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
Micro, Small, and Medium Enterprises (MSMEs) are crucial drivers of economic growth, innovation, and job creation across the globe. They play a significant role in contributing to GDP, fostering entrepreneurship, and ensuring the economic inclusion of various segments of society. The growth of MSMEs, however, varies greatly depending on the region, access to resources, regulatory environments, and market conditions.
The adoption of digital technologies, such as e-commerce platforms, mobile payment solutions, and cloud computing, has enabled MSMEs to reach broader markets and improve operational efficiency. Technology allows small businesses to compete with larger enterprises by offering innovative products and services.
Our newsletter is an attemppt to provide brief about the developments in MSME Sector on weekly basis.
- Our Special Corner
- “Can ULI meet credit needs of women-owned MSMEs?
On August 26, Governor of the Reserve Bank of India (RBI) Shaktikanta Das announced that the apex bank is running a pilot of the Unified Lending Interface (ULI), a technology platform that will provide friction-less credit to small borrowers, especially those in rural areas.
The Unified Payments Interface (UPI) has been a game-changer in India’s digital payments landscape. Das expects the ULI to transform the lending system in a similar way.
Essentially, the ULI will facilitate a seamless flow of digital information (on land records, from banks, insurance companies, etc). By digitising access to a customer’s financial and non-financial data, the ULI will cut down the time taken for credit appraisal.
While the success of the UPI was attributed to Jan Dhan accounts, Aadhaar cards, and mobile telephony, popularly known as the JAM trinity, the RBI has proposed a new trinity — of JAM, UPI, and ULI — that will bring about a revolution in India’s digital infrastructure.
According to a report brought out by Ernst & Young, there are nearly 64 million micro, small, and medium enterprises (MSMEs) in India, but their credit penetration is only 14 per cent, as compared to 37 per cent in China, and 50% in the United States, the two other countries with large startup ecosystems.
Whether led by economic distress or opportunity, India is witnessing a rise in women-owned enterprises. The government’s Udyam Registration Portal has been witnessing a rise in women-owned MSMEs. According to a government statement issued in June, India has 63 million MSMEs, of which 20.5 per cent are women-owned, employing 27 million people. Rural areas have a greater share of women-owned MSMEs — at 22.4 per cent — as against 18.42 per cent in urban areas.
Can the ULI do what the Grameen Bank did for women-owned businesses? There are several challenges along the way. For instance, nearly 20 per cent of women in India still do not have access to a bank account, says a report brought out by the Observer Research Foundation in December 2022.
Then there is the gender gap in mobile phone ownership and usage of mobile Internet. According to GSMA’s Mobile Gender Gap Report 2023, mobile ownership was 81 per cent for men and 72 per cent for women. Mobile Internet adoption was even lower — at 52 per cent for men and 31 per cent for women. This is despite low average revenue per user (ARPU) and attractive Internet data packages. (Source: Click Here)
- 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.
- “Soon, loan processing for MSMEs, others will be faster, simpler: Here’s how”
Soon, taking a loan for your small business, buying equipment for farming, or covering other essential needs will be faster and easier. The Reserve Bank of India (RBI) plans to launch the Unified Lending Interface (ULI) on a national level, aiming to transform the lending process across India. Initially introduced as a pilot project in 2023, ULI will soon be available for wider use, according to RBI Governor Shaktikanta Das.
Much like the Unified Payments Interface (UPI) revolutionised payments, ULI aims to do the same for lending, making it quicker and simpler for you to access credit when you need it most.
What is Unified Lending Interface?
ULI is a digital platform designed to make lending processes more efficient. It’s particularly focused on helping those who may have previously struggled to access credit, such as farmers and small business owners. ULI addresses the unmet demand for loans across various sectors, including agriculture and Micro, Small, and Medium Enterprises (MSMEs).
How will it speed up loan processing?
ULI integrates data sources like Aadhaar, e-KYC, land records, and PAN databases. This allows lenders to quickly assess your creditworthiness, cutting down the time it takes to process loans. “ULI creates an ecosystem of fast and easy access to credit, which is particularly beneficial for MSMEs and farmers who often need loans quickly,” says Rishi Agrawal, CEO and Co-Founder of Teamlease Regtech.
How does ULI help borrowers?
Ashish Goyal, Co-Founder & CFO of Fibe, believes ULI will make the lending process smoother for borrowers by reducing the hassle and delays associated with getting a loan. “It’s a game-changing initiative to digitalise lending, allowing for quicker, more accessible loans tailored to your needs,” says Goyal.
Key features of ULI
- Consent-based digital access: ULI provides lenders with access to your financial and non-financial data, including land records, through a consent-based system.
