Financial innovation necessary for easy access to loans for MSMEs: ILO Study
New Delhi, Nov 28 (KNN) Companies that spend large share of their external funding on working capital are likely to have higher wages and labour productivity and lower unit cost says ILO (International Labour Organisation) in its latest report “World Employment and Social Outlook 2017: Sustainable Enterprises and Jobs,”.
According to ILO, MSMEs could not get external loans at low rates, therefore they suffer.
A 10 per cent increase in share of loan used as working capital results in 2.2 per cent higher wages, 5.9 per cent higher labour productivity and 3.9 per cent lower unit labour costs.
On the contrary, a 10 per cent increase in internal funds used as working capital is associated with wages that are 1.3 per cent lower, 2.7 per cent lower labour productivity and 1.6 per cent higher labour costs.
Deborah Greenfield, ILO deputy director-general for policy in a press interview said that the MSMEs play important role in job creation but could not get loans easily due to lack of audited financial statements, repayment history and business assets for use as collateral.
She added that the policymakers should promote easy access of loans for MSMEs which can benefit both employers and employees.
According to ILO, the companies use most share of their loans on working capital in those countries which have strong creditor rights protection , hence financial innovation and inclusion is required for strengthening the MSME sector, the study added. (KNN/AG)