Bridging the gap: How corporates can fuel MSME growth in India

Micro, Small, and Medium Enterprises (MSMEs) contribute over 30% to India's GDP and employ more than 110 million people, making them a cornerstone of the country's economy. In the face of unprecedented challenges posed by the COVID-19 pandemic, MSMEs have demonstrated remarkable resilience and adaptability.

Recognising the critical role these enterprises play, initiatives like Godrej Nirmaan by Godrej Capital are emerging to offer comprehensive support to MSMEs. To delve deeper into how large corporations can foster the growth and development of MSMEs, YourStory spoke with Manish Shah, MD & CEO of Godrej Capital.

Edited excerpts from the interview:

YourStory: As someone with extensive experience in the financial services industry, what role do you envision for large corporations in fostering the growth and development of MSMEs?

Manish Shah: Large corporations are in a unique position to play an essential role in the growth of MSMEs. MSMEs often function as suppliers and customers to bigger corporates, creating a codependence that necessitates our support for their growth. Addressing the credit and business growth needs of MSMEs is an area where we can contribute significantly.

YS: How can corporates leverage their resources, expertise, and networks to provide a conducive environment for MSMEs to thrive?

MS: Corporates have a unique opportunity to support MSMEs by leveraging their resources, expertise, and networks. For example, large corporations can play a vital role as partners in growth and facilitators of services. With Godrej Nirmaan, we've created a platform that provides MSMEs with easy access to essential services like legal and compliance support, access to new markets, and upskilling and hiring of talent. By extending our negotiating power, we can secure favorable rates and services for them, just like the ones we benefit from. Additionally, many other large corporations are introducing special initiatives and recognition platforms to give MSMEs the support and exposure they need. This kind of holistic support can significantly boost the operational efficiency and competitive edge of MSMEs.

YS: What specific initiatives or programmes can corporations implement to support MSMEs in areas such as access to finance, mentorship, technology transfer, and market access?

MS: Several initiatives can be undertaken to support MSMEs:

• Access to Finance: MSMEs need tailored financial advisory and support to improve their financial records, enhance creditworthiness, and access affordable credit options. This support is crucial for MSMEs to secure better credit terms and funding opportunities, facilitating their growth and sustainability.
• Technology and mentorship: Collaborating with various tech companies allows us to offer bespoke products and services tailored for smaller businesses. These collaborations can include everything from software solutions to training programs, ensuring that MSMEs stay technologically competitive.
• Market access: Establishing partnerships to help MSMEs register, buy, and sell on platforms like Amazon and government e-marketplaces (GeM) that can significantly widen their market reach. This not only helps them increase sales but also exposes them to a broader customer base, driving growth and innovation.

YS: What challenges or barriers do you think MSMEs face in establishing mutually beneficial partnerships with large corporations, and how can these be overcome?

MS: MSMEs often face the paradox of needing credit to grow yet struggling to demonstrate sufficient income to secure that credit. Improving creditworthiness is crucial for enhancing MSMEs' access to financial support, a barrier underscored by statistics indicating a substantial credit gap in India. This is a significant barrier that requires a rethinking of how we assess creditworthiness. Instead of traditional metrics, we need to ensure a more targeted approach to supporting MSMEs in accessing the financial resources they need to thrive. Additionally, establishing trust and understanding between large corporations and MSMEs can be challenging. Corporates must be willing to invest time and resources in understanding the unique needs and challenges of MSMEs. By building transparent and supportive partnerships, we can create a more equitable and beneficial ecosystem for all parties involved.

YS: As a leader in the financial services industry, what is your assessment of the current landscape for MSMEs in India, and what are the key challenges they face?

MS: The MSME sector in India is on a path of gradual formalisation and scaling. This transition is both inevitable and necessary for sustainable growth. However, MSMEs continue to face fundamental challenges, particularly in accessing credit and resources on terms that are favourable and realistic. Despite the presence of numerous formal financial institutions, small businesses often rely on informal lending due to the stringent terms of credit that may not cater to their specific needs. While the financing infrastructure is thorough, these terms sometimes do not align with the practical realities of operating a small business. Addressing these issues requires innovative solutions and a willingness to rethink traditional approaches to financing.

YS: How can Godrej Nirmaan help address these challenges and create a more conducive environment for MSMEs to grow and succeed?

MS: Godrej Nirmaan is designed to tackle these challenges head-on by providing a comprehensive platform that offers access to credit, technology, mentorship, and market opportunities.

By leveraging the vast resources and partnerships of Godrej Capital and the ecosystem of the Godrej Industries Group, Godrej Nirmaan aims to create an ecosystem where MSMEs can thrive. This includes facilitating better credit terms, providing technological tools and training, and opening up new market avenues through strategic partnerships. Our goal is to create a supportive and enabling environment that allows MSMEs to focus on their core business activities and growth.

YS: What offerings or services can corporations provide to support MSMEs through Godrej Nirmaan?

MS: Partners who can offer support to address challenges faced by MSMEs in their business journey across various sectors are encouraged to join Godrej Nirmaan. For instance, local manufacturers seeking access to export markets can collaborate with export houses and logistics providers to streamline their supply chain and navigate trade effectively. Small businesses aiming to establish or enhance their online presence can benefit from mentorship, guidance, and support provided by relevant platforms. Tailored solutions like a new marketplace and avenues for distributors and suppliers can help them grow their reach and business.

Moreover, legal and compliance experts can assist MSMEs in ensuring adherence to regulatory requirements, covering areas such as licenses, certifications, intellectual property protection, and contract negotiations. Financial institutions can also play a crucial role by providing customized financial solutions, including credit facilities and investment advice, designed to meet the specific needs of MSMEs.

By leveraging strategic partnerships, Godrej Nirmaan aims to empower MSMEs with the necessary tools and support to overcome barriers and achieve sustainable growth in their respective industries.

YS: What would be your call to action to invite new partnerships/partners to join the Nirmaan platform and support the growth of MSMEs in India?

MS: To all potential partners I’d say, if you have solutions that can simplify or accelerate the business growth journey for MSMEs, we invite you to join us at Godrej Nirmaan. Let's team up to ensure that managing, growing, and expanding businesses becomes seamless. We are keen to partner with like-minded companies dedicated to supporting MSMEs, expanding the ecosystem, and contributing to nation-building.

Together, we can create an ecosystem that supports the growth of MSMEs, ensuring their success and, in turn, the prosperity of the broader Indian economy. It is essential to adopt a collaborative approach and be their allies in business, rather than competing for limited resources. By working together, we can unlock the full potential of the MSME sector, driving economic growth and innovation in India.

If you are interested in partnering with Godrej Nirmaan, please reach out at: [email protected]