Digitization: The Empowering Factor For MSME Growth In India

The MSME sector has indeed seen a boom in the adoption of digital platforms and payments post-pandemic. According to a recent IBEF report, 72% of the MSME payments are now made online (through cards, UPI, net banking, etc.). Despite this, the MSME sector still lacks concrete digitized solutions. There is still scope for improvement. However, with the adoption and digitization the growth of MSMEs can be accelerated. Let’s look at the key drivers of the Indian MSME growth leading towards creating a digitized MSME world for the Indian economy.

Key Factors Driving Growth for the Indian MSMEs:

Government’s Initiatives

The government's vision of digital India is like a bridge that connects MSMEs with the digital world, enabling them to reach their full potential and thrive in the digital age. The government is working hard toward making the vision of digital India successful by launching various programs, schemes, and networks to help MSMEs save time and money while boosting their operations.

Two schemes that have empowered MSME growth in India the most are –

Emergency Credit Line Guarantee Scheme (ECLGS) - it is introduced to provide additional credit facilities to small businesses. The total amount earmarked under the scheme is Rs 5 lakh crores, out of which 71% of the total amount is already disbursed till December 2022.

Open Network for Digital Commerce (ONDC) - It is a platform introduced to help small and medium businesses create innovative digital commerce applications and services by leveraging open APIs, interoperability, and open-source technologies. The platform aims to promote digital inclusion and support the growth of the Indian digital economy.

FinTech’s Innovation on Credit Availability

Before FinTech innovations, getting credit with no credit or a low credit score was difficult when MSME founders were looking forward to starting from scratch. Banks and other financial institutions were keen to craft a safe portfolio while lending to well-established businesses. The shift towards digital modes by MSMEs is creating a digital trail of financial transactions for new-age FinTech players to evaluate their creditworthiness and extend credit instantly. Regular digital transactions show the business’s financial health of a company and its ability to grow in this competitive business environment. Digital lending platforms and micro-lending facilities empower MSMEs to grow faster without interruptions. As reported by Experian, India’s digital lending market was worth USD 270 billion in 2022 and is expected to reach USD 250 billion by 2023.

Digital Payments to drive growth

Demonetization and the Covid pandemic incidentally became the critical drivers for embracing digital technology in making payments. When we compare the growth of digital payments between the pre and post-Covid period, we can see a more than 200% increase in digital payment volume during the last four years from 2018-19 to 2021-2022. The wide acceptance of digital payments is like a key that unlocks the door to success for MSMEs, enabling them to receive payments faster, reduce the time of processing further payments, and improve their cash flow, just as a key unlocks a door to a room.

Digitization of Business Process

The company has various functions that are critical to ensure smooth operations such as data management, inventory management, record-keeping, customer support, and whatnot. Digitization of BPM (business process management) not only helps with better customer interactions but also helps to reduce costs and human errors by replacing manual processes with computerized processes.

Conclusion

Digitization is not just an option but a necessity for the growth and success of MSMEs in India. With the government's vision of digital India, MSMEs are experiencing a significant transformation in their operations and growth prospects.

Check out Worldline solutions that enable MSMEs to embrace digitization to stay ahead of the curve and thrive in the digital age.