Digital public infrastructure to unlock the potential of MSMEs – Times of India

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Finance Minister’s announcement in the budget to allocate over INR 22000 crore for MSMEs is a testament to the robust growth and the indispensable contribution of the MSME sector to the Indian economy. Last few years have been momentous to the growth of this sector and with the increasing government impetus, it is proliferating the industry to the next level. Dedicated to the upliftment of the 65 million MSMEs, the interoperability of the different touchpoints is rapidly shaping the different contours of the economy’s digital ecosystem.
A digital ecosystem that delivers end-to-end solutions, from finance access, payments, operations, and management to convenient skilling and knowledge sources, would be an encouragement for enterprises to fully adopt digital technology. Digital technology has the potential to considerably benefit India’s MSME sector if the emergent infrastructure is supported by the government, solution providers, and, most crucially, users. 
Over the last two-three years, the Government has been focusing on promoting the MSME sector and several initiatives have been announced. In 2019-20, a dedicated online platform was proposed by the government to provide loans for MSMEs up to INR 1 crore (US$ 0.15 million) in less than an hour. In the same fiscal, INR 350 crore (US$ 52.50 million) was promised under the Interest Subvention Program for MSMEs. To enable the filing of bills and their payment on the platform itself, the government was set to develop a payment stage for MSMEs. All Central Public Sector Enterprises (CPSEs) now have access to the Government e-Marketplace (GeM), increasing the potential for MSMEs to market their goods. 
Let us take a closer look at the different cornerstones of the digital infrastructure aiding the MSME industry: 
Access to finance: MSMEs contribute greatly to economic activity of the country. Access to easy, cheap and timely credit is one of the key necessities for the growth of any business. MSME usually face capital crunch on a regular basis. Various Government initiatives provide much needed credit to MSMEs at a cheaper rate. One of the most significant advantages of using technology in lending is that it can speed up the entire process. With the use of big data and AI in public infrastructure, lenders can assess borrowers’ creditworthiness and approve loans in a matter of minutes. The same can also be utilised can also be used to assess risk more effectively. By analyzing a borrower’s credit history, financial statements, and other relevant data, lenders can identify potential risks and take steps to mitigate them. 
Financial institutions and other participants, such as fintech companies, might combine, generalise, and exchange data about SMEs. When the data pool gets bigger, credit risk models often grow more accurate. The is practiced in Japan and France, wherein credit data is stored and used used for portfolio management, interest rate setting, and loan evaluations. In addition, they have also helped banks analyse credit risk in a more advanced way. Credit scoring techniques and the creation of shared databases are still in the early stages in emerging nations.
Be that as it may, the social and economic benefits of fintech in enhancing underserved populations’ access to financial services, enabling simpler and less expensive cross-border payments and transfers (such as remittances), and more, their use is still relatively low in comparison to conventional debt financing. 
The end goal is to create a robust network that will simplify complex processes, and help the financial resources reach the beneficiaries timely, thus upholding the financial inclusion vision of Digital India. Therefore, investment in a public infrastructure that is 24/7 online can make MSMEs resilient and better equipped to tackle the unforeseen shifts in the economy. 
Online marketplaces: India’s e-commerce marketing is thriving at an astronomical rate and will outpace more mature global markets by 2030. It is expected to touch $ 200 billion by 2026. India has become home to multiple divisions of commerce ranging from business-to-business (B2B), direct-to-consumer (D2C), and consumer-to-consumer (C2C). One of the most important aspects of going digital with data and information is that it expands the horizons in two ways-for the businesses and for the consumers. Digital public infrastructure gives MSMEs the resources to expand their markets and go beyond borders. On the other hand, it helps consumers locate far-off businesses and avail themselves of their products and services. With more players in the ecosystem, the market will get more competitive, thus leading to R&D and innovation. On the authorities’ front, digital public infrastructure can foster a fair and level playing field for the market players.
Digital payments: Digital public infrastructure can provide an impetus to payment platforms that enable secure and seamless online transactions between buyers and sellers. Payment gateways are being integrated into e-commerce websites, mobile apps, and other digital platforms, allowing MSMEs to accept payments from customers using a variety of digital payment methods, such as credit cards, debit cards, e-wallets, and UPI. The linkage of UPI with international fast payments systems is giving a robust infrastructure to execute cross-border remittance. Real-time payments can improve cash flow and reduce the time and cost associated with traditional payment methods, such as checks and wire transfers.
Access to information: In this day and age, data is oil. With the digitalisation of the public ecosystem, MSMEs will have access to resources and information that can help them gain insights and apply them to their businesses. MSMEs often operate in highly competitive markets with limited resources, so access to information can help them make informed decisions, develop new products and services, and improve their operations. This can also include online learning and development, SOPs, and access to market intelligence.
Efficiency and productivity: Digital infrastructure can help MSMEs improve their efficiency and productivity by automating routine tasks such as inventory management, invoicing, and record keeping. This can free up time for small business owners to focus on growing their businesses. MSMEs are already using digital marketing tools to reach a wider audience and improve customer engagement. Cloud-based solutions should be introduced to manage their business data, collaborate with remote teams, and access software applications without investing in expensive IT infrastructure. Analytics tools such as Google Analytics, Mixpanel, and Kissmetrics can also assist MSMEs to track website traffic, user behaviour, and marketing performance, among other metrics.
All in all, digital public infrastructure can play a vital role in unlocking the potential of MSMEs by providing them with the tools and resources they need to thrive in an ever-growing digital economy. It can help MSMEs improve their business development process, financial management, reduce transaction costs, and expand their customer base by being present digitally. It can also foster trust and increase efficiency and transparency in financial transactions, which can be beneficial for both MSMEs and their customers. 
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Views expressed above are the author’s own.
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