Small firms find it hard to get export finance. Relief may be on way.
Subscribe to enjoy similar stories. Smaller enterprises struggling to crack export markets, especially in some of the poorest countries, may find it easier in the future, with the Exim Bank of India working on a model to smoothen export finance for them. Indian lenders, unsure of importers and banking systems in so-called least developed countries (LDCs), are often hesitant to fund Micro, Small and Medium Enterprises (MSMEs)shipping to such nations.
The Centre has now asked Exim Bank to design a model to assess the risks faced by banks involved in such exports and finance them, two people aware of the matter said. The model will aim to promote exports by MSMEs and protect them from payment defaults. According to one of the two officials cited above, MSME exporters face a twin problem of availability and cost of finance.
While the government's 3% interest subsidy for MSMEs brings down loan costs, availability of finance itself remains a problem. “Suppose somebody is exporting to an African country which is not politically stable—Banks will be slightly hesitant to fund it unless you give good collateral since you are taking a risk on the customer who is abroad. But here in India, my bank is taking an exposure for the manufacturer here.
If the money is stuck there, we don't know about their banking systems and their legal issues. These are challenging. How you manage those kind of risks is what we are trying to do through Exim Bank," the person said on the condition of anonymity.
Read more on livemint.com
