Inability to access markets, retain customers top challenges for MSMEs: Report

A majority of MSMEs surveyed cited the inability to access markets, retain customers, and effectively market their products are among the top challenges, according to an ICRIER report unveiled on Monday.

The report surveyed a total of 2,007 micro, small and medium enterprises (MSMEs) between November 4, 2022, and January 20, 2023.

Of the total sample, 65 per cent of the firms were micro in size, 19 per cent were small, and the remaining 16 per cent were medium.

The analysis from the survey suggests that MSMEs -- which adopt e-commerce platforms as a sales channel -- tend to be owned by younger and more educated individuals.

A higher share of export-oriented MSMEs are found to be integrated with e-commerce platforms compared to firms that do not export, suggesting a positive relationship between firms' export orientation and e-commerce adoption, the Indian Council for Research on International Economic Relations (ICRIER) said in the report.

On average, integrated MSMEs appear to be better off than non-integrated firms on key performance indicators, such as turnover, profitability and share of employment benefits.

At the time of the survey, 1,005 enterprises were already integrated with e-commerce platforms, while the remaining 1,002 were not integrated.

The survey findings suggest that integration with e-commerce platforms not only enables MSMEs to improve their access to the market but also access to finance, thereby alleviating critical barriers to their growth.

"Thus, for MSMEs to be effective engines of inclusive growth, their digital transformation must be a priority," the survey highlighted.

"A vast majority of the surveyed enterprises reported that the inability to access markets, retain customers, and effectively market their products were among the top challenges faced by them. Given that market access and marketing-related challenges are a significant constraint to their growth, MSMEs recognise the potential of e-commerce to expand their reach to a wider geographical coverage," the report said.

However, leveraging platforms to enable MSMEs to expand access to markets and grow their businesses requires an enabling environment in the form of the right policy support from the government, it added.

Apart from challenges pertaining to access to markets, surveyed MSMEs also indicated several other challenges relating to physical infrastructure bottlenecks, lack of access to credit and skilled labour and problems of delayed payments.

To address these bottlenecks, the central and state governments have put in place various schemes that provide financial assistance, access to technology and upgradation facilities, infrastructure development, skill development and training.

These include Emergency Credit Line Guarantee Scheme, Credit Guarantee Fund  Trust for Micro and Small Enterprises, the Credit Linked Capital Subsidy Scheme (at the central level), the MSME Sarthak Scheme (Karnataka), Uttar Pradesh government's One District One Product (ODOP) scheme and the Rural Craft and Cultural Hubs (West Bengal), among others.

The respondents strongly felt that there is a need for consolidation and rationalisation of the schemes.

MSMEs also highlighted the importance of effective coordination between the central and state governments and the significance of having a comprehensive MSME policy that will allow such firms to find policy incentives and programmes in a single place.

Further, they noted that it was also essential for governments at all levels to create greater awareness about the various incentives and programmes for a higher uptake.

MSMEs were selected across six product categories -- sports goods (16.7 per cent), toys (15.7 per cent), processed and preserved food products (16.9 per cent), apparel (17 per cent), furniture (17.6 per cent), and handicraft products (16.1 per cent).

The survey covered Ahmedabad, Bhubaneshwar, Delhi, Jaipur, Lucknow, Ludhiana, Jalandhar, Agra, Meerut, Saharanpur, and Chennai.