‘To bridge MSME credit gap, participants in trade finance ecosystem need to innovate while leveraging technology’

By Shyam Govindan and Nilesh Jajoo 

Credit and Finance for MSMEs: Global trade has recovered from the dip during the Covid-19 pandemic times but continues to face headwinds due to factors such as looming recessionary pressure, growing trend of protectionism and regionalism along with continued supply chain disruptions. Despite these emerging global dynamics, Indian exports have shown healthy growth and government initiatives aiming toward reduction in trade barriers, promotion of manufacturing, and building infrastructure have positioned India well for continued growth momentum.  

At the center of India’s economic growth are Micro, small and medium enterprises (MSMEs) who contribute to around 40 per cent of India’s exports. Several initiatives have been undertaken to help MSME exporters to improve their market access, ease of doing business, and access to credit which has provided this sector with the required thrust. However, wider accessibility and adequate amount of financing remain to be an unaddressed challenge holding back the true potential of this segment to power the growth aspiration of India. The problems associated with financing the sector are well-known in terms of availability of documentation with relevant and accurate information, low financial literacy, etc. The solutions to address these problems lie in innovating the overall approach toward credit evaluation and monitoring of MSMEs.  

Trade finance has been widely recognized as one of the…

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