With the advent of UPI on credit, democratising lending will get easier, and MSMEs can serve as integral mediums for them
Micro, small and medium enterprises (MSMEs) have played a critical role in bringing digital payments to the bottom of the pyramid. In general also, the MSME sector has a significant share in employment in the country. As the last year’s Budget 2022 announced few measures for COVID-hit MSMEs like ECLGS and increased budgetary allocation, among others, MSME-focussed fintechs in Budget 2023 also demand measures such as tax sops and relaxation in credit guarantee criteria.
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Ketan Patel, CEO of Mswipe Technologies, said, “MSMEs have played a critical role in bringing digital payments to the bottom of the pyramid through their user-friendly transaction interfaces and innovative offerings; furthermore, supported by an open API ecosystem and. QR payments are accepted by more than 30 million merchants, a 12x increase from just 2.5 million merchants accepting QR payments five years ago.”
He added that 2022 has been a defining year for the fintech and digital payments industry. Furthermore, with the advent of UPI on credit, democratising lending will get easier, and MSMEs can serve as integral mediums for them.
Alok Mittal, CEO of Indifi Technologies, said, “Digital Lending has transformed the MSME lending landscape and driven more inclusion. The Budget 2023 must play a role in enabling digital lenders. The current credit guarantee programs like CGTMSE and CGFMU are limited either by an interest rate cap of 18 per cent, or by a minimum BBB+ rating for the underlying lender. These criteria tend to filter out the inclusion-driven younger digital lending NBFCs.”
He added that designing such programmes to suit the inclusion objectives will enable millions of micro and small businesses to avail growth financing. Similarly, most public sector banks have partner entity rating criteria for co-lending, whereas the exposure is on the underlying MSME – relaxing these entity rating criteria will allow PSBs to partner more strongly in the MSME credit inclusion opportunity.
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Bhavin Patel, CEO and co-founder of LenDenClub, said P2P lending has evolved as a prominent investment asset class, ensuring the flow of investments from those with excess to those in need.
“While we work to meet the credit demands, we need assistance from the government to open the supply side by incentivising P2P lenders with tax exemptions up to a certain income. Further, it should allow bad debt write-offs, enabling defaults to be treated as capital losses during filing returns,” said Patel.
Last year, Finance Minister Nirmala Sitharaman in the Budget extended the Emergency Credit Line Guarantee Scheme (ECLGS) to March 2023. Besides, the guaranteed cover was also extended by an additional Rs 50,000 crore. The total allotment under the scheme would increase to Rs 5 lakh crore. In the previous Budget, the finance minister unveiled ECLGS of Rs 20 lakh crore to help the Covid-hit MSMEs.
Budget 2023 Demand By Startups
Ankit Jain, co-founder and CEO of StepChange, said, “We believe that the best thing that the government can do for climate tech startups is to create the market for climate solutions. For this, the government should come up with detailed targets and plans with appropriate resources for decarbonisation of the economy.”
He added that in particular, the government through its nodal bodies like BEE, SEBI, etc. should give large companies clear targets and timelines for decarbonisation over the next 10 years. The government should balance this with incentives like green loans at lower interest rates for companies that hit their decarbonisation targets.
Aditya Kumar, co-founder and CEO of Niro, said, “Startups play a crucial role in driving innovation and job creation – and a pivotal role in helping India achieve its dreams of becoming a $5 trillion economy. As such, our primary hope from the Union Budget would be to improve various aspects with respect to taxation associated with startups, e.g. taxing ESOPs at the time of liquidation (not exercise); reduction of minimum alternative tax (MAT); and creating incentives for Angel investors to invest in high-risk, early stage startups (through an income tax offset, for example).”
Prerna Kalra, co-founder and CEO of Daalchini Technologies, said that as Union Budget 2023-24 is round the corner, a tax relief incentive of 30 per cent expected to expand the angel investor pool to propel early-stage firms.
“Taxing the ESOPs at the point of sale is another ask by the industry and can be a game-changer for many emerging startups. Likewise, rolling out a single window for all relevant registrations can help businesses quickly initiate operations without delays,” Kalra added.
