The MSME (Micro, Small and Medium Enterprises) sector is facing an addressable credit gap of around ₹30 lakh crore, which is about 24 per cent of the total credit demand, according to a recent report by SIDBI (Small Industries Development Bank of India).

The report highlighted that even though credit supply to MSMEs has increased, the gap remains significant, especially in certain segments.

It said, "While an increased credit supply to MSMEs is in evidence, the study broadly estimates that the sector still has an addressable credit gap of about 24 per cent or ₹30 lakh crore".

The services sector has a higher credit gap of around 27 per cent, while the gap for women-owned MSMEs is even higher at 35 per cent.

It also noted that in comparison, male-owned MSMEs face a credit gap of around 20 per cent. Many women entrepreneurs still rely on informal sources of credit to meet their business needs.

Among different types of enterprises, medium-sized businesses face the highest gap at 29 per cent as they require more capital to scale up operations. Micro and small enterprises also face challenges in accessing sufficient funds.

At the business activity level, the report added that the MSMEs involved in trading face the largest credit gap at around 33 per cent. This is mainly because trading businesses often lack the collateral needed to get formal loans.

Despite these challenges, the SIDBI says that the MSME sector is well positioned to become one of the key drivers of the Indian economy as it moves towards the goal of 'Viksit Bharat'.

The sector is seeing strong growth in women entrepreneurship and sustainability-focused businesses. The report mentioned that the increasing formalisation of MSMEs and a growing shift towards digital lending are expected to help bridge the credit gap over time.

However, it stressed the need for specific policy initiatives to address gaps in segments like services and women-led enterprises.

To further support the sector, MSMEs need help in improving market access and productivity. Government support in areas such as digital adoption, skill development, labour availability, and infrastructure will be essential for their growth.

Published on May 19, 2025