FE ScaleUp Summit 2022: India’s top MSME voices unfold path for accelerated growth of small businesses | The Financial Express

FE ScaleUp Summit 2022: India’s top MSME voices unfold path for accelerated growth of small businesses

Credit and finance for MSMEs: The one-day summit focused on how to accelerate the pace of growth of a micro enterprise into a small business and further to a medium enterprise.

FE ScaleUp Summit 2022: India’s top MSME voices unfold path for accelerated growth of small businesses
The second panel discussion explored how MSMEs can get collateral-free credit from banks and NBFCs.

Credit and finance for MSMEs: The second edition of the ScaleUp Summit organised by Financial Express Digital on Thursday explored how India can enable more micro and small enterprises to grow into mid-sized or large businesses at a rate at par with developed economies. The event opened with the address of the government’s MSME promotion body National Small Industries Corporation’s (NSIC) chairman and managing director Gaurang Dixit as chief guest. In his remarks, Dixit stressed on formalising the MSME sector in order to boost its growth.

“The government is doing efforts towards formalisation of MSMEs by bringing schemes like Udyam registration, Atmanirbhar Bharat Package, and Fund of Funds scheme as well to provide growth capital to scale up MSMEs.” “For extending credits, we (NSIC) are having an arrangement with 16-17 banks to provide hand holding supports to MSMEs,” Dixit said adding that coming out of the pandemic impact has to be a collective effort of central public sector enterprises, private sector and central and state governments.

The one-day summit also had a keynote address by T Koshy, managing director and chief executive officer of the government’s open e-commerce project Open Network for Digital Network (ONDC).

Highlighting the fundamental benefit of ONDC as a platform for sellers, Koshy said that anybody or any enterprise that has something to offer to be sold should be able to make their catalogue visible across the (ONDC) network. “Whichever platform you are on, you are equally discoverable in front of the world and here’s where ONDC comes by unbundling the building blocks of commerce,” he added.

ONDC enables sellers to tap India’s e-commerce market through an equitable and secure platform integrated with multiple other sellers, buyers, and logistics players. On the buyer side, they will benefit from access to a wider range of products through a single app instead of going to different marketplaces.

The first panel discussion of the conference was focused on how cloud or software as a service can help MSMEs grow digitally. While according to multiple industry reports, the awareness and adoption of digital technology among MSMEs has increased marginally over the past few years, a vast majority of enterprises are yet to be brought under the SaaS fold.

More importantly, getting the right software tool has become more critical than just the adoption of SaaS and also to answer questions like what kind of tools suit businesses need based on their size, the right skills needed to adopt SaaS, cyber security measures required, SaaS vs on-premise tools etc.

“There is a big gap in adoption of technology but it is addressable if we start looking at the individual use of technology and enterprise use of technology,” said Shobhit Mathur, Partner, Business Consulting, EY India. The other speakers on the panel were Amit Kumar, Founder and CEO of MSME advisory firm MSMEx and Suryanarayan Iyer, Senior Director, India Applications Solution, Oracle.

SaaS adoption among small businesses assumes significance as the market for SaaS adoption in India is expected to be worth $50 billion by 2030 and is poised to become one of the globe’s top centres of innovation in the next decade, according to a report in June this year by the venture capital firm Bessemer Venture Partners (BVP).

The following panel discussion explored how MSMEs can get collateral-free credit from banks and NBFCs. With new businesses mushrooming in the country on one hand and division in family assets happening on the other, collaterals are depleting fast for MSMEs to pledge to secure credit.

So, what will it take for a first time borrower or an existing MSME to secure credit without mortgaging their assets to manage their working capital cycle, to tide over delayed payments issue? How CGTMSE and cash flow based lending can be of help? What regulatory and tech interventions are required and why formalisation of the MSME sector is critical in capital raising are the key questions to answer.

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The panel was joined by Dhruv Dhanraj Bahl, Head, Merchant Lending, BharatPe; Prasanna Madhyasta, EVP & Business Head, Supply Chain Finance, U GRO Capital; D P Goel, Co-Chair, MSME Committee, PHD Chamber of Commerce and Industry (PHDCCI); Subhransu Sekhar Acharya, Chief General Manager, Small Industries Development Bank of India (SIDBI); Vikrant Narang, Deputy CEO, Ambit Finvest and moderated by Raman Aggarwal, Director, Finance Industry Development Council (FIDC).

While for first-time borrowers, the government’s CGTMSE scheme provides credit guarantee cover to banks for collateral-free loans up to Rs 2 crore, for repeat borrowers, transaction-based lending or cash flow-based lending is likely to be the way forward in contrast to the traditional balance sheet-based lending.

“Most of the NBFCs today are willing to give collateral-free to MSMEs credit since we have the access to data,” said Madhyasta from U GRO Capital.

The event also organised a masterclass session on how to manage finance for business growth by Bhairav Kothari, Founder & CEO of SuperCFO Advisory Services. As a small business, formal credit is not really accessible when required and neither equity-based funding is a real option.

While raising finance is important for MSMEs, what is equally important perhaps is how to navigate your business through available finance and how data and technology can help you. It is also important because often businesses underestimate the power of proper cash flow planning and how segmental profit and loss can help.

“To evaluate raising funds for your business one needs to introspect and ask questions such as what do we need money for? what is our risk taking appetite? etc,” said Kothari.

Also read: FE Exclusive: Loans to retail, wholesale traders under CGTMSE to be treated at par with other segments

The programme concluded with a panel discussion on the topic ‘how buy now pay later (BNPL) is solving MSMEs’ working capital crisis’. The BNPL model has recently caught both lenders and borrowers attention for short-term credit needs and competitive interest rates that help MSMEs manage their working capital cycle. As per Juniper Research, BNPL users in India are predicted to grow from 25 million in 2022 to 116 million by 2027.

According to Manish Kumar, Founder and CEO of supply chain financing company KredX, “For MSMEs, BNPL is not an aspirational product but a sustainable product. BNPL is trying to give a payment experience on a credit platform.” However, “BNPL has two important aspects — underwriting and collection. If we are not seeing any of it then it’s a risk,” said Mihir Gandhi, Payments Transformation Leader, PwC India.

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First published on: 08-12-2022 at 18:16 IST