Ease of Doing Business for MSMEs: While the government can plan and allot resources and craft conducive policies, private and non-profit organizations can bring superior implementation expertise through effective program management with in-built accountability for outcomes.
As per recent ILO data, MSMEs account for a staggering 70 per cent of employment worldwide and India is no different.
Ease of Doing Business for MSMEs: Founded in 2000 by Silicon Valley billionaire entrepreneur Romesh Wadhwani – philanthropic organization Wadhwani Foundation works towards accelerating job creation in India and other emerging economies through large-scale initiatives in entrepreneurship, small business growth, innovation, and skilling. The foundation operates in 20 countries, including India and works in partnership with governments, foundations, corporations, and educational institutes and runs multiple initiatives. It has also been awarded $ 1.5 million by Bill & Melinda Gates Foundation to upskill hundreds of government-funded incubators in India. Dr Ajay Kela, President and CEO of Wadhwani Foundation shares his views on government measures and their impact to support MSMEs, job creation by small businesses, elevating them from Covid-induced misery and more in an interview with Financial Express Online.
MSMEs remain key to employment in India even as there is a dire need of job-creators. What more government could do for MSMEs towards job creation?
With India adding 8-10 million people a year to the workforce for the next decade, the demand for jobs in India is unprecedented. As per recent ILO data, MSMEs account for a staggering 70 per cent of employment worldwide and India is no different. However, Covid-19 crushed MSMEs from all angles, and most will take months and years to return to stability and normal growth. Besides capital and cash management help, MSMEs are in desperate need and eager to receive personalized business consulting that will accelerate their return to normalcy. The government has already released a stimulus package to address their financial needs. If this is coupled with business consulting services, it will enable MSME to utilize the funds better to survive and thrive by building strategies to address challenges with customers, broken supply chains, and disrupted internal processes, including cash management and employee retention.
In fact, through the Rs 200 crore Wadhwani Sahayata programme, in partnership with a large team of business consultants, banks and NBFCs, Wadhwani Foundation is doing just that by helping MSMEs navigate through this crisis towards survival and success and ultimately help save or create 1 million jobs through supporting 20,000 MSMEs. The idea is to first save jobs and then create jobs.
But what about addressing issues around financial stress, low consumer demand, manpower issues etc.?
Although the recent MSME stimulus package will enable many small businesses to get back on their feet, a sustained and long-term revival of the MSME sector will depend on effectively tackling vulnerabilities such as financial stress, uncertain demand, dispersed workforce, and a downbeat export market through four areas. First, finance — adopting measures to enhance liquidity in the system with things like a moratorium on term loans, reduced interest rates, easing of working capital financing, etc., second government procurement — mandating and ensuring at least 30 per cent of government procurement is targeted towards SMEs. Third, payment terms — mandating payment of outstanding invoices within 30 days, both from government and private organizations and fourth market access — relaxing export restrictions and providing innovation grants to small business to grab the opportunity of disrupted supply-chain and desire of global firms to reduce their dependency on China.
How significant you think would be the impact of measures taken for Covid-hit MSMEs and what could be done to make them more comprehensive?
The recently announced Rs 3.75 lakh crore stimulus package for the MSMEs should ease their immediate stress. The threshold for eligibility for the collateral-automatic loans (Rs 25 crore outstanding and Rs 100 crore turnover) will go a long way to spur survival and long-term growth and job creation. Also, due to the partial credit guarantee scheme being extended to enable promoters of these units to increase their equity, an estimated 2 lakh stressed MSMEs with non-performing assets (NPAs) should benefit. Finally, the provision for Rs 20,000 crore to be funnelled through CGTMSE will help promoters to infuse loans as equity in their businesses.
While collateral and guarantee free loans, equity funding options, better access to government procurement, e-market linkage and higher thresholds are strong enablers, liquidity and credit guarantees for banks & NBFCs will help remove hesitation in lending. However, if the same policy is implemented by the states, the impact will be comprehensive with the potential of giving a big push to new employment opportunities for the skilled, semi-skilled and unskilled workforce in India.
What role do you see for private companies, funds, philanthropic and non-profit organizations in stepping up support for MSMEs?
In a huge and diverse country like India, governance is not easy. At any given point of time, there are a thousand problems screaming for a better solution. Private companies, funds, and non-profit organizations can prove to the most effective in bringing last-mile innovative solutions to connect the dots. While the government can plan and allot resources and craft conducive policies, private and non-profit organizations can bring superior implementation expertise through effective program management with in-built accountability for outcomes. Another key contribution by non-profits like Wadhwani Foundation is the all-pervasive use of technology not just to scale impact, but also as an effective means of data crunching, monitoring and evaluation for a clear enunciation of outputs and outcomes.
What are the latest initiatives running at Wadhwani Foundation for MSMEs, and startups apart from skill development programmes?
We run initiatives such as Wadhwani Advantage that offers personalized, on-demand knowledge and consulting resources through an AI-enabled mobile platform to create millions of new jobs. We also have Wadhwani Entrepreneur to enable startup entrepreneurs, Wadhwani Venture Fastrack to maximize success rates of early-stage startups, Wadhwani NEN to empowers students to create high-potential startups, Wadhwani Inspire to establishes a nationwide culture of entrepreneurship, Wadhwani Innovate to accelerate world-class innovation, and Wadhwani Opportunity to empower millions of students with 21st-century employability skills. We have recently been into a multi-million-dollar partnership with the government to fund hundreds of innovation grants to startups and SMEs. We have also been appointed by National Skill Development Corporation (NSDC) to provide employability skills to all their training partners and also by the government to deliver employability skills to 12,000 students in government high schools. We have also been funding promising startups into healthcare innovation.