Technological Solutions And MSMEs

    Overview of the Indian MSMEs Sector

    In India, Micro, Small and Medium Enterprises (MSMEs) are essential for creating jobs at reduced capital costs, addressing regional inequalities, and fostering industrialisation in rural regions. Due to digital efforts brought about by cutting-edge technologies like artificial intelligence, data analytics, machine learning, and financial & accounting intelligence, nearly all sectors in India, including MSMEs, are undergoing considerable transformation. As a result of modern technology, MSMEs are developing new business models like the ones below: Through its platforms, LendenClub links lenders and verified borrowers; Meesho helps small companies to sell items online through social media channels; and Brego offers real-time insights from a company’s financial data. Most of these technologies are made to support MSMEs automating, producing intelligence from their routine operations, or interacting with stakeholders (such as financial institutions, customers, or suppliers) in order to help them become more productive and innovative.

    The epidemic has also compelled this industry to use cutting-edge technology and innovate in order to develop and survive. 250 small company owners were polled by Dun & Bradstreet in the fourth quarter of 2020 to see how COVID-19 was affecting their day-to-day activities. 54 per cent of respondents claimed that by digitising routine tasks, they were able to save operating expenses, and 51 per cent said that by adopting new technologies and digitising, they had improved their competitive position. It is essential for MSMEs to have greater visibility into their operations while keeping an eye on the quality and delivery of goods in order to avoid any hiccups due to the introduction of competitive services, multichannel distribution models, and the involvement of multiple stakeholders, and multimodal needs.

    Let us see the statistical numbers to be able to understand the MSME sector better in various aspects.

    Key MSMEs Statistics in India

    MSMEs number 63 million in India. According to the 73rd National Sample Survey (NSS), which was performed between 2015 and 2016, the MSME sector created 11.10 crore employment nationwide or 22 per cent of all occupations in India. The two states that contribute the most to the MSME sector are Uttar Pradesh and West Bengal (each with 14 per cent), followed by Tamil Nadu and Maharashtra (each with 8 per cent).

    MSMEs’ Approximate Number (by Activity)

    Trade accounts for over 36% of MSMEs’ operating revenue, followed by Other Services (33%) and Manufacturing (31 per cent). MSMEs have a substantial impact on the expansion of India’s GDP. According to the Ministry of Statistics & Programme Implementation (MOSPI), from 2014–15 to 2018–19, the sector contributed amounts to the GDP at current prices such that it went up from 29.34% in 2014-15 and went up to 30.27 in 2018-19. 

    Government initiatives and liberalised FDI policies enhance MSMEs

    India’s FDI regulations have been liberalised, allowing 100% FDI through the automatic route in the majority of industries, including MSMEs. The “Single Brand Product Retail Trading” FDI policy has significantly improved the MSME environment in India. The policy requires purchasing 30% of products from India, particularly MSMEs in rural and cottage industries, as well as from artisans and craftsmen. The government provides timely business lending programmes and assistance packages to the sector in recognition of the major contribution MSMEs have made to India’s economic development.

    For instance, an economic assistance package worth Rs. 20 crore (US$ 2.66 million) was announced for MSMEs in May 2020. A credit guarantee programme is known as the “Distressed Assets Fund – Subordinate Debt for Stressed MSMEs” was launched in June 2020 to provide stressed MSMEs with credit facilities through lending institutions. This programme, which was formerly valid until March 2021, has now been extended through March 2022. Since 2015, the Indian government has allowed a number of additional loans (special to MSMEs), including Micro Units Development and Refinance Agency (MUDRA) Loans and National Small Industries Corporation (NSIC) Subsidies. Since a long time ago, nationalised banks like Kotak Mahindra, ICICI, and SBI have also provided specialised loans for the growth of MSMEs.

    Tech-based Platforms’ Role in the MSME Growth Pathway

    Government involvement in the MSME sector is mostly restricted to addressing MSMEs’ finance concerns. And for just this reason, modern start-ups have entered the scene. Platforms based on emerging technology are increasingly assisting MSMEs in upgrading and integrating their operational capabilities. The majority of tech-based platforms specialise in different fields, enabling them to support numerous aspects of MSME operations including managing supply chain and logistics, dividing work among related departments, and keeping track of product quality.

    MSMEs are now receiving assistance from a number of start-ups and technology companies that are specialising in offering new-age technological solutions, such as data analytics, artificial intelligence, augmented reality (AR), machine learning, and the Internet of Things (IoT). The majority of MSMEs in India are located in rural regions, thus it is crucial that digital solutions satisfy their needs despite obstacles like poor internet access and a lack of sufficient funding, creativity, and technology. The following is a list of some well-known technological enablers empowering MSMEs in financial and operational services.

