This Weekly E- Newsletter (The Friday Journal) aims to increase awareness regarding various news / updated and activities that have been taken place for the MSMEs and to provide information about the various schemes and programmes along with latest updations from time to time. It is a digital tool used to share relevant and valuable information with the Readers.

MSMEs are an important sector for the Indian economy and have contributed immensely to
the country’s socio-economic development. MSMEs produce and manufacture a variety of
products for both domestic as well as international markets. MSMEs have played an essential role in providing employment opportunities. MSMEs have driven India to new heights through requirements of low investment, flexible operations, and the capacity to develop appropriate native technology. This newsletter has been released with an aim to educate MSMEs on various facets of business development.

  • MSME in India

MSMEs contribute significantly to India’s Gross Domestic Product (GDP). By supporting MSMEs, the government ensures a steady flow of economic activities across various sectors. MSMEs engage in diverse industries, including manufacturing, services, and trade, which collectively boost the economy’s overall output.

MSMEs foster a culture of entrepreneurship and innovation. By providing financial and technical support, the government encourages individuals to start and grow their businesses. This innovation drives competitiveness, improves product quality, and promotes technological advancements.

The support extended to MSMEs by the Indian government is pivotal in harnessing the potential of this dynamic sector. By fostering growth, innovation, and inclusivity, MSME support contributes to a robust and resilient economy.

Our newsletter is an attemppt to provide brief about the developments in MSME Sector on weekly basis.

  • Our Special Corner
  • “60% Of MSMEs Plan To Digitise Their Business Processes By 2025: Vi Study

On World MSME Day, Vi Business has published findings from its study on micro, small and medium enterprises, which shows that almost 60% of MSMEs plan to digitise their business processes by 2025. Additionally, the enterprise arm of Vodafone Idea Ltd. also launched an enhanced digital assessment tool for MSMEs in English and Hindi.

The study explores the digital maturity of MSMEs across 16 sectors, including IT and ITes, financial services, transportation, construction, retail, agriculture, media and entertainment, and manufacturing, and how they are leveraging digitisation and technology.

Key highlights of the MSME Growth Insights study include:

  • Digital Maturity: The top three sectors with most digital maturity are IT-ITES, fi­nancial services and transportation. Also, sectors like retail and construction are also making significant strides.
  • Budget Allocation: Around 43% of MSMEs plan to increase their overall digitalisation budget by 2025. Sectors with lower digital maturity index are particularly inclined to increase their investments.
  • Senior Leadership Driving Digitalisation: Involvement of senior leadership or CEOs results in more comprehensive digital transformation, with success rates of digitalisation higher when championed by them.
  • Technology Use: Despite challenges like knowledge gaps and financial constraints, MSMEs are using technologies like cloud computing, internet of things and advanced workspace tools to improve productivity, collaboration and market reach. The study showed that 40% of MSMEs from IT and ITeS, retail and construction have adopted IoT solutions in business.

Vi Business’ newly launched Digital Assessment Tool, an extension of its MSME programme, focuses on digital customer, digital workspace and digital business. Based on responses, the tool provides user-specific report stating the digital maturity scores of business, benchmarked against the industry with relevant digital product recommendations.

  • MSME Schemes:

The government has introduced many schemes to encourage the micro and small industries. Through many schemes, the Central government is boosting the credit availability for the MSMEs. MSME (Micro, Small and Medium Enterprises) schemes are initiatives launched by the Government of India to support and promote the growth and development of small businesses in the country.

  • “Interest equalisation scheme extended for MSME exporters”

The Interest Equalisation Scheme (IES) is an important initiative by the Government of India aimed at providing financial relief to Micro, Small, and Medium Enterprises (MSMEs) engaged in exports. This scheme is designed to make credit more affordable for MSMEs, thereby enhancing their competitiveness in the global market. The Interest Equalisation Scheme is a critical tool in the government’s strategy to support MSMEs and enhance their global competitiveness.

Objective:

  • Reduce the burden of borrowing for MSMEs involved in exports.
  • Make them more competitive in the international market by effectively providing them with loans at subsidized rates.

Latest update:

The Department of Commerce has extended the Interest Equalisation Scheme for pre- and post-shipment rupee export credit for Micro, Small and Medium-scale (MSME) exporters till August 31.

According to a trade notice from the Department dated June 28, the outlay for the extended period is ₹750 crore and the extension is not applicable for non-MSME exporters beyond June 30. The terms of the scheme will remain the same.

For eligibility, application process and other process, please get in touch with us.

  • Trade Receivables Discounting System (TReDS) – Part 40

Trade Receivables electronic Discounting System (TReDS) is an online electronic platform and an institutional mechanism for factoring of trade receivables of MSME sellers. It enables discounting of invoices through an auction mechanism to ensure prompt realization of trade receivables.  

