The world is celebrating International MSME Day 2019 today, and as a country with the largest number of MSMEs globally, it’s only fair we discuss how far we have come in contributing to the sector as an economy. Indian MSMEs have stood the test of time, technology and labour.
International MSME Day 2019 is not just recognised as a day to celebrate the growth of MSMEs, but also to identify the challenges and provide solutions for the sector. Currently, MSMEs have around 50 million businesses, create employment of about 70 million and manufacture more than 6000 products daily.
The MSME sector accounts for about 45% of the manufacturing output and around 40% of the total export of the country.
The main challenges MSMEs face today revolve around:
- Working Capital & Access to Credit
- Shipping & Logistics
- Skill Development
How are MSMEs important to India?
India relies on MSMEs to keep a track of economic growth. The MSME sector contributes significantly to the manufacturing output, employment and exports of the country.
MSMEs are the backbone for India’s digital economy. Over the many years, it has grown, MSMEs have seen higher and faster growth than any other industrial sector.
How? MSMEs are:
- Providing employment
- Contributing to countries GDP
- Possess an Annual Growth Rate of 19%.
However, despite these developments, MSMEs are struggling to live up to the potential contribution to the economic growth of the country. A push towards helping MSME growth accelerate will not only increase contribution to the country’s GDP but it will also help in generating jobs in the country.
MSME Challenges and Solutions:
Indian MSMEs are contributing around 8 % in GDP and 45 % in industrial production. Compared to other countries like China, Japan and Korea, where MSMEs contribute around 50-60% in GDP figures, the Government and RBI have to make larger strides to boost the sector.
This year, the focus has shifted to help MSMEs tackle access to loans and credit, provide technical skills in order to keep up with demands and enable easier shipping of products.
We picked the top 3 challenges that MSMEs are facing currently, based on statistics, and stated the best possible solutions for them too.
Working Capital & Access to Credit:
MSMEs have worked hard to respond to the alterations made by the RBI and Government in the past. However, MSMEs primary challenge lies with easy access to finance, more specifically, working capital.
Running daily operations can become a hurdle for small businesses that do not have easy access to credit. This is also because lending to MSMEs has not been a favourable space for large banking institutions due to their stringent credit appraisal techniques.
This is mainly due to several businesses under the MSME sector:
- Not having a good credit score
- Working primarily on a daily cash basis, which is their working capital.
Post demonetisation, MSMEs could not risk withdrawing cash from their accounts. This resulted in job losses as several contractual based employees were laid off due to an inability on part of the owner to pay them in cash.
First, the RBI and Government have worked closely together to understand MSME cash flows management and provide easier loans to expand production. The RBI pushed for the digitization of MSMEs and established schemes to promote digital payments in the country to meet the lack of cash availability.
Top incentives that have been introduced by the RBI and Government include:
- SMEs can get loans up to 1 crore sanctioned in 59 minutes
- GST exemption limit doubled to 40 Lakh annual turnover; 20 Lakh for the NorthEastern States.
- MSMEs can avail the composition scheme to file just one annual return and pay taxes only once every quarter.
- Allowing a restructuring for MSME Loans up to INR 25 Crore.
In support of the increasing RBI schemes, small businesses can also access easy, quick working capital loans through Instamojo’s mojocapital. Mojocapital also allows small businesses to manage cash flow by managing payouts better. The different payout options offered by Instamojo are:
- Same Day Payouts
- Next Day Payouts
- Instant Payouts
Check out how Drink Prime, a small business uses Instant Payouts with Instamojo:
Shipping & Logistics:
Many small businesses perfect their branding and product goals but fail to streamline their shipping and logistics. The primary concern for MSMEs in this area is to find a trustworthy shipping partner. Apart from this, logistics and supply chain issues arise such as:
- Poor road network and connectivity
- Lack of skilled and trustworthy delivery partners
- Expensive shipping charges
- Lack of access to the latest technology
To tackle this hurdle faced by businesses, Instamojo introduced a quick solution to shipping woes, using mojoXpress.
mojoXpress is a shipping and logistics service by Instamojo. mojoXpress allows small businesses to ship products from the Instamojo online store.
- Ships to over 12,000+ pin codes PAN India.
- Scheduled pickups and executive will pick up the package from the doorstep.
- Easy to track the package using a tracking ID sent via email.
- An immediate tracking ID will also be mailed to customers.
- Feasible shipping costs which will be deducted directly from payouts, with no additional steps.
Check out how Bakarmax uses mojoXpress to ship their products with ease:
Most Indian MSMEs are set up in tier 2 and tier 3 cities. For a lot of small business owners, a major challenge lies in developing the right skills required to run a business.
Apart from skill development, it is also important to focus on work-based learning, including apprenticeship opportunities in MSMEs.
Small businesses are going digital. Along with digitizing payments, there is an increasing push to make businesses go online. To facilitate MSMEs to have easier access to skill development knowledge, we have developed a knowledge stack of information that business owners will find useful.
This helps MSMEs train their workforce and understand hiring requirements for different departments of their business in the long run. Learn more about setting up a business, finding the right funds and discovering different tools to scale your business from 0-100 through our:
- E-books: Our wide range of free e-books explore subjects from setting up an online business without a website to finding easy access to loans for your business.
- mojoSeries Webinars: Watch industry pioneers give expert advice on topics ranging from marketing, finance and legal tips for small businesses on mojoSeries, short webinars hosted on our social media channels.
- Product Demo Videos: Our in-house team provides short tutorials to help small businesses find easy access to our tools.
Besides this, we are introducing a huge platform for all businesses to have unlimited access to skill development training. To know more, stay updated on all our products, offers and small business schemes simply by setting up your dream business with an Instamojo account.