- Common and standardised APIs: ULI’s standardised APIs will make it easier for lenders to access data, reducing the complexity of integrating new systems.
- Plug and play: Lenders can use ULI’s ready-made infrastructure to start providing loans immediately, without the need for extensive technical setup.
Connecting with other digital systems
ULI will be part of the digital ecosystem that includes Jan Dhan, Aadhaar, and UPI, making it a key player in India’s efforts to improve financial inclusion. This integration will help address the existing demand for credit and strengthen India’s digital infrastructure.
- Source: Click Here
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- Trade Receivables Discounting System (TReDS) – Part 49
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.
“TReDS is financial lifeline for MSMEs, remedy for problem of late payments: Sundeep Mohindru, M1xchange
Adoption of TReDS has picked up pace on account of ease with which sellers and buyers can source working capital finance on the platform via digital bill discounting, says Sundeep Mohindru, Promoter & Director, M1xchange, a digital invoice discounting platform for MSMEs. In an interview with ET Digital, Mohindru talks about the regulatory support being offered by the Reserve Bank of India (RBI) and how it gives businesses confidence to adopt TReDS. TReDS is an electronic platform for facilitating the financing or discounting of trade receivables of MSMEs via multiple financiers.
The other benefit of adopting TReDS is that it can lead to a direct reduction in the cost of goods and services purchased. Companies can secure better deals and discounts from suppliers by facilitating early payments to vendors by discounting their trade receivables, he says. Edited excerpts:
Economic Times (ET): According to RBI’s latest data, invoice discounting via TReDS saw a 73% Y-o-Y surge with invoice transaction value touching Rs 30,320 crore in Q2 FY24 against Rs 17,525 crore in Q2 FY23. Moreover, TReDS also witnessed a 22% growth in Q2 FY24 as compared to Q1 FY24 signifying the arrival of the festive season as MSMEs see increased demand and rush during these times. What according to you is the reason for this growth in adoption of TReDS?
Sundeep Mohindru (SM): The surge in adoption of TReDS in recent years can be attributed to several factors. The rate of interest at which the business is financed on the TReDS is very competitive. It leads to availability of capital for MSMEs at 5-8% lower than the loans sourced from the open market. This reduction in interest cost enables them to offer competitive prices to their customers. As a result, their customers — large corporations — are also adopting this in large volumes and enabling early payment for their MSME sellers.
The ease with which the seller and buyer are able to source working capital finance on TReDS by way of digital bill discounting is enabling faster growth. CIBIL score or balance sheet strength or collateral by MSMEs are not required and therefore there are no limitations for scale up. The onboarding and KYC is fully digital on M1xchange TReDS, thereby enabling access by MSMEs from second-tier and third-tier cities.
Banks have benefitted with adoption of TReDS as repayments have been on time. This has given them confidence to open credit to BBB-rated corporates and, thus, the MSME sellers of BBB-rated corporates have started to benefit from early payment from TReDS.
ET: Why should more companies in the country look at adopting TReDS?
SM: Adopting TReDS can lead to a direct reduction in the cost of goods and services purchased. By facilitating early payments to vendors by discounting their trade receivables, companies can secure better deals and discounts from suppliers. This, in turn, translates into lower costs for the company and ultimately lower prices for consumers.
ET: What are the further areas of improvement in the TReDS platform?
SM: Earlier this year, the RBI permitted insurance companies to come onto TReDS. This, along with a wider pool of financiers, has significant implications for MSMEs and the trade finance landscape. These changes enhance the accessibility and security of trade receivables financing, making it more attractive for businesses, especially those with lower credit ratings. Insurance companies will bring more safety net for financiers and, in turn, higher liquidity for MSMEs.
The current TReDS window is buyer-driven and is completely dependent on the buyer’s acceptance of the invoices. The UK Sinha committee’s report recommended creation of a TReDS second window which is envisaged as a “buyer less” model wherein the need of buyers to accept the invoices is not required.
- Source: Click Here
- MSME Corporate News:
- Imports of goods like umbrellas, musical items from China hurting Indian MSMEs: GTRI
Increasing imports of goods such as umbrellas, toys, certain fabrics, and musical instruments are severely hurting MSMEs as many of these products are also made by domestic businesses, according to think tank GTRI. The report said that during January to June 2024, India exported goods worth only USD 8.5 billion, while imports stood at USD 50.4 billion, resulting in a trade deficit of USD 41.9 billion.
This low export and high import makes China India’s largest trade deficit partner.
He said that these imports from China are “hurting” Indian MSMEs, as many of the imported products are also made by these local businesses.
