Cash flow-based lending to improve MSME credit access, says expert

The government's push for cash flow-based lending is expected to improve credit access for MSMEs, says Anurag Khandelwal of Price Waterhouse. He added that the MSME sector, which contributes over 37% to the economy, will flourish with this focus.

The government's push for cash flow-based lending is expected to improve access to credit for micro, small and medium enterprises (MSMEs) by strengthening their financial position and enabling additional lending, Anurag Khandelwal, Partner, Price Waterhouse Chartered Accountants LLP, told ANI on Friday.

Speaking to ANI on the sidelines of CII's Interactive Session on Credible Growth: Capital, Entrepreneurship & Financial Reporting, Khandelwal said government representatives highlighted measures to promote lending based on cash flows. "In the morning, there was a representative from the government authorities as well. They mentioned about making the investments based on the cash flows. So they are trying to help the MSMEs just to improve the overall cash flow situations and provide them additional lending," Khandelwal said.

Overcoming Implementation Hurdles

He acknowledged that the reforms may face initial implementation challenges but expressed confidence that the government's sustained focus on the sector would ensure their success. "Some of these things... teething issues. when you bring up any solution or you are trying to build any changes...Having said that, when you take the entire sector together with a clear focus from the government side, I think this is likely to flourish very soon, very quickly," he added.

The Role of MSMEs and Support Systems

Describing himself as a big fan of the MSME sector, Khandelwal said it contributes over 37-38 per cent to the Indian economy. He said the government has introduced several initiatives to support MSMEs, including improving access to finance.

Tackling Delayed Payments with TReDS

Highlighting the Trade Receivables Discounting System (TReDS), he said the platform has helped address delayed payments by enabling supplier financing. "Historically, there have been issues when they were not getting paid in time and hence the working capital cycle was taking much longer. With this supplier financing arrangement coming in, at least the MSME gets paid in time and the corporates pay interest to the banks who are helping them to finance these transactions," he said.

Governance in a Challenging Global Environment

On governance and capital, Khandelwal said trust remains central to attracting investment and sustaining business growth. He added that investors are increasingly focusing not only on profits but also on how companies generate them, including governance standards and environmental, social and governance (ESG) practices.

Khandelwal also said businesses are operating in an environment shaped by geopolitical tensions, macroeconomic uncertainty, technological disruption and climate-related challenges. India, he said, is also affected by global developments, including conflicts in the Middle East and Russia's conflict with NATO, which have disrupted supply chains and influenced interest rates.

Government Initiatives and Global Perception

Commenting on the government's recent initiatives, including free trade agreements (FTAs), he said they are positive steps towards inclusive growth and the Viksit Bharat 2047 vision. He added that industry leaders have appreciated the government's reforms, particularly those aimed at supporting MSMEs.

Responding to allegations by the US that Indian goods are produced using forced labour, Khandelwal said such claims should be assessed based on complete facts and should not be generalised. He added that while isolated instances may exist in parts of the unorganised sector, such practices are not common among large corporates focused on long-term growth. (ANI)

(Except for the headline, this story has not been edited by Asianet Newsable English staff and is published from a syndicated feed.)