Indian MSMEs Keen on Going Green But Lack Finances, Says Report

Micro, small and medium enterprises (MSMEs) in India are willing to adopt sustainable practices, however lack of proper guidance and resources such as securing green finance to take the initial step are hindering the process, according to the report released by Kinara Capital.

The survey conducted of 3,649 MSMEs from Manufacturing, Trading and Services sectors in over 100 cities revealed that nearly 3 in 4 MSMEs (73.2%) were unaware of available Green Financing solutions, while 11.2% cited lack of clarity in the process as challenge. Despite this knowledge gap, the report highlighted a strong intent among MSMEs to transition to environmentally-friendly solutions.

In addition, the report indicated that 74.2% of the surveyed MSMEs that are looking to avail business financing within the next year are planning to invest it in making their own business operations more sustainable. The report also stated that over half 51.7% of the MSMEs that did apply for green business loans received funding, underscoring the sector’s strong credit readiness and a willingness to embrace sustainable practices.

Among the Manufacturing MSMEs, the metal-related sub-sectors, such as Fabrication, Machine Components, Auto Components, and Metal Works, represent 37.8% of positive responses. Within the Trading MSMEs, Consumables sub-sectors are the frontrunners with a 30.6% response from mostly B2C retail such as Provision & General stores, Healthcare & Personal Care Products, Comestibles and Medical Shops. Following Consumables, at 19.9% are the B2B Trading MSMEs selling Automobile Parts, Industrial Products, Elements & Mixtures, Polymers, and Metal & Machine Components. And, in the same range at 19.8% are the Textile & Apparel Trading MSMEs.

When it comes to analysing regional intent, MSMEs in Tamil Nadu & the Union Territory of Puducherry have emerged as leaders with 37.5% expressing their intent to incorporate environmentally responsible practices. Following this are the MSMEs from the states of Andhra Pradesh & Telangana at 31.6% willing to invest in the green transition of their businesses. MSMEs in Karnataka followed in third place with 22.1% stating their Go Green intent; and with a combined 8.8% response rate, fewer MSMEs from the states of Gujarat & Maharashtra opted for a green transition in the near future.

Global Significance of MSMEs

According to a report by the International Finance Corporation (IFC), MSMEs make up over 90% of all firms and account, on average, for 70% of total employment and 50% of GDP worldwide. In emerging markets and developing economies (EMDEs), the MSME finance gap now stands at $5.7 trillion – a number that swells to $8 trillion when informal enterprises are included.

Supporting MSMEs in accessing green financing can help economic development. With proper incentives and advisory support, MSMEs could play a pivotal role in India’s net-zero ambitions, potentially reducing emissions while increasing operational efficiency and long-term competitiveness.