    Financial solutions for MSMEs based on technology

    • The LendenClub LenDenClub is a peer-to-peer website that links lenders and approved borrowers. It was founded in 2015. Its platform Instamoney, it enables MSMEs with little access to bank financing to get small-ticket loans. The business has served 2 million clients thus far and paid out more than Rs. 10 billion (US$ 132.8 thousand).
    • Brego – A 2019 startup from Mumbai, Brego uses a mobile-based SaaS solution to assist MSMEs in gaining real-time insights from their financial data. The app gives stakeholders visibility into their financial operations by enabling quick access (through mobile phones and even web browsers) to important financial criteria including sales, receivables, profit & loss, and cash flow. Additionally, the app enables company owners to send real-time information to team members, clients, and suppliers through email or WhatsApp.
    • PayNearBy which debuted in April 2016, offers a range of digital financial and non-financial services to nearby merchants. The company already provides services to more than 15 lakh shops, and it soon hopes to increase this number to 5 million businesses in Tier I and II cities as well as rural regions. Retailers may make use of a number of services, including cash deposit and withdrawal, money transfers, savings, insurance, travel, digital payments, and government perks.

    With their fintech solutions, several more businesses, including MSwipe, RazorpayX, RXIL, Algo360, Cashinvoice, and Happy Loans, are enabling the MSME sector.

    Operational tech-based solutions for MSMEs

    • Meesho: A Bengaluru-based company founded in 2015, makes it possible for people and small companies to sell goods online using social media platforms like Facebook, Instagram, and WhatsApp. To offer financing options for MSMEs, Meesho also joined together with fintech startup Klub in August 2020. Intriguingly, Meesho had a 750 per cent increase in users only during its annual Christmas sale event, with tier 4+ markets, including distant areas of the nation, accounting for 60% of demand.
    • India Trade: India’s largest online B2B marketplace, Tradeindia was founded in 1996 with the goal of assisting SMEs in becoming digital. The firm is the first in the nation to offer e-commerce and solutions for booking domains, SSL, Adword, SMO, and FB Promotion to SMEs. It also offers payment protection plans (TI Pay), Collateral Free Loans (TI Lending), and Logistics (TI Logistics).
    • Adjustbooks: Alignbooks is a cloud-based accounting programme created in September 2016 with the aim of assisting MSMEs in automating their invoicing process. The company has served over 30,000 MSMEs in India thus far and handled over 15 lakh client bills. A standalone version of Alignbooks’ software has also been made available to serve the needs of rural residents with spotty internet access.
    • Locus: Founded in 2015, Locus automates complicated supply chain decisions using proprietary algorithms and machine intelligence. The company introduced a free tool called “QuickStart” in April 2020. It is a self-serve lite version of the software suite aimed to assist MSMEs in enhancing their supply chain during the pandemic. With their technological services, tech behemoths like Amazon and Flipkart are also enabling MSMEs. Flipkart, for instance, has started a number of programmes to assist MSMEs, including the Samarth Programme, which onboards Indian artisans, weavers, and handicraft producers onto e-commerce, and a partnership with the Federation of Indian Chambers of Commerce & Industry (FICCI), through which it has started a number of workshops for MSMEs.

    Similar to this, Amazon introduced “Digital Kendras” in July 2021 to support MSME company owners and inform them of the advantages of digitising their businesses. Amazon had digitalized 2.5 million SMEs in India as of April 2021. Dell is a tech company that often tackles the problems faced by MSMEs and helps the industry with its technological advisers. Since 2019, the firm has held an annual “MSMEs Day” on its platform. Walmart and Google, two other behemoths, have endorsed the campaign to support MSME businesses.

    Final words

    A survey conducted in 2020 by Endurance International Group, an IT services company, found that >50% of MSMEs have adopted video conferencing tools to ensure business continuity since the pandemic-induced disruptions, and 30% of MSMEs have launched their company websites or connected with e-commerce platforms. One of the most important sectors of the Indian economy, MSME accounts for 48% of yearly exports, and 30% of GDP, and is significant employment. The potential for tech-based solutions to benefit MSME enterprises is enormous. According to the Cisco India SMB Digital Maturity Study 2020, SMEs would be able to increase India’s GDP by US$158-216 billion by 2024 as a result of digital adoption.

    It’s interesting to note that India’s environment for digital start-ups is also driven by favourable government policies, a constantly expanding customer base, and a growing number of educated young people who are tech-savvy. Over 7,000 technological start-ups are located in India, and their numbers are growing rapidly (by 35-40 per cent). It is anticipated that the uptake/adoption of tech-based solutions would hasten MSME outreach to a larger client base that can only be reached through digital marketing and AI solutions.

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