Credit and Finance for MSMEs: Giving priority lending status to particular retail subsectors and encouraging massive organised retail players, e-commerce players, and makers to lend can aid standard tiny retailers and traders with their liquidity needs, consulting firm Kearney stated on Tuesday. The ideas have been element of the important measures advisable in a report titled National Retail Policy: To allow the subsequent wave of retail development by Kearney along with business physique CII to the government ahead of the upcoming National Retail Trade Policy. The report stated that providing certain retail subsectors priority-sector status can unlock a massive volume of capital from public-sector banks at low-interest prices apart from exploring versatile possibilities with faster processing time, streamlined loan approval approach, and non-fixed asset-primarily based collateral such as receivables to ease credit crunch for such retailers.
Manufacturers such as FMCG providers can also give their direct retailers extended credit period or functioning capital loans against receivables to aid them, the report added. The suggestions come days following the government had announced an extension to its Rs 3 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) from October 31, 2020, to November 30 and additional till March 31, 2021, to provide collateral-totally free credit assistance to Covid-hit MSMEs and other corporations. As of November 12, 2020, Rs 2.05 lakh crore loan quantity was sanctioned to 61 lakh borrowers out of which Rs 1.52 lakh crore was disbursed.
“A National Retail Policy should consider all aspects of retail, especially traditional retail, which is hit hardest by the ongoing pandemic…specifically for unorganized retail, there is a need to improve access to capital as well as enable technology-led modernization,” stated Subhendu Roy, Partner, Consumer Goods and Retail, Kearney. Addressing a FICCI occasion final month, Minister of State for Commerce and Industry Ministry Som Parkash had stated that “we are in the final stage of drafting a National Logistics Policy, New Industrial Policy, e-commerce Policy and National Retail Trade policy.”
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Even as the government had various initiatives towards solving functioning capital challenges for MSMEs, the credit gap for the units stood at Rs 16 lakh crore out of which the retail sector accounted for 30 per cent, according to the IFC Intellecap report 2018. The pandemic influence had triggered a additional influence on the retail sector especially tiny retailers with about 5-7 lakh retailers permanently shutting their corporations, the report stated. Small retailers would want versatile term loan goods at reduce interest prices of about 8 per cent rather of 15-25 per cent at which NBFCs and specialized lenders provide loans to retailers, it added.
The report also recommended the government to allow technologies benefit to make lending less difficult by setting up a platform to register standard retailers and onboard startups to aid ascertain the creditworthiness of borrowers and style appropriate loan goods. Lastly, the government need to launch awareness programmes to strengthen economic literacy amongst retail borrowers by partnering with retailer bodies to educate retailers about securing credit by means of formal channels.