[India MSME Summit 2021] ‘Koshish kar, toh hal niklega’: What MSMEs need to do to get out of the COVID-19 depression

Despite the many rescue packages announced by the Indian government over the last year, micro, small and medium enterprises (MSMEs) have reeled under the pressure put by the COVID-19 pandemic. Enterprises have said a lack of clear communication from the government, hard to access and understand schemes, red tape, inefficient offline processes, and improper disbursement of loans and funds are to be blamed — all of which ultimately negate the efforts being made by regulators.

Government relief efforts aside, leaders in the MSME sector are now saying they may find some reprieve if they just look inwards and challenge some of their own perceptions, processes, and the way they conduct business.

“Loans outstanding and non-performing assets have gone out of hand in the sector. SMEs should now think about how they can reduce costs, achieve economies of scale, and spread their risk,” said Dr Vivek Bindra, Founder of Bada Business, an online learning platform for business education, in a panel discussion with SMBStory, at its MSME Week 2021 event.

The panel also included Mukesh Mohan Gupta, President of the Chamber of MSME; Ridhima Arora, Founder of Namhya Foods, an Ayurvedic snacks maker; and Hardika Shah, Founder and CEO of Kinara Capital, a last-mile, collateral-free lending platform for MSMEs.

Here are five quick takeaways from the conversation, which revolved around policy and schemes for MSME survival, and what MSMEs need to do on their end to become more resilient.

Worst-hit sectors by the pandemic

All four panelists agreed that the worst-hit MSME sectors included tourism, hospitality, real estate, and aviation.

“The line between essential and non-essential businesses got drawn quite sharply last year. And so those businesses that were non-essential have been more impacted. Micro enterprises have been impacted far severely than medium enterprises,” Hardika said.

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Ridhima seconded and added that any business that required people to step out took a huge hit, especially if they weren’t agile or flexible enough to pivot.

MSMEs have to look inwards now and reduce redundancies

According to Vivek, businesses today are struggling for many reasons, including:

-      Failure to understand themselves and their business

-      Not being able to hire good people

-      Not being able to pivot when needed

-      Getting stuck in legal and regulatory issues

-      Chasing investors, not users

-      Not keeping an eye on competition

-      Poor expansion or over-expansion, as well as scaling too early, or too late

-      Not being able to raise funds

-      Leadership failures

-      Lack of cash flow and inadequate inventory management

-      No sight on runway, and using business funds for personal use

-      Not being able to create a sound revenue and business model.

All of these things, and more, basically require internal investigations if businesses are struggling, and the ship can only be righted once those problems are identified.

“Pandemic is the time when people can build right codes and right models,” Vivek added.

NBCFs should play a bigger role in the solution

Kinara Capital’s Hardika said that NBFCs — non-banking financial companies — are not sufficiently included in the government’s solution to solve MSME’s financial problems such as inadequate capital and the need to access loans easily and quickly.

“NBFCs are trying to solve for last-mile problems, but there are no schemes enabling them,” she said during the panel discussion.

“And while the government’s credit guarantee scheme is good, we need to think about what we will do in the long term for asset restructuring, creating common companies.. what can we do to guarantee unsecured lending en masse,” she added.

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Need better visibility on schemes available for MSMEs

Namya Foods’ Ridhima said that in her experience of running an MSME company, she found that there’s a gap between what schemes the government says it’s coming out with, and what finally comes out.

Accessibility is an issue when it comes to these schemes, and information is not communicated effectively. Government schemes have to be made more accessible and more usable, so that increasing number of people can take advantage of them, she added.

But Chamber of MSMEs' Mukesh said there are adequate avenues online where people can access government schemes for MSMEs, including the Udhyami Mitra portal where people can apply for loans up to Rs 10 crore, following which their selected bank’s head officer approaches them to set up a discussion.

Emergency credit line schemes, collateral-free loans up to Rs 2 crore, subsidies for digitisation and technical upgradation, schemes such as Stand Up India to support women and SC/ST entrepreneurs, as well as public procurement policies, among several other schemes, can help MSMEs solve a myriad of problems they face day-to-day, he added.

Becoming tech-driven is of paramount importance

Our cell phone bills are getting lower, but internet usage bills are getting higher; tuition classes are decreasing but online education is increasing; brick and mortar brokerages are shutting shop but online brokerages are doing very well; restaurants are closed by orders are still increasing because of Swiggy — all of these are clear indicators that technology is increasingly becoming an integral part of the future of business, says Vivek.

In India, MSMEs can tap this opportunity, but only if they understand the market well. In the US, for example, 90 percent of smartphone users are on the iOS platform — in India, 90 percent are on Android, which means mobile app solutions should be light, small, have a friendly interface, and should not require too much storage.

“Even if MSMEs can’t do apps, adopt digital finance at least,” he suggested, adding streamlining back-office operations such as accounting, inventory management, enabling payment services, etc., can help companies think of growth strategies.

Similarly, having good algorithms can help consumer-facing companies predict their customers’ buying behaviours and help businesses manage their inventory, and projection for sales, says Ridhima.

Ultimately, MSMEs should take away from the session that there is a way out of the quagmire they’re in. As Mukesh put it:

“Koshish kar, hal niklega, aaj nahi toh kal niklega.” (Try, you will get a solution; if not today, then tomorrow).