The Trade Receivables electronic Discounting System (TReDS) was released by the Reserve Bank of India in 2018 to help small businesses resolve cash flow issues.

“How new TReDS proposals by RBI will incentivise MSMEs, strengthen bill discounting

The Micro, Small, and Medium Enterprises (MSME) industry is the growth engine of the Indian economy, accounting for 30% of the nation’s GDP, 48% of the total exports, and 40% of the employment of India’s total workforce. Despite the pivotal role of MSMEs in the socioeconomic development of the country, the industry is constrained by poor access to finance and working capital requirements. Inadequate and delayed availability of finance results in cash flow issues, halting daily operations and restricting cross-border expansion plans.

To boost the MSME sector, it was crucial to offer them timely finance irrespective of the loan ticket size, keeping in mind their ability to provide collateral and their credit score. Countering this widespread issue, the Reserve Bank of India (RBI) launched the Trade Receivables Discounting System (TReDS). TReDS platform enables registered MSMEs to raise recourse-free financing against their invoices raised on registered buyers within 24 hours.

The need for new measures

TReDS is an electronic bill discounting platform regulated by the RBI framework and a joint venture between SIDBI and NSE to provide MSMEs instant payments for outstanding trade receivables. Numerous past policies and measures undertaken by the RBI were directed to provide a broader range of MSMEs with seamless access to funds.

TReDS bill discounting platform took off to a great start, showing significant growth in invoice discounting. Over time, RBI has been strengthening the TReDS ecosystem and encouraging all participants, in turn, to support small businesses to meet their working capital requirements through the digital ecosystem.

New policies

The latest development in this regard came on February 8, 2023, when RBI expanded the scope of TReDS in the Governor’s Monetary Policy Committee (MPC) speech.

Here are the key highlights of the announcement:

  • TReDS platform will allow insurance companies to act as ‘fourth participants’, other than MSME sellers, buyers, and financiers.
  • The proposal calls for all entities and institutions under the Factoring Regulation Act to participate as financiers for undertaking factoring operations on the TReDS platform.
  • TReDS will now enable secondary market operations – enabling financiers to transfer their invoice portfolios to other financiers on the TReDS platform.
  • MSME Corporate News:
  1. ‘GCCI will focus on MSMEs’

The top office-bearers of the Gujarat Chamber of Commerce and Industry (GCCI) have been elected unopposed and the new team is going to focus on issues affecting MSMEs and startups, said current senior vice-president Sandeep Engineer, who will become president of GCCI next month.

He said, “We are going to work on issues affecting MSMEs. We are going to develop infrastructure for startups and will focus on new technology. We are going to nurture new entrepreneurs. We have added 12,000 nominal members and we have decided to take this number to 1 lakh this year to ensure that small traders are members of GCCI.”

Rajesh Gandhi, MD of Vadilal Industries, who is going to take charge as senior VP of GCCI, said, “We will make representations on issues affecting MSMEs to the govt to usher in simplification and to ensure that Gujarat contributes to making India a $5 trillion economy.” Tnn. (To read more – Click Here)

  • Access To Finance, Financial Literacy Initiatives, Partnerships: How NBFCs Can Foster MSME Growth

The recently concluded MSME Day has once again brought to the forefront the critical role that Micro, Small, and Medium Enterprises (MSMEs) play in the economy. In India, MSMEs contribute significantly to GDP, employment, and innovation. To accelerate their growth and ensure their sustained success, financial services firms are pivotal.

On the role of non-banking financial companies (NBFCs) in fostering MSME development, Jairam Sridharan, managing director of Piramal Finance, said, “We recognise the critical role financial institutions play in driving the holistic growth of MSMEs. To foster their development, financial institutions must adopt a multi-faceted approach. First, seamless access to finance is vital. Financial institutions should provide tailored lending solutions, including microloans and flexible credit lines, catering to the unique needs of MSMEs. Streamlining the loan approval process through digital platforms can significantly reduce bottlenecks, enabling faster access to capital.”

Third, collaboration is key. Financial institutions should partner with government and industry organisations to create comprehensive support systems. This collaboration can provide MSMEs with access to grants, subsidies, and mentorship programs like the Pradhan Mantri Mudra Yojana and the Startup India initiative, offering them the necessary resources and guidance to scale their operations, Sridharan.

Digital Payments: A Catalyst for Growth

Akash Sinha, CEO and co-founder of Cashfree Payments, emphasised the transformative potential of digital payments. “Digital payments are emerging as a game-changer in taking Indian MSMEs to the next level of growth by introducing innovations to reduce costs, make secure transactions and expand market reach – all of which are crucial for businesses with limited resources.”

