Yogi govt to tie up with micro lenders for small business funding

UP govt plans to integrate MFI channel with its flagship One District One Product scheme

Uttar Pradesh is mulling a tie-up with microfinance institutions (MFIs) to ease the flow of funds to the beleaguered micro, small and medium enterprises (MSMEs).  

The Yogi Adityanath government is planning to integrate the MFI channel with its flagship One District One Product (ODOP) scheme launched earlier this year.  

UP MSME and Export Promotion Minister Satyadev Pachauri told Business Standard that the state was working on a roadmap to tap MFIs for providing cheaper credit to small businesses. 

The MSME sector is the backbone of UP's industrial landscape and contributes 60 per cent to its annual industrial output. It employs 40 million people and generates direct economic activity worth nearly Rs 1.2 trillion annually. The state is home to almost five million MSMEs and the sector is the second largest employer after agriculture.

"We are already working on the MFI model, which will institutionalise the MFIs' funding to the MSME sector," he said on the sidelines of the Uttar Pradesh Micro Finance Association (UPMA) conference 2018, held in Lucknow recently.  

He said the government would act as a facilitator for MSMEs in meeting their short-term funding needs from MFIs, who would also benefit with an expanding customer base in UP.

"There are a large number of businesses that need small-ticket loans ranging from Rs 10,000 to Rs 50,000 and these could be adequately catered to by the MFIs rather than big commercial banks," he said, addressing the conference. 

Pachauri claimed MFIs could play a vital role in the success of the ODOP scheme, which would, in turn, generate a large number of jobs for local youth. "We are trying to integrate farming with industry so that the farmers get remunerative prices for their produce," the minister said, adding that the government was giving the packaging industry a boost, so that value addition could be done for farm produce and processed food for other markets.    

Pachauri also stressed on the imperative of bringing women into the mainstream of industry and institutional credit for unlocking their potential for speedier socio-economic development, since they constituted almost 50 per cent of the country's population. 

Launched in January 2018, ODOP seeks to promote traditional industries synonymous with the respective districts of UP to spur the local economy and create jobs.

During the UP Investors Summit on February 21-22, 2018, the Adityanath government had netted investment proposals worth nearly Rs 60 billion.

UP is uniquely famous for product-specific traditional industrial hubs across 75 districts -- Varanasi (Banarasisilk sari), Bhadohi (carpet), Lucknow (chikan), Kanpur (leather goods), Agra (leather footwear), Aligarh (lock), Moradabad (brassware), Meerut (sports goods), and Saharanpur (wooden products), etc.

Adityanath has espoused ODOP and recalls it at public platforms to underline his pro-industry agenda. The government wants to aid the district-specific industries and products in gaining national and international recognition through proper branding, marketing support and easy credit.