Smaller, niche businesses started as a trend in many countries have slowly transformed to become strong pillars of growth for economies. These businesses have not only added to a country’s GDP but have also become powerhouses of breakthrough ideas and employment. In India, MSMEs play a vital role contributing to nearly 49 percent of the total exports while adding 30 percent to the GDP and generating a sizeable portion of direct and indirect employment. It is safe to say that small businesses have become a bedrock of the country’s economy.
MSMEs saw stabilized growth in business and were on the upward trajectory until COVID-19 hit. Most businesses were unprepared to face a challenge of this magnitude and were struggling to stay afloat.
Challenges faced by MSMEs during the pandemic
Organisations with limited resources found themselves bearing the brunt and in need of a contingency plan. Most of them operate on a wafer-thin margin and were unable to mitigate the impact. According to the World Bank, out of some 58 million MSMEs in India, more than 40 percent lack access to formal sources of finance which inadvertently makes them most vulnerable in a crisis.
In this scenario, businesses with a digital presence faced less of an impact compared to those who were yet to adapt to digital. Most small sized businesses continue to operate out of brick-and-mortar stores for a myriad reason – lack of skilled digital resources within the organisation, budget constraints, security concerns, etc. Acquiring affordable tech talent to set up the digital infrastructure and manage the operations is a mammoth task for small enterprises. Moreover, access to funds and availability of credit is a long and tedious process adding to their predicament.
Not just Digital, go from local to global
On the internet, geography is history. For consumers, WWW present one large shelf of goods and services. This trend has only accelerated post pandemic and shift to digital and online is permanent. For MSME’s, this provides a level playing field, opportunity to reduce dependance on one domestic market, offline channel and target global consumers online for their goods and services with cross border eCommerce.
The opportunity is to transform from a local seller to a proud exporter, earning value forex for the country and highlight brand India with their goods and services. Unlike in the past, the journey is much easier with digital tools at MSME’s disposal. The MSME’s and freelancers have choice of digital payment platforms, marketplaces, shopping carts, websites, social media platforms to target global consumers across almost 200 markets. Additionally, developing deep partnerships with marketplaces, shopping carts, billing engines, freelance portals can also provide a boost to MSMEs and freelancers in their local to global journey.
Talent for digital transformation
Among everything else, if I am asked to pick one critical success factor to succeed in digital economy it will be access to skilled digital talent. The competition for talent in digital space has never been more intense. Attracting, retaining, and growing of skilled resources is a constraint even for large businesses. For small businesses it is even more challenging. Hence, we have innovative out of box solves for MSME community. One way to strike the right balance is by setting up a freelancer talent portal where MSMEs can engage with freelancers on a project basis or on an hourly basis. Indian freelancers with their superior digital expertise have already made a name for themselves and for India in the global marketplace. For example, the talent portal can consist of freelancers proficient in digital marketing, shopping carts integration, website development thus giving MSMEs access to skilled and specialized talent. For local freelancers, India offers one more market in addition to global and an opportunity to serve their own MSME in their country and hone some of their skills. Here Govt and organisations like NSDC can also partner with industry bodies and institutes to launch vocational training programmes specifically aimed at arming the rural masses with digital skills thus empowering them and utilizing their services at an affordable cost.
Access to credit – Fuel for growth
Easy availability and timely access to credit is paramount to the growth of MSMEs. Credit flow is essential to ensure the survival and sustenance of small business owners. Majority of these businesses find it extremely tough to get loans from traditional channels and awareness is low.
The urgency of the matter has attracted attention from the Government. They have introduced grants and initiatives to accelerate the process of loan disbursement including innovative platforms like loanin59minutes.com managed by SIDBI. Additionally, there is rise of digital platforms and fintech players partnering to offer alternatives for digital finance. The entire experience is digital and MSME are not required to visit branches and file physical paper-work.
Global multilateral agencies like The World Bank, too, recently approved a $500 million program (named as RAMP) to support MSMEs in India to increase liquidity access for viable small businesses impacted by COVID-19. The RAMP program aims to support firms to return to pre-crisis production and employment levels and attract private sector funding into the sector.
Some other measures that can help the MSMEs with credit availability is including the new generation digital lenders in extending their finer services to these small and medium sized businesses. Extending the MUDRA collateral free loan programme to small merchants and traders would also create a positive impact. Such steps would directly boost small value exports from India as well as benefit microenterprises, artisans, handicraft producers, small services exporters, sole proprietors, and women led enterprises.
MSMEs have played a significant role in keeping the business afloat by their relentless drive and resilience. Even though the pandemic cast an air of uncertainty over business, the sector is well on its path to contributing almost 50 percent to the GDP and generating work for the billion population of India.