“Some MSMEs have to shut down or reduce their operations, and they find it hard to grow due to the easy access to low-cost Chinese products. These challenges affect job creation and economic growth in India,” Srivastava said.
The GTRI data analysis stated that China supplies 95.8 per cent of India’s umbrellas and sun umbrellas (USD 31 million) and 91.9 per cent of artificial flowers and human hair articles (USD 14 million).
Additionally, glassware (USD 521.7 million, 59.7 per cent), leather articles including saddlery and handbags (USD 120.9 million, 54.3 per cent), and toys (USD 120.2 million, 52.5 per cent) are seeing a similar trend, severely impacting domestic manufacturers, it said.
Also, Indian MSMEs are struggling to compete in industries such as furniture, bedding, and lamps; and cutlery. (To read more – Click Here)
- City Union Bank MD sees good potential for MSMEs in solar energy sector
The renewable energy sector can make a lasting impact in the growth of micro, small, and medium enterprises (MSMEs) in Tiruchi region, said N. Kamakodi, Managing Director and Chief Executive Officer of City Union Bank, here on Thursday.
Speaking at a session on MSME growth insights and leveraging government schemes organised by the Confederation of Indian Industries (CII), Mr. Kamakodi said the textile sector in the country, especially in Coimbatore and Tiruppur region, made a real turnaround by leveraging the subsidy component over the last two decades. Many textile units had sprung up by tapping the opportunities and the sector had come to stay.
Mr. Kamakodi said there were days when the MSMEs in Tiruchi revolved around the order of the Bharat Heavy Electrical Ltd. (BHEL). However, the entrepreneurs, who encountered a crisis, had switched their attention to the demands from the wind mill energy sector. The Tiruchi cluster had a potential to expand their wisdom.
In the post COVID-19 period, he said there had been slackness in investment to expand the business or entrepreneurs as they primarily wanted to ensure a feel good factor in their units or business ventures. There would be no worst scenario for the industrial sector than the COVID-19 period. In spite of testing time, most MSMEs had stabilised. Hence, the entrepreneurs could go for expansion.
M. Ramalingam, general manager, District Industries Centre, said that Tiruchi had an excellent road, air, and train connectivity with strong human resource. However, the facilities were not utilised well. Engineering industries in Coimbatore had adapted to the emerging market and they had become a world supplier of machines. The technique could be replicated in Tiruchi as well. Read more – Click Here
- Public sector industries must prioritise MSMEs when purchasing raw materials: Shobha Karandlaje
Union Minister of State for MSMEs Shobha Karandlaje on Friday emphasised that public sector industries must prioritise MSMEs when purchasing spare parts and raw materials.
The minister inaugurated a two-day conclave on MSME, organised by the Federation of Karnataka Chambers of Commerce & Industry (FKCCI) at Palace Grounds in Bengaluru. Karandlaje said small, micro, and medium sector industries play a vital role in the industrial development of the country. “These MSMEs create jobs for our youth. The Centre has evolved many schemes to encourage MSMEs,” she added.
According to Karandlaje, there is a need to improve the skill development of youth in MSMEs to better align with the needs of the industry.
According to him, the MSME Conclave-2024 is an important platform to ensure the growth and sustainability of the MSME sector in the state. Industry leaders, policymakers, and financial institutions have joined forces to provide all the necessary information about starting MSMEs. (To read more – Click Here)
- Will appeal to PM Modi to direct PSUs to prioritise raw material purchase from MSMEs: MSME ministry
Minister of State in the MSME Ministry Shobha Karandlaje on Friday said a memorandum will be submitted to Prime Minister Narendra Modi for public sector units to prioritise the purchase of goods from micro, small and medium enterprises (MSMEs). The MoS was speaking at a conclave on MSMEs organised by the Federation of Karnataka Chambers of Commerce & Industry (FKCCI) in Bengaluru.
According to a PTI report, revealing that large PSUs are importing many raw materials from other countries, Karandlaje said her ministry will appeal to the Prime Minister to direct these PSUs to prioritise purchasing raw materials from MSMEs.
Importantly, central PSUs are mandated to purchase at least 25 per cent of their total procurement value from micro and small enterprises (MSEs) in a financial year, of which 4 per cent is to be procured from MSEs owned by SC/ST entrepreneurs and 3 per cent from MSEs owned by women entrepreneurs.
In FY24, the procurement value from MSEs had hit a new high. According to the data available on the MSME Ministry’s public procurement monitoring portal MSME Sambandh, central PSUs had procured goods worth Rs 75,253 crore from MSEs in FY24, growing by 16.2 per cent from Rs 64,721 worth of procurement made in FY23, FE Aspire had reported in May this year. (To read more – Click Here)
