Micro, small and medium-sized enterprises (MSMEs) have played a vital role in driving digital payments to the bottom of the pyramid. Overall, the MSME sector also has a significant share of employment in the country. Since last year’s 2022 budget announced some measures for COVID-affected MSMEs such as ECLGS and an increased budgetary allocation, in the 2023 budget MSME-focused fintechs are also demanding measures such as tax cuts and easing of credit guarantee criteria.
Ketan Patel, CEO of Mswipe Technologies, said: “MSMEs have played a vital role in driving digital payments to the bottom of the pyramid through their easy-to-use transaction interfaces and innovative offerings; additionally supported by an open API ecosystem and. QR payments are accepted by more than 30 million merchants, a 12-fold 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. Moreover, with the advent of UPI on credit, democratizing lending will become easier, and MSMEs can serve as an integral medium for them.
Alok Mittal, CEO of Indifi Technologies, said: “Digital Lending has transformed the MSME lending landscape and driven greater inclusion. The 2023 Budget should play a role in enabling digital lenders. Current credit guarantee programs such as CGTMSE and CGFMU are limited by either an interest rate cap of 18 percent or 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 programs to meet inclusion goals will enable millions of micro and small businesses to access growth finance. Similarly, most public sector banks have partner-entity assessment criteria for co-loans while the exposure is on the underlying MSME. Relaxing these entity assessment criteria will allow PSBs to collaborate more strongly in the MSME borrowing opportunity.
Bhavin Patel, CEO and co-founder of LenDenClub, said P2P lending has evolved into a prominent investment asset class, ensuring the flow of investment from those in surplus to those in need.
“As we work to meet credit needs, we need help from the government to open up the supply side by incentivizing P2P lenders with tax exemptions up to a certain income. Further, it should allow bad debt write-offs, allowing defaults to be treated as capital losses during the filing process,” said Patel.
Last year, Finance Minister Nirmala Sitharaman in the budget extended the Emergency Credit Line Guarantee Scheme (ECLGS) until March 2023. Moreover, the guaranteed coverage was also extended by an additional Rs 50,000 crore. The total allocation 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-affected MSMEs.
Budget 2023 Demand by startups
Ankit Jain, co-founder and CEO of StepChange, said: “We believe that the best thing government can do for climate technology startups is to create the market for climate solutions. For this, the government needs to come up with detailed targets and plans with appropriate resources for decarbonising the economy.”
He added that the government in particular through its node bodies such as BEE, SEBI, etc. should give large companies clear targets and timelines for decarbonising over the next 10 years. The government should balance this with incentives such as green loans at lower interest rates for companies that meet their low-carbon targets.
Aditya Kumar, co-founder and CEO of Niro, said: “Startups play a vital role in driving innovation and job creation – and a vital role in helping India achieve its dreams of becoming an economy of become $5 trillion As such, our main hope of the Union budget would be to improve several aspects related to taxation related to startups, e.g. tax (MAT); and creating incentives for Angel investors to invest in risky early-stage startups (for example, through a tax deduction).
Prerna Kalra, co-founder and CEO of Daalchini Technologies, said that as Union Budget 2023-24 comes around the corner, a 30 percent tax cut is expected to expand the angel investor pool to propel early-stage companies.
“Taxing the ESOPs at the point of sale is another industry demand and could be a game-changer for many emerging startups. Similarly, rolling out a single window for all relevant registrations can help companies get started quickly and without delays,” added Kalra.
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