Monday, 4 April 2016

UN Sustainable Development Goals

Goal 9 target: Increase the access of small scale industrial and other enterprises in particular in developing countries to financial services, including affordable credit and their integration into value chains and markets  

The entrepreneur has to go from one bank to another bank for obtaining loan for his/her industry. He/She may convince one bank and may be not another bank and sometimes none of them. So the entrepreneur may sometimes even have to abandon the thought also. 

According to a financial institution, in the present scenario, there is high rate of non performing accounts. This is the main reason for financial institutions not willing to finance new entrepreneurs. The second reason is the lack of experience of new entrepreneurs. Loans for which  security can be provided  are being financed by the financial institutions. There are also loans that are more risky in nature. For non performing accounts fund liability is increased and for that the financial institution officials may also have to suffer.  Sometimes it happens that financial institution officials lending the money are also accountable for the non performing accounts. The official from the financial institution lending the money have to suffer by their money getting deducted by their management for the non performing accounts and so financial institutions do not like to take this risk even though there are genuine cases and even in genuine cases in general, the officials may say that the project is not viable and the entrepreneur cannot contest it. Unsecured loans are therefore not being financed by banks. There is lack of confidence in the officials to lend the money because of this internal procedure and so the internal procedure has to change. If this procedure is reduced from the management then the financial institution officials may come forward in lending money to more entrepreneurs. There are sometimes sub-standard reckless lending. But majority of the cases are hampered due to the internal management procedure and to remove these hindrances internal management procedure needs to change. And the officials require as certainty from government that if the account becomes bad the government will refinance it because then the officials can finance without any apprehension. 

Recently, schemes like Shishu, Kishore and  Tarun have been launched but it's not clear about their coverage for example for trading units. In Shishu scheme, loans upto Rs 50,000/- is being  sanctioned to the entrepreneur. If there is bona fide interest of the person in his/her entrepreneurial activity and if this loan becomes a failure then there is no problem. Shishu scheme is doing well. For entrepreneurs, today's loan is based on cibil score and it should be less than the required limit.

 According to another financial institution, it is public money that comes through safe deposit and term deposit and this money is to be given back to them so banks are careful in giving loan to entrepreneur. There is no such hard and fast rule. The entrepreneur has to convince the bank manager and the bank manager will also asses the viability of the project.and when he is convinced he will extend the loan. If there is money in the bank that entrepreneur wants to use the money later on then there is dual combination that there is money from his own source and bank source. The location of the bank is also important because if the person wants to do business in another location then it may become difficult for the beneficiaries and then the project may not be viable according to the location.

#BankLoANsolutionsforMSMEs  Entrepreneurs, First Generation Entrepreneurs MSMEs, businesses, women entrepreneurs etc can share this.

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