Missing Middle Enterprise Finance in India: Technical Note Series 3

Estimating the gap in credit flow to micro, small, and medium enterprises in India

This technical note discusses the credit gap in micro, small, and medium enterprise (MSME) finance in India. It also examines recent government efforts to step up credit flow to MSMEs in general and microenterprises in particular.

The note highlights the lack of a single report on overall demand-supply estimation of credit for MSMEs and presents findings from various reports on the subject. Key points include:

• MSME Annual Report shows that over 92% of enterprises in the MSME space have no access to finance;
• National Commission on Enterprises in the Unorganised Sector had estimated the credit gap for micro enterprises at 73% of total demand as at the end of March 2012;
• Scheduled Commercial Banks data puts average credit off take for MSMEs at INR 716,000 at the end of March, 2012;
• Sub Group of Planning Commission estimates the outstanding credit gap for the MSME sector at 62% of credit demand at the beginning of the 12th Five Year Plan;
• Total credit demand, just for microenterprises, comes to around INR 7.9 trillion for 2012.

Feb 2013, MSME Umbrella Programme GIZ India