M.S.M.E’s contribute to 45 % of the total manufacturing output and around 40% of the total exports of the country. The small business sector in India is truly the fortune at the bottom of the pyramid which is why it is a point of focus for the government. There are various schemes launched by the Government to aid in the growth and development of M.S.M.E’s. The 3 major MSME schemes in India are

1.The Performance and Credit Rating Scheme
One of the major issues that small businesses face is the lack of credit availability. Most Lending institutions have exhaustive requirements from loan borrowers and follow a fairly similar process when it comes to evaluating the credit worthiness of their borrowers. The performance and credit rating scheme is an important scheme for MSME’s as it aims at providing a credible third party rating on capabilities and creditworthiness of MSME’s. This scheme is also poised to help the MSME’s in building up their existing operations. MSME’s will gain awareness about best practices and will therefore be able to improve their credit worthiness in order to gain access to loans at better rates. A standardized rating process can also help MSME’s to benchmark themselves against their competitors and increase their acceptability towards their vendors and customers.

For the purpose of rating, the fee to be paid to rating agencies will depend on the turnover of the micro and small enterprises and has been categorized into 3 slabs:

1. For turnover upto Rs.50 lac: MSME ministry will reimburse 75% of the fee to be paid to the rating agency subject to a ceiling of Rs. 15000.
2. For turnover between Rs. 50 lac to Rs. 2 crore: MSME ministry will reimburse 75% of the fee to be paid to the rating agency subject to a ceiling of Rs. 30000.
3.  For turnover above Rs. 2 crore: MSME ministry will reimburse 75% of the fee to be paid to the rating agency subject to a ceiling of Rs. 40000.

The Performance and Credit Rating Scheme is being implemented by the Ministry of MSME through National Small Industries Corporation.

Click here to know more about the Performance and Credit Rating Scheme

2.Credit Guarantee Trust Fund for MSME:

The Ministry of MSME and SIDBI (Small Industries Development Bank of India) have jointly established a trust called Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). This is an important scheme for MSME’s and its  objective is to provide collateral free loans to entrepreneurs and small businessmen. The scheme covers new and existing Micro and Small enterprises which are engaged in service and manufacturing jobs excluding the retail trade.

Loan Amount: The maximum loan amount under CGT is 1 crore. It can be provided to a startup or an existing business in the form of a term loan or a Working Capital Loan.

Main Advantages: In case the small or micro enterprise fails to repay the loan to the bank, the CGTSME has a provision to repay the loss incurred by the bank, upto 85 % of the credit facility. The focus of this model is that banks should give emphasis to project viability and business model validation to be able to avail a loan.

To know more about the Credit Guarantee Trust Fund for SME, click here.

3.Digital MSME Scheme:


The Digital MSME scheme is an important scheme for MSME’s as it  aims to encourage MSME’s to embrace digital tools for greater efficiency and enhanced competitiveness. The scheme is hinged on encouraging MSME’s to switch to Cloud Computing instead of spending time and money on developing in-house IT solutions. The Cloud based technologies will enable the MSME’s to use the internet to manage their business processes.

Advantages of a Cloud Based Model:
1. A Business only needs to pay as per its usage and does not have to make a heavy initial investment.
2. Easily Scalable: In case the user needs to expand they can scale very easily without having to invest time and effort.
3. A Cloud Based Model is location and device independent and only requires internet access.

To encourage MSME’s to switch to this model; the government is providing a 2 year subsidy on user charges. A maximum subsidy of Rs. 1 lac per unit will be disbursed to MSME’s over a period of 2 years.

Services offered under the Cloud Based Model:
1.ERP
2.Accounting
3.Manufacturing Design
4.Taxation (GST) and Compliance.

To Apply for the Digital MSME Scheme click here.