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9.2 million MSMEs to benefit from fintech era, 49% of them still prefer traditional lending over digital: Survey

Illustrating the increasing popularity of digital payment technology in recent times, the report, by digital payment solution provider further highlights that currently digital payment technology is marked by a high level of MSME user satisfaction.

ET Online|
Nov 19, 2019, 02.13 PM IST
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The report points out that the MSME landscape has witnessed a paradigm shift in recent times, thanks to a mixed bag of opportunities and disruptions.
BANGALORE: An estimated 9.2 million MSMEs registered under GST could be a potential market for advanced offerings from the Fintech stable, given that 47% of these MSMEs have adopted digital tools for business processes, payments, and online sales in India, revealed a pan India survey by MSME tech startup Instamojo.

As per the study by the Bengaluru-based digital payments and services startup -- of 400 MSME entrepreneurs surveyed, 49% of Indian MSMEs still prefer traditional lending channels over digital.

A vast majority of respondents (75%) believe that technology helps solve many of the challenges. “They leverage online information, logistics and email apps, social media, task management solutions and also train employees on technology. A dearth of skilled labour, time spent solving the challenges and a lack of understanding of how technology might help, keeps the rest from trying,” it said.

Notably, transactional convenience and monetary incentives to customers create value for about two-thirds of the MSMEs surveyed. Another 20% see value being created from customer preference for digital payment technology and data security and synchronization, the report added.

Illustrating the increasing popularity of digital payment technology in recent times, the report, by digital payment solution provider further highlights that currently digital payment technology is marked by a high level of MSME user satisfaction. “Nearly three- fourths of the respondents reported to be “very satisfied” or “extremely satisfied” with their experience of digital payment products,” it noted.

The report also highlights that although 75% of the MSMEs believe that technology helps solve major challenges pertaining to operations, the other 25% of MSMEs, however, attribute this to other factors such as unavailability of skilled labour and lack of understanding of technology.

“The MSME sector makes up for a large chunk of the Indian economy, employing more than 117 million people and contributing to making India a $5 trillion economy. However, the sector still faces several roadblocks like the lack of tech knowledge or the absence of skilled workforce,” said Sampad Swain, Co-Founder & CEO, Instamojo.

Highlighting recent opportunities and disruptions, the report points out that the MSME landscape has witnessed a paradigm shift in recent times, thanks to a mixed bag of opportunities and disruptions.

Giving a thumbs up to the Government’s MUDRA scheme, it says that the pathbreaking scheme by the NDA government has allowed startups and small businesses to access capital ranging from Rs 50,000 to Rs 1 million. “The Udyog Aadhaar Memorandum enabled 5.2 million businesses to register officially and avail benefits which included exemptions on taxes, reduction in fee for filing patents, credit guarantee schemes and a concession in electricity bills,” it noted.

On the fillip side, the findings make an observation that as Indian MSMEs look to state-sponsored benefits and to overcome exigencies they have also been bogged down by a legacy of critical challenges that have stifled their business growth for years. “The credit deficit faced by India's MSMEs got exacerbated due to four key disruptions. Demonetization adversely impacted liquidity, the introduction of GST made demands on their cash flow and compliance capabilities, the NBFC crisis drastically slowed credit, and their export competitiveness was blunted by the Letters of Understanding (LoU) ban by RBI,” it added.

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