App-Based Solution to provide market access to micro & small enterprises
Abstract : Finance for micro, small, and medium-sized enterprises (MSMEs) has been a concern for all stakeholders including entrepreneurs, financial institutions, and government organizations. The key objective of the study was to identify various challenges faced by MSMEs in sourcing of finance during different stages of their life cycle. This study is a first-of-its-kind attempt to focus on these aspects. The study further explores whether the financial awareness of MSME entrepreneurs is a major limitation in the identification and utilization of sources of finance. Data was collected through personal interviews using a structured questionnaire from a sample of 85 MSMEs. The survey was conducted mainly in the city of Bangalore covering a wide spectrum of sectors like precision tools, weavers, jewelers, food retailers, metal works, textiles, and book shops. The results reinforce the findings of other studies that utilization of formal sources like banks is significantly small compared with informal sources like personal and family wealth. The study found that the main challenges faced in underutilization of formal sources were inadequacy of collateral assets and lack of financial awareness of entrepreneurs. Based on the conclusion that requirement of finance differs with the life-cycle stage of the MSME, recommendations have been proposed for entrepreneurs, financial institutions, and policy makers.
? Most of the time, delay in realisation of such receivables increases their operating cycle and reduces their ability to procure new orders or fulfil the existing ones.
? It would also help in removing the bias towards manufacturing enterprises in the existing definition and would improve the ease of doing business.
? However, a large number of MSEs exist in the informal sector and are not registered with any statutory authority. To explore existing and emerging technologies suitable for MSMEs.
? MSMEs also need to deal with the issue of protection of their intellectual property and with the scarcity of skilled workers.
? These issues pose inherent challenges to financing of MSMEs due to lack of awareness of funding schemes among MSME entrepreneurs and the limited role of venture capitalists, nonbanking financial companies (NBFCs), foreign banks, angel investors, and initial public offerings in financing MSMEs.
? A delay in payment affects cash flow to the MSME and also negatively impacts its ability to process other orders.
• We propose to run a regulatory sandbox for cohorts focussed on lending.
• It has been proposed to establish Enterprise Development Centres (EDCs) within District Industries Centres (DICs) in each district.
• To propose measures for leveraging technology in accelerating growth of the sector.
• The proposed definition has been considered progressive and suitable because of introduction of Goods and Services Tax (GST).
? They are also unable to take advantage of most of the Government schemes which are mostly based on digital infrastructure and require beneficiaries to have some form of digital identify and presence.
? Some lenders are collaborating with FinTech companies to take advantage of such surrogate data for speedier credit underwriting for extending loans to MSME sector.
? This requires the corporates, both in the public and private sector, to join the TReDS platform and make the system more efficient.
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