Digitalization of MSMEs

For the past few years, India has been on the journey of digital transformation. The increase in internet penetration, the introduction of UPI, enabling of digital payments in small businesses and government offices are some of the changes which have helped. But the biggest reason behind the accelerated growth of digital transformation has to be Covid-19. Individuals / Companies which were hesitant to adopt digitalization were forced to embrace it. MSMEs also started to follow the same route. Before Covid-19 as per the survey of YES Bank, only 5% of MSMEs completely embraced digital technology. The year 2020-21 witnessed a huge increase in these figures. But still, some MSMEs are operating completely offline.
MSMEs were heavily hit by the pandemic due to the reduced cash flows, inability to leverage the newer technologies like cloud computing, consumer analytics, IoT, and lack of access to Credit.

Various surveys show that SMEs which embraced digital technology have more than doubled their growth when compared to those that have not. Digitalization helped them to unlock new markets. However, MSMEs face many challenges while adopting a digital path like limited budgets, lack of proper knowledge and training, trust issues, and security concerns. But to sustain and thrive they should transform soon, or they will lose on many opportunities.

Why is it important for MSMEs to transform digitally?
SMEs can have a better customer base, improve their operational efficiency, cost savings on several activities, customer engagement and retention, hassle-free payment options, unlocking better financing options for working capital, and a better understanding of overall opportunities in the market through proper utilization of available technology.

How MSMEs could leverage digital technology?

• Create a mail ID, Website, and social media account for the company.
• Utilize government services like e-marketing.
• Tie up with aggregators like Indiamart for reaching out to more customers.
• Targeted Ads through social media
• Using facilities like Google ‘My Business App’, CRM, and ERP software to increase profitability.
• Unlock more opportunities through partnerships with Fintech companies like OfBusiness which helps save on material costs and provides credit for working capital requirements.
• Adopt technologies for payments and collections, invoicing, GST filing, payment reminders, and payment reconciliation.

New Initiatives of Government
The government has started several initiatives to help improve the digital literacy of MSMEs. To enhance the business of MSMEs, the government has launched MSME global mart portal which is an e-marketing platform. 18 MSME tool rooms or technology centers across India, Job portals like MSME Sampark, Digital MSME Scheme, MSME Samadhaan, MyMSME initiative are some of the steps taken by the government.

In February 2021, Razorpay and Mastercard partnered to help MSMEs and Entrepreneurs in India to embrace digital payments.
Many SMEs are still far behind in utilizing all these facilities and thus not able to reap the benefits of digitalization.

Way Ahead
Small business owners should be given proper awareness about the immense benefits of adopting technology. It is expected that there will be around 105 Million SMEs by the end of 2024, in which 90% would be ‘digitally influenced’. MSMEs will be having a greater role in leading India to a $5 Trillion economy. The government is planning to increase the number of tool rooms from 18 to more than 100 within a few years so that our country can utilize the huge potential of MSMEs.

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