The MSME sector has experienced a lot of changes and gap in the
recent times. After the inception of the MSMED ACT 2006, many of
the MSME businesses came to fruition. There was a huge amount
of interest amongst the entrepreneurs to be a part of this up and
coming industry. The results have been remarkable and at par with
the expectations of the market participants. The demand for MSMEs
has surged tremendously.
The quality of businesses and their respective products and services has
drastically improved with the passage of time. Liquidity is king for the
MSME markets. It is very important to have free cash flowing through
the ecosystem as so to have more innovation across the board. The role
of fintech in filling the credit gap in the MSME sector is observed most
notably in the recent times.
Small and medium businesses are often referred to as engines of
growth, given their position as job creators in both the developed and
as well as in the emerging markets. The contribution of the MSME
businesses often goes unnoticed in the world of heavy marketing by
mega corporations but is of vital importance to the society.
MSMEs businesses have to struggle a lot in terms of securing funding
for the operations leading to credit gaps within the sector. This is where
fintech startups can play a pivotal role in emancipating the MSMEs
from the problems of securing funding in the most efficient manner. As
the MSMEs struggle to get access to finance easily, it becomes a major
nuisance for the survival of many of those businesses belonging to the
sector and few of them are forced to shut down their operations
entirely.
Top fintech companies are at the forefront of the new wave of changes
that are taking place within the MSME ecosystem. The innovative
solutions that they are providing will help the MSMEs lead the small
business movement in the coming years. Credit gap must be ensured
that it is reduced in due time or if things go out of hands, it really
becomes problematic for MSMEs to handle their finances.
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SME businesses need to focus more on their longevity and thus need to
find more interesting ways of obtaining funding for themselves. And
not just relying on the savings of the founders, family and friends. It is
a tremendous task for the MSMEs to identify where to go where to get
the best value for their money. This is the precise reason that leads to
the funding gap that MSME businesses experience.
Banks have to consider what happens when things go wrong, so they
are always looking out for security. The typical MSME probably doesn’t
have security assets and as a result of which majority of them
experience the denial of loan sanctions for the purpose of their
operations.
MSME these days are unable or unwilling to change their finances and the
working of their enterprises according to the transformational and
automation of financial processes. Many MSMEs lack the awareness and
comprehension of availing formal financial services. To cover this roadblock,
fintech has been introduced to offer automated financial products like
investments and loans digitally.
There are many fintech companies in India that are trying to change the face
of MSME like Capital float, Clix capital, Lendingkart, SMECorner, U GRO
Capital etc. These companies are bringing out newer types of lending
solutions that entirely benefit the MSME space. There are trying to bridge
the MSME credit gap in the most efficient way that is possible.
Fintech partners with MSMEs and Indian Markets to provide crowd funding,
MSME loans, credit, and other online lending amenities. They use
alternative scoring, digital and virtual channels of loans, and other financial
products for acquisition and channelizing their financial needs.
Following are some other functions of fintech companies :
1. Credit scoring services.
2. Creation of profiles on individuals that include spending, credit,
investment for management.
3. Creating risk profiles of customers and platform for onboarding
customers.
4. Robo advisors, discount brokers and liasing agents for various financial
services etc.
5. Personal finance provisions.
The main areas in which fintech companies are able to bring innovation for
the MSME sector includes the likes of Data analysis, Artificial intelligence,
Low interest rates, Low cost on transacting and applications etc. MSMEs
offer employment to over 100 million people, contributes to 28.77% of the
country’s GDP, 40% contribution towards exports, and around 45% towards
industrial inputs. So, there is a need to financially support and encourage
this sector by offering them reasonable policies and campaigns. This is
where Fintech comes into picture where it has eased the struggles of
MSMEs and provides easy financial services.
There are many fintech startups in Pune that are working on eliminating the
problems of the MSME finance. It has only become possible for many of the
MSME to survive and thrive due to the commendable work done by the
fintech startups. The credit gap is soon going to dwindle because of this and
ultimately the MSMEs will be able to function more smoothly and be able to
obtain financial services very quickly and with ease.
Do watch: https://www.youtube.com/shorts/mxmhEv0xPgM
There are many opportunities within the MSME sector currently and those
entrepreneurs that are able to identify the key demand areas will only be
able to harness the full potential of the sector and develop products that are
useful and drive the MSME adoption. The standards of MSME businesses are
slowly improving due to the higher amount of participation leading to more
competition within the sector.
It is also important for the MSME businesses to realize that using their
finances properly may lead to quick development internally as well as more
reception of the brand in the marketplace and thus become a win win
scenario for both the users are well as the operators within the MSME
space. Thus, the time has come for MSMEs to shine and help in the
betterment of India’s future.