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Below the Comment on Post Budget by Hardika Shah, Founder & CEO, Kinara Capital

It is very encouraging to see a number of announcements aimed at bolstering the MSME sector in the Union Budget 2024-25. The Finance Minister's introduction of a credit guarantee scheme specifically tailored for MSMEs in the manufacturing sector is a particularly promising move. This initiative, which facilitates access to term loans for MSMEs to purchase machinery and equipment without the need for collateral or third-party guarantees, will incentivize formal lending at the last mile by mitigating credit risk. The creation of a self-financing guarantee fund to provide guarantees of up to INR 100 crores is also a game-changer in terms of delivering formal credit to small businesses. Equally commendable is the enhancement of the Mudra Yojana loan limit from INR 10 lakhs to INR 20 lakhs for entrepreneurs The government has already extended 43 crore loans amounting to around INR 22.5 lakh crores, and this move will expand the ambit of the scheme, empowering many more MSMEs with the necessary financial support.

One of the most forward-thinking aspects presented in the Budget with regard to MSMEs is the new assessment model for MSME credit. By enabling the development of capabilities to assess MSMEs for credit, rather than relying on external assessments, the government is paving the way for a more accurate and inclusive credit assessment process, a practice we at Kinara Capital have already adopted. Utilizing the digital footprints of MSMEs represents a significant improvement over traditional assessments based solely on assets or turnover, as the Finance Minister said, and it inclusively targets MSMEs without formal accounting systems, which is a huge step forward in driving financial inclusion at scale.

I am thrilled to see these initiatives, as they align perfectly with our larger vision of a more financially equal landscape by delivering access to formal credit to MSMEs. Our commitment to alternative credit assessment and last-mile facilitation resonates strongly with the government's push towards financial inclusion for MSMEs through policy, tech, and financing support. We look forward to contributing to and benefiting from these progressive changes, driving growth and stability within the MSME sector.

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