Sustainability standards: Finmin urges banks to incentivise MSMEs
The finance ministry has advised banks to support those micro, small and medium enterprises that have adopted certain sustainability standards for manufacturing with a raft of incentives, including cheaper credit, at a time when interest rates are on the rise, official and banking sources told FE. The move is part of the government's broader efforts to encourage MSMEs to become "Responsible manufacturers" and improve credit flow to these units that account for a bulk of the country's job creation.
MSMEs account for about 40% of the country's exports, 6% of the manufacturing GDP and almost 25% of the services GDP. In a letter to financial institutions, the department of financial services has asked them to put in place policies, approved by their boards, for extending incentives to ZED-certified MSMEs.
The ZED certification is granted by the MSME ministry to those eligible units that comply with certain sustainability standards to not harm environment.
The lenders have also been asked to ensure complete integration of the ZED portal with their online portal where MSMEs can apply for loans.
Only 531 MSMEs have obtained ZED certification, according to the data available on the MSME ministry website, and the government intends to encourage a wider pool of small businesses to adopt such standards.
According to the latest data, outstanding credit to MSMEs jumped 24% as of August from a year before to Rs 18.16 trillion, partly aided by the Rs 5-trillion government's Emergency Credit Line Guarantee Scheme.
In recent years, MSMEs have been hit hard by a combination of factors, such as demonetisation, the roll-out of the goods and services tax regime and, more recently, the pandemic.