If you own a small business, technology can be a great help. Apps such as Mint and Credit Karma allow users to plan their finances and make smart decisions, while Mailchimp provides a single platform for marketing and customer relationships. Small business associations are great resources for small business owners and can help them navigate the ever-altering world of technology.
Understanding MSME Landscape
However, many businesses are not fully leveraging the advantages of technology. They see it as a time-saver but rarely use it to enhance efficiency and reduce costs. They are also not customising technology solutions to suit their business needs. As a result, low levels of technology engagement lead to increased labour costs and inefficiencies.
MSMEs need to develop new strategies to stay competitive. Industry 4.0 technologies can help them build new business models. By developing smart products, manufacturing companies can increase the proportion of value added from product sales to downstream services. However, in order to achieve this goal, MSMEs must understand how new technologies can help them compete.
The availability of credit information is a key factor in the success of an SME. Improving credit information can lead to significant improvements in employment growth for SMEs. According to a recent PaisaBazaar study, more than half of self-employed people are unaware of their credit scores. The introduction of data streams from credit bureaus could lead to a six-fold increase in employment growth among MSMEs.
Government-led interventions should be launched to make technology more accessible to small businesses. This could be in the form of subsidies or designing training programs to address skill gaps. These government-led interventions could change the perception of technology and help them capture better value.
Large enterprises have the luxury of exploring capital markets for growth, whereas MSMEs often have limited access to this. Therefore, understanding Industry 4.0 and its benefits will help MSMEs make better decisions.
Small Enterprise India works with SMEs to explain the role of technology
Technology is a key factor in driving the growth of a business, and Small Enterprise India works closely with SMEs to explain its role and benefits to them. The Small Enterprise 30-city roadshow on the Digital Transformation Drive and the conference on Fintech for SMEs “FINNOVATE”, helps SMEs to understand the nuances of digital adoption. With the help of technology, SMEs can become more efficient and competitive. For example, they can develop new products, services, and distribution models and increase their share of government procurement. They can also improve the efficiency of processes, reduce costs, and improve worker safety.
SMEs are critical for economic development. They create jobs, income, and wealth. They also play a major role in poverty reduction. They are especially crucial in less developed economies, where they tend to be easier to adapt to. They are also a critical contributor to GDP and are very important to local economies.
Today, SMEs make up a large share of the world’s firms and employment. They account for over ninety per cent of registered businesses. They employ half of the world’s labour force and are accountable for a large portion of global growth.
MSMEs are a vital part of the Indian economy and need to be promoted on a sustainable basis. Their challenges are exacerbated by a lack of proper infrastructural facilities, financial support, and advanced technology. In addition, the introduction of Goods & Services Tax has also put them at greater risk.
COVID-19 has changed the operational environment for MSMEs. The strictest lockdown hit the smallest firms the hardest. The sudden announcement to follow the COVID-19 protocols has resulted in many problems for MSMEs. This includes problems in production and supply chains, as well as a scarcity of labour and raw materials. In addition, prices have gone up, and malfunctions have arisen.
Cost of setting up technology
In order to make digital transformation affordable for SMEs, governments must support the investment needed to build a digital strategy. This support must be provided with minimal delay and red tape. By making the technology accessible to MSMEs, governments can spur innovation and help them grow. They should also leverage private-public partnerships to foster ecosystems and attract investors. Unfortunately, governments have been slow to act on this matter, and the short-term effects could be devastating.
A significant budget is required to promote MSMEs, and the recession has put a strain on many governments. Despite some recent relief from the COVID-19 pandemic, many countries face a budget crunch. India’s deficit was more than nine per cent in the first year, and while the situation has improved, it is expected to remain high for a few more quarters. In such a climate, the private sector can help the government improve its economic interventions.
Another major challenge facing MSMEs is the lack of financial resilience. Many small businesses cannot absorb negative cash flow and don’t have ready access to new credit. This presents a significant risk to their survival and growth. This problem is particularly acute for MSMEs, who make up more than 90% of all businesses and more than half of jobs worldwide.
Benefits of digitalisation for MSMEs
Digital solutions can provide MSMEs with various benefits, starting from efficiency gains in transaction processes and access to financial services. While this is good for MSMEs, it can also pose multiple challenges. For example, digitalisation can expose MSMEs to online fraud and misinformation, create a persistent digital divide, and lead to infrastructure-related issues. Therefore, there is a requirement for a comprehensive approach.
For example, the government of India has recently introduced the Digital MSME Scheme, aiming to help MSMEs learn how to manage digital platforms. In addition, many MSMEs are leveraging social media platforms to promote their businesses and increase brand awareness and customer base. In today’s economic climate, almost all MSMEs are adopting digital technologies to stay afloat.
Governments, solution providers, and users must invest in creating an ecosystem for MSMEs that helps them digitally integrate and adopt technologies. This ecosystem is crucial in enabling India’s MSME sector. It should provide solutions to the segment’s needs and be affordable to small businesses.
Digitalisation is crucial for MSMEs in all aspects of their operations. It can increase their competitiveness and make them more productive. In fact, in the first quarter of 2019, a survey revealed that businesses that used digital tools improved their value and productivity by 16% on average. This means that SMEs with digital tools are much more likely to survive economic downturns.
Governments play a key role in supporting SMEs, and they must recognise that it is imperative to accelerate their digitalisation. This process can help SMEs compete globally and achieve global market reach. Governments can target SMEs through various programs, including skill development, organisational change, and process innovation.