MSMEs growing fund gap reaches $530 billion, says SME Forum

Crowdfunding platforms offer a promising alternative for MSMEs

MUMBAI: A recommendation paper submitted by the India SME Forum to the RBI highlights the widening finance gap for MSMEs in India, which has reached $530 billion, posing substantial challenges. The sector continues to be underserved, limiting growth potential and competitiveness in global markets.

The paper suggests that crowdfunding platforms offer a promising alternative for MSMEs. Over 80 countries, including the United States, the United Kingdom, the European Union (EU), Saudi Arabia, and the United Arab Emirates (UAE), have established regulatory frameworks for crowdfunding. The US, UK, and China dominate the financial reward crowdfunding market, with the US holding 51 per cent, China 28 per cent, and the UK 17 per cent share collectively.

Crowdfunding leverages the collective contribution of numerous individual investors through online platforms to finance projects, businesses, or ventures. Peer-to-peer (P2P) lending, a subset of crowdfunding, allows individuals to lend and borrow money directly without traditional financial intermediaries. P2P lending platforms connect borrowers with investors, offering potentially more accessible loans at competitive interest rates compared to conventional bank loans.