The MSME sector accounts for a larger portion of India's exports and is a more significant contributor to the GDP of the nation. However, there are several bottlenecks, such as lack of access to credits, physical infrastructure constraints, reluctance to adopt new technologies, and many more, which prevent the creation of a supportive business environment for the sector's advancement. One important strategy adopted by the Ministry of MSME to address this problem is to formalise the sector by recognising more unrecognised MSME businesses. It helped many uncategorized industries to come together and access more resources.
Significant steps taken by the ministry of MSME to reduce the bottlenecks through the formalisation of the MSME sector
- Bringing small businesses under a structure
Formalisation was a great strategy, which helped numerous MSME entrepreneurs upgrade their dream businesses. The first step or the biggest ambition of the MSME ministry is to identify the micro, small and medium entrepreneurs and bring them under a formal structure, said by the MSME Ministry Secretary B.B Swain at an industry interaction event, which is organised online by Financial Express. This initiative helped to bring the MSME businesses that operated informally into the limelight and register them formally to get all the benefits and various schemes that the ministry of MSME offers.
- Udyam Registration
The Udyam Registration Portal is another such brilliant initiative that was introduced by the Ministry of MSME on July 1, 2020 to ease the registration process. It facilitates the formal registration of informally operating MSMEs through a digital, paperless process. The Udyam portal has crossed more than 90 lakh registrations in two years. As per the recent report of the Ministry of MSME, the total micro, small, and medium enterprises registered on the Udyam portal are around 1 crore, which employs 7.6 crore people of which 1.7 crore are women. This will bring more transparency to the distribution of government aid to the right people without any delay.
- Delayed Payment
Another major concrete step taken by the Government of India to uplift and empower the MSME sector was clearing the delayed payment. Delayed payment is one of the biggest bottlenecks MSMEs face from the entities they work for. In a speech, Union Minister Nirmala Sitharaman shared the details about the steps the Government has initiated to clear the pending payments from the Central and State Governments, Central and state-owned organisations, and private limited industries to support the growth of the MSME sector.
"We have pressed the private companies to clear the payment cycles of MSME businesses within 45 days. For the first time, incentive announcements of Rs 6000 crore were made. The RAMP scheme has benefited the exporters. Around 18,000 MSMEs have received digital transfers totaling more than Rs. 500 crores to help the firms grow under the Self Reliant India fund” she said.
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How formalisation streamlined Digital Lending?
Digitisation of the MSME sector is a cognizant approach adopted by the Government of India to lead the country toward a digital economy. The COVID-19 pandemic has provided renewed impetus to MSMEs to digitise and formalise, which has led to more proprietors becoming increasingly comfortable with having their business needs met digitally.
In the past or before the starting of digital lending in MSME, it was a mammoth task to obtain a loan for a small and medium-sized business, especially if it’s coming from an unrecognised sector. It caused a lot of delays in the process and impacted the productivity of the organisation. This issue had been resolved with the introduction of Digital Lending.
The digital platform and infrastructure enabled small business entrepreneurs to formalise and digitise their business and take the advantage of the Udyam portal and the various schemes provided by the MSME ministry and the Government of India.
The shift that digital lending has brought about is altering how MSME financing is perceived. What was formerly a difficult and time-consuming activity is now a readily available business decision. It is beneficial for the lending environment, MSME borrowers, and the Indian economy as a whole to empower the underserved through capital inclusion.
The government is establishing a better environment with ease of doing business by removing the bottlenecks and organising the MSME sector. The MSME sector is primarily run by people of the lower or middle classes who lack access to the necessary resources, credit, and knowledge of the most recent technological advancements. As a result, the ease of doing business is crucial.
Formalisation can create a better industrial base, spread awareness about rights and opportunities, increase the employment rate among the rural and semi-urban population, and can reduce import dependency, and increase the export potential by increasing productivity.
Kinara Capital has helped many MSME entrepreneurs to upgrade their dream businesses by holding their hands and fulfilling their funding needs. Any registered small business owners who want to establish their business can visit Kinara’s website or myKinara digital app to check the eligibility of their enterprise through a 1-minute eligibility test. An eligible MSME entrepreneur can apply for a business loan and get the amount credited to their bank account digitally.
- MSME sector
- small business owners
- digital lending
- Udyam registration