Government to offer direct factoring facility for MSMEs

In order to boost the growth of Micro, Small and Medium Enterprises (MSME) sector, the Export Credit Guarantee Corporation of India (ECGC), a state owned enterprise controlled by the Ministry of Commerce, will offer direct factoring facility for MSMEs sector. Factoring is a cash management tool under which an enterprise or business person sells accounts receivable at a discount to a third party funding agency to raise capital. The ECGC has planned to introduce direct factoring facility service in the second quarter of the current financial year, which would help small enterprises to meet their working capital requirements without approaching banks. The ECGC had already launched a new country-risk rating for the benefit of MSMEs. It has become imperative for India to boost the MSME sector which contributes around 8% of the country's GDP, 45% of the manufactured output and provides employment to over 8 crore people. Meanwhile, the government has been taking various measures to boost the sector’s growth and has increased Budget allocation for the sector to Rs 24,000 crore in the 12th Five-Year Plan from Rs 11,000 crore in the previous five-plan period. The government has also set up a six-member inter-ministerial panel, which will suggest measures to boost the MSME exports.