Bridging the Credit Gap

Madhusudan Ekambaram, Co-Founder & CEO, KreditBee, underscores the importance of credit accessibility for MSMEs. “MSMEs are widely recognized as the backbone of the Indian economy, significantly contributing to capital generation, employment, manufacturing, and exports. These enterprises account for approximately 30% of India’s GDP and employs over 11 crore people across various industries. Despite the potential, MSMEs face significant challenges, particularly the access to credit that hinders their progress. An estimate of over 80% of MSMEs, reportedly do not have access to formal financial system.

  • Govt launches initiatives to boost online trading of MSMEs, credit access for women-led businesses

Union minister for MSME Jitan Ram Manjhi on Thursday launched two initiatives to boost micro and small businesses trade using e-commerce and to support women entrepreneurs on International MSME Day celebrations in the national capital.

The minister launched an MSME Trade Enablement and Marketing (TEAM)’ initiative aimed at helping small businesses participate in online trade using the Open Network for Digital Commerce (ONDC) platform.

The second initiative, named ‘Yashaswini’, is a mass awareness campaign to support informal women-led businesses by giving more access to capital and more trade opportunities with large corporations to formalize them.

Initiative to help 5 lakh micro and small businesses

The MSME TEAM initiative will help five lakh micro and small businesses, and half of the beneficiaries of these schemes will be women-led businesses, Manjhi said.

Union minister of state for law and justice Arjun Ram Meghwal spoke about the areas of reforms aimed at making MSMEs globally competitive. He added that the government is ensuring ease of doing business and ease of living through legal reforms and technological innovations towards strengthening MSMEs. (To read more – Click Here)

4. Govt to amend 2006 Act to streamline disputes over delayed payments to MSMEs

The Union Ministry of Micro, Small, and Medium Enterprises (MSME) is amending the MSME Development Act, 2006 to improve mechanisms for managing disputes related to delayed payments and to better address the evolving needs of the MSME sector. Additionally, the MSME ministry is in the process of transforming the Samadhaan portal, which currently only tracks disputes arising from delayed payments to micro and small enterprises (MSEs), into a comprehensive online resolution platform.

“The Act has a lot of issues that need to be handled, including delayed payments and the kind of support MSMEs need. The Act was brought in 2006, and times have changed. The nature of support needed has also undergone a vast difference. Similarly, when it comes to the National Board for MSME, it should have representation of all the secretaries from states because the industry has to connect with state governments at the ground level,” Vinod Kumar, President of the Indian SME Forum, told The Indian Express. Kumar participated in the event organised by the ministry as a panellist.

At the event, Union Minister for MSME Jitan Ram Manjhi emphasised the need to focus on micro enterprises in rural areas to improve quality of life and address unemployment. “When we talk about the rich and the poor, we admit that today 70 per cent of the population falls below the poverty line. Of these people, 90 to 95 per cent are somehow managing their lives. We are very fortunate to have a prime minister like Narendra Modi who is able to understand the problems of these people and wants to work for them. The development of micro industries is very important for this,” Manjhi said in his address.

During the event, Ateesh Kumar Singh, Joint Secretary at the MSME ministry, revealed that the ministry is upgrading the Samadhaan portal from a simple tracker to a comprehensive full-stack online platform for resolving delayed payment disputes. The portal was launched in 2017 for the monitoring of outstanding dues to MSEs from buyers of goods and services. “Today, the Samadhaan portal primarily provides information for analysis. It does not offer a platform for direct resolution. To improve this, the portal needs to incorporate online dispute resolution mechanisms. Users should be able to file complaints, have notices sent to the other party, receive responses, and participate in mediation or other resolution processes—all online,” explained Kumar. (To read more – Click Here)

5. Sidbi bats for sustainable development of MSMEs; pilots several projects  

Small Industries Development Bank of India (Sidbi) has been making efforts for sustainable development of the MSME sector, which plays a key role in the economy, a senior official of the financial institution said on Thursday.

Deputy Managing Director of Sidbi, Sudatta Mandal, said it has taken proactive steps to make the MSME eco-system green with several financial and non-financial engagements.

Speaking at an interactive session on the occasion of International MSME Day organised by the MCCI, Mandal said Sidbi has launched various lending products on competitive terms to facilitate energy-efficient transition of the MSMEs.

Mandal said Sidbi has made continuous efforts for holistic development of the MSME sector, which now contributes to 45 per cent of India’s exports and close to 30 per cent of the country’s GDP. Mandal urged the sector to take advantage of schemes for technology upgradation, promoting innovation and credit-linked capital subsidies to grow in a sustainable manner.

Projects of 176 MSMEs covering investments worth Rs 3.20 lakh crore have been approved under the PLI (production linked incentive) schemes of the Centre, he added.

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He has contributed in ICAI, ICSI and MCCI and other various Newsletters. He is also a speaker at various platforms including seminars / webinars.