital Lending, Bank of Baroda and Harshvardhan Lunia, Co-Founder & CEO, LendingKart. A few fintechs, namely Flexiloans, AYE Finance, Kyepot and Kinara Capital also had the opportunity to showcase their innovations to provide access to financing for MSMEs.

There was also a closed door micro-insurance workshop hosted to create the ideal product for SMEs that was led by Amar Joshi, Chief Business Officer, SBI General Insurance and Anurag Rastogi, President - Chief Actuary and Chief Underwriting Officer, HDFC ERGO General Insurance, and moderated by Shivaprasad Krishnan, Founder & CEO, KRICON Capital and Soumya Mukherjee, General Manager (retd), Oriental Insurance.

Platforms for financing the unfinanced

The third day began with an interesting working session on the Open Credit Enablement Network (OCEN), presented by leaders from CredAll and ISpirt. According to them, financial institutions are hesitant to lend to untapped borrowers and OCEN is a significant gamechanger in democratising credit for MSMEs. The presentation focused on how to become an LSP (Loan Service Providers) on OCEN, the benefits for LSPs and entrepreneurs. There was also a working session with potential LSPs on the next steps they need to take to become LSPs, which included articulating MSME customer profiles and credit challenges to build unique credit products on OCEN.

A closed-door session was also led by the TReDS leadership to discuss potential interventions for greater adoption of the platform.

The voice of the entrepreneur

Summarising the event, Srinivas Rao Mahankali, CEO, GAME said, "First, we framed the problems with traditional and new-age players. Then we showcased innovations which could potentially be mainstream. Third, we focused on platforms like OCEN and TReDs to reduce friction in the credit ecosystem.” The entrepreneurs who shared their challenges on the first day of the event came back to share the key takeaways from the finance week and how it helped them.

GAME has an ambitious target of creating 10 million mass entrepreneurs by 2030, 50 percent of whom will be women. "Today, they (the percentage of women entrepreneurs) are 20 percent and with timely access, we believe they can scale, buy material, build a team, employ more women and work systematically," added Srinivas.

Keeping this vision in mind, a panel comprising women entrepreneurs was held to discuss ways in which formal finance could be brought to women entrepreneurs. The panel comprised Hardika Shah, Founder and CEO, Kinara Capital; Ajaita S., Founder and CEO, Frontier Markets; Dr Paromita Sen, Research Manager, SEWA Bharat; Usha Amin, CFO and Partner, Saha Fund, and was moderated by Sharon Buteau, Executive Director, LEAD at KREA University. They discussed women's collective as a powerful source of financing, how to help women better prepare for pitches to venture capitalists, and so on.

The closing summary was shared by Anjuly Chib Duggal, following which Tushar Thakkar, Associate Partner, Dalberg Advisors India spoke about the need for timely payments to MSMEs. "Microenterprises account for 97 percent of MSMEs and they're the largest employers in the ecosystem. Close to 45 percent of receivables are delayed by six months. Long cash flow cycles is an important issue that needs to be addressed immediately," he said.

CEOs of 20 large corporates took the Prompt Payment Pledge, led by Uday Shankar (President, FICCI), allying for other corporates to join in as a way of easing the financial situation for MSMEs.

The day ended with an apt keynote by Shri Nitin Gadkari, Minister of Micro, Small & Medium Enterprises, Govt. of India. He said, “The turnover of the village industry is Rs 80,000 crore and we want to make it Rs 5 lakh crore in two years. It's important to create more employment potential in agriculture, rural and tribal areas, to develop the sector socially, educationally, economically, and at the same time provide good health service and infrastructure.” He added that initiatives to strengthen mass entrepreneurship is important as it will give new vision to the entrepreneurs, and make India the number one global economy in the world.