The micro, small and medium enterprises (MSME) sector play a pivotal role in the country’s economic landscape, contributing to its GDP and providing employment to many. And yet, it has always witnessed (and overcome) challenges and hardships, caused by internal (eg. skill set gap) and external factors (eg. the pandemic) that impacts MSME growth.
However, though there has been extensive support and financial aid from the government to accelerate MSME growth and make it resilient, there are some common MSME challenges that the sector continues to face that prevents it from delivering to its full potential.
In this article, we look at five popular challenges that MSMEs in India face and how to find a solution to it.
Challenges to MSME growth and the way out
The MSME sector was greatly impacted by the pandemic and the subsequent lockdown, with many businesses having to shut down while others struggled to survive. The sector had to almost overnight, adopt digital tools in business, follow trends, and adapt to the new normal to ensure business continuity.
Though many businesses acted fast and adjusted to change, the process was not easy. And while many businesses today are still recovering, the challenges and obstacles continue. Here is looking at some of the small business challenges and the solutions to it:
1. Awareness and access to information
Among the most prominent problems faced by MSMEs in India is the lack of awareness, knowledge, and access to information.
The digital-first culture is gradually picking pace, but when it comes to accessing the latest and relevant information online, the sector is lagging.
This is more pronounced in the rural sector, where limited knowledge is obstructing innovation, entrepreneurship and even growth.
While there is no easy fix to this problem, some of the solutions that MSMEs can consider would be:
- Joining a B2B growth platform to find new opportunities, connect with other businesses, and find solutions to business challenges
- Following news websites and online platforms to find relevant information and stay updated
- Visiting relevant government portals regularly for the latest updates and business information
2. Technology and digital tool adoption
Technology adoption and MSME digitalisation is more than accepting digital payments, or managing social media profiles, or using WhatsApp Business for customer interactions. It is about business automation and adopting new technologies to optimise business processes.
The government led initiatives at reforms (eg. GST and e-Invoicing) to aid MSME in their digital transformation journeys has been greatly beneficial. Yet, the process is slow with several bottlenecks that MSMEs are gradually overcoming.
While there is no one-fixed-solution to the challenge of digital and IT adoption, some of the inexpensive options MSMEs can consider include:
- Seeking business consulting services from industry experts (online or offline) to identify tech-challenges and implement change
- Participating in online webinars, forums and groups, or seminars, to learn about innovation, IT trends, and new technologies
- Adopting digital software solutions in business to cut costs and time, automate and optimise processes
- Enrolling in skill enhancement programs (for both senior management and employees) to learn about the latest tech solutions
3. Financial constraints and access to funds
This is a perpetual challenge for all businesses – large and small. But when it comes to small businesses, it is amplified by lack of knowledge, access to funds, and regulatory requirements. From cash flow and working capital challenges, to creditworthiness for loan sanction, and making timely payments to stakeholders (and employees), the financial challenges of MSMEs are widespread.
The government has introduced several MSME loans schemes to aid the micro, small and medium sector to have access to funds and credit for running operations and driving growth. However, lack of clarity prevents many MSMEs to access financial aid when most needed.
Some of the ways in which MSMEs can overcome the challenge to access and avail funds include:
- Staying informed of the latest financial aid schemes by following government portals and relevant news platforms
- Hiring a financial consultant for guidance
- Looking at collateral free loans (or unsecured loans) from banks and NBFCs to overcome cash crunches
- Using financial and accounting tools for streamlining processes and finding solutions to daily cash flow challenges (eg. investing in an invoice discount software to avail early payments)
Read More: How Can MSMEs Benefit from ECLGS?
4. Leadership, innovation, and skilled manpower
Another common challenge the MSME sector encounters is the lack of a visionary leader to steer their growth journeys. There comes a time when every business requires expert guidance to take it to the next level. Internally, most MSMEs lack skilled experts and the finances to hire one.
Similarly, the MSME sector faces challenges of scarcity in skilled manpower. During the pandemic, many skilled worked relocated/migrated making it almost impossible for businesses to find affordable, skilled people.
Solution to these obstacles could be:
- Creating a culture of learning and seeking regular advice from industry-experts
- Focusing on workforce management and talent development
- Normalising trainings and skill enhancement based on existing and future skills
- Hiring experts as consultants on a periodic basis to guide employees on innovation, IT and infrastructure, and change
5. Convenience, trust, and market competition
And finally, running a business is not an easy task. From managing people and finances, to compliance, operations, inventory – it is a 360-degree job.
There are daily operational and infrastructural challenges, woes with logistics, compliance and tax, credit, loans, profits, etc. Plenty of obstacles that slow growth and progress, making it inconvenient and daunting for MSMEs in India to start and run a business.
Moreover, there’s the additional burden of competition from larger businesses, and lesser brand awareness among potential users that impacts growth.
Some of the ways in to sail through these challenges would be:
- Increasing online visibility (eg. through websites, social media, profiles on B2B platforms etc.)
- Building on customer loyalty and satisfaction by providing quality products/services and exemplary customer support
- Joining forums and groups, attending webinars etc. to learn about trends, competition, customer feedback, draw insights, and expand business network
- Staying up to date with the latest industry-specific news, business articles and more
Solutions to problems faced by MSMEs: The way ahead
As an entrepreneur, small business, or start-up owner, you are not the first to face roadblocks and hurdles during your path to success. With proper guidance, leadership, skill development and structured approach to improvement, it is possible to overcome most issues and challenges faced by MSMEs.
It is recommended therefore to keep learning, innovating and experimenting with new ideas and methods. It is also imperative to adopt digital tools and technological solutions into business to stay ahead, and always have a Plan B ready to face adverse conditions.