Here’s what to expect in 2022

The MSME sector is undoubtedly instrumental in driving the growth of the Indian economy. The MSME sector which was largely affected by the Covid-19 pandemic has rebounded, and Indian MSMEs say business is just not back to normal but is thriving. The year 2022 has started to show great results and hopefully the rest of the year will mark great achievements for the sector in India.

Several industries that have been impacted by the Covid-19 pandemic and induced lockdowns say they have now moved beyond losses and are starting to show signs of growth. The agro-food industry, which has been largely affected, has now been able to regain its profitability and seek to develop more rapidly.

In my opinion, here is what to expect from MSMEs:

Technology adoption will continue to increase

The MSME sector has shown strong acceptance of digitalisation. Over the past two years, micro, small and medium enterprises have realized the power of technology and how digitalization contributes to the ease of doing business. The year 2022 is also devoted to the growth and development of MSMEs. The number of technology products built for the MSME sector over the past 3 years has been adopted at a rapid pace. There will always be technological innovations in the sector that will contribute significantly to the economy.

At least 10% of MSMEs will fully adopt technology to run their businesses by the end of 2022. Already, the majority of MSMEs have adopted fintech platforms to manage payments, the success of platform adoption fintech leads to the exploration of other technology products to facilitate business operations.

Need for growth capital

I recently had a conversation with an SME entrepreneur in the F&B sector about how their business is doing. His answer surprised me. He mentioned that his current problem is capital investment for growth. He said the business is not only back to normal, but growing at a faster rate than ever. So, this entrepreneur is now looking to raise capital to meet the increased demand for his business. Apparently he was indicating that it is the same trend with other companies in the F&B sector.

The 2022-23 Union budget focused not only on reviving but also on growing the MSME industry. Over the next five years, the government intends to roll out a program worth 6,000 crore for MSMEs. Along with government initiatives, private credit institutions have also shown strong interest in providing capital to MSMEs. This, in turn, allows micro, small and medium enterprises to access better loans. Hence, these factors indicate higher growth in terms of capital and loans for MSMEs in India.

Smart decision making

The Covid-19 pandemic has given companies a better understanding of the importance of good decisions. MSMEs, a traditional industry that operated in simple ways, have now started to embrace new technologies and leapfrog formats that have been explored over the past decades. Arguably, business decisions are backed by data and analytics as a technology is more accessible than ever. In the future, MSMEs can be expected to make covid-proof decisions or smarter decisions involving financial or operational aspects.

SMBs that typically fail to follow due diligence methods while making risky decisions are now trying to dig deeper to understand their customers and stakeholders before onboarding or signing deals. Simple methods like KYC, credit checks, etc. will see their adoption increase in 2022.

SMEs will be able to identify and reduce late payment/cash flow issues

In 2022, late payment management and technology adoption will go hand in hand for MSMEs. MSMEs have recently adopted technology to manage cash flow and late payments. Disrupted cash flow or late payments are two major factors holding back the growth of MSMEs. Several government initiatives and private actors have sprung up to help MSMEs with solutions that recover payments faster and thus correct delayed payment cycles for the industry.

Changing credit practices, technology-based credit agreements and extensions will slowly see adoption in the commercial credit industry.

Implementation of credit insurance

Although the Insurance Regulatory & Development Authority of India (IRDAI) has endorsed and facilitated the process of covering credit risk through credit insurance, uptake has been poor. The low uptake can be attributed to the lack of awareness of MSMEs and the complex/time-consuming process to benefit from trade credit insurance. However, post-pandemic, insurance companies are finding it easy to raise awareness about trade credit insurance with case studies of loan defaults caused by the Covid19 pandemic. Entrepreneurs are also realizing the importance of securing their credit exposure and adopting pandemic-proof business practices.

Birth of many entrepreneurial companies

Much of the youth are drawn to startups and the conversations around creating a startup. Previously, MSMEs were more of a traditional business structure, passed down through the family. However, that seems to be changing, and more so after the Covid-19 pandemic. This year and the decade will see the emergence of entrepreneurial businesses in the MSME industry. Recognizing MSMEs for their global potential and as incubators of India’s entrepreneurial talent, the government has not only facilitated a favorable ecosystem but also provided active support through fiscal initiatives from time to time. I personally know an IIM alumnus who registered her business under the MSME Act.



The opinions expressed above are those of the author.


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