Ketul Acharya, President of the Global Alliance for Mass Entrepreneurship (GAME), discusses critical aspects impacting Micro, Small, and Medium Enterprises (MSMEs) in India. He sheds light on the financial challenges due to the lack of a standardised MSME definition, key obstacles MSMEs face, and government policies promoting their growth. Acharya also delves into the concept of mass entrepreneurship, its importance for MSMEs, and GAME’s successful initiatives fostering a supportive entrepreneurial ecosystem. His insights provide a comprehensive overview of MSME growth strategies and their future trajectory in India’s economic landscape.

1.To what extent does the lack of a standardised universal definition for MSMEs cause financial challenges for the sector?

The definition of MSME in India has evolved over the years. The bigger issue though lies in the preparedness of both banks and MSMEs, to handle the vast needs of the sector. Currently, cumbersome processes and requirements often make it difficult for MSMEs to access finance.

Traditional loan application processes can be complex and time-consuming for MSMEs. Stringent collateral requirements and lengthy approvals further disadvantage them. On the other hand, banks perceive MSMEs as high-risk borrowers due to factors like limited credit history and potential for instability. This can lead to stricter loan terms or even loan rejections.

By focusing on improving preparedness on both sides and addressing the core challenges of demand and supply, significant progress can be made in ensuring better access to finance for the crucial MSME sector.

2.What are the other key challenges that MSMEs encounter in India?

 Access to credit, particularly, suitable equity options for long-term investment, remains a challenge for MSMEs. Additionally, inadequate infrastructure, skilled labour shortages, and limited market access restrict their potential. Financing technological advancements and facing competition from cheap imports add further pressure.

These obstacles are compounded by a lack of a strong growth mindset among some MSME owners. This can hinder the crucial transitions from nano and micro enterprises to small and medium-sized businesses, limiting their overall contribution to the economy.

3.What policies and regulations has the government put in place to promote growth in the MSME sector?

 Recognising the critical role MSMEs play in India’s economic engine, the government has implemented various policies and regulations to address their challenges and fuel their growth.  This focus goes beyond providing financial support; it actively seeks to create an environment that fosters solutions, innovation, and ease of doing business. These include:

• Structured loan schemes and subsidy schemes extended by the government and lenders offer customised credit products. Platforms like PSB loans in 59 minutes, Quick loans to borrowers who have GST track record
• Initiatives like the Public Procurement Policy mandate that a certain percentage of government purchases be made from MSMEs, providing them with crucial market access. Not only does it help MSMEs integrate into the larger supply chain but also encourages them to compete effectively.  Reservation of specific products for government procurement from MSMEs gives them a further competitive edge.  E-commerce platforms like GeM further empower them by providing a platform to sell directly to government departments, encouraging them to embrace e-commerce solutions.
• Promoting supply chain financing through TreDs platforms, fintech platforms, enacting legislations
• The government is actively creating an environment that fosters solutions, innovation, and ease of doing business. By constantly evaluating and refining its policies, the government aims to empower MSMEs to become stronger engines of economic growth and job creation in India.

4. What is Mass Entrepreneurship and why does it matter for MSMEs? Can you share a notable example of a successful mass entrepreneurship programme that GAME has implemented?

Mass entrepreneurship refers to a movement for empowering millions of ordinary businesses in every small town and city started by millions of ordinary people to create widespread prosperity and jobs at scale. At GAME, some of our most successful programmes are:

• Making entrepreneurship aspirational: In an effort to propel entrepreneurship to a top career choice in India, the Entrepreneurial Mindset Curriculum (EMC) nationwide initiative aims to ignite a wave of entrepreneurial spirit. By scaling successful pilot programs and fostering collaboration with the government and key influencers, the movement will create a robust ecosystem for entrepreneurship. This will ultimately cultivate vibrant communities where entrepreneurs can thrive through mutual support and shared experiences.
• Access to credit for micro-enterprises:
  • NBFC Growth Accelerator Program (NGAP) targets Non-Banking Financial Companies (NBFCs) that play a crucial role in financing MSMEs. In association with SIDBI, this program by GAME aims to equip NBFCs with tools and training to better assess and support entrepreneurs. NGAP aims to improve access to finance for NBFCs, allowing them to reach a wider range of MSMEs.
  • To tackle the widespread issue of delayed payments for MSMEs, GAME has launched two reports in collaboration with key Union Government stakeholders. These reports quantify the problem’s scale and explore solutions to break this cycle.

• Developing a growth mindset: GAME’s Growtherator program is a targeted initiative designed to supercharge the entrepreneurial spirit within a specific region. By focusing on existing businesses, it aims to create a domino effect that benefits both MSMEs and the overall economy. Growtherator utilises business accelerators, providing MSMEs with a concentrated dose of training, mentorship, and peer learning. Ultimately, the program empowers MSMEs to become the engines driving a thriving local economy.
• Ease of doing business: By simplifying and streamlining MSME formalisation processes could be a key factor in the sector’s medium to long-term revival. Once measures are implemented to help MSMEs survive the current crisis, focusing on “Ease of Doing Business” across five pillars can further fuel their resurgence. These pillars include simplification, digitisation, decriminalisation, evaluation, and support.

According to GAME, by focusing on these areas, we can create a more conducive environment for MSME growth

5. What are some key strategies that GAME has introduced for MSMEs and how is it benefiting the sector?

At GAME, we recognise the crucial role MSMEs play in economic growth and job creation. Our strategies focus on building a supportive ecosystem for MSMEs to thrive, using the concept of “Seed, Soil & Climate.”

• Seed – This refers to igniting entrepreneurship aspirations and fostering an “Entrepreneurship Mindset” among under-represented demographics like rural/urban youth, women, and social entrepreneurs.
• Soil – Here, the focus is securing essential resources for aspiring entrepreneurs at the hyperlocal level, including physical and digital infrastructure, markets, and capital.
• Climate – This refers to fostering a supportive business environment (ease of doing business) by creating role models, amplifying the value of risk-taking through communication, and building local acceptance for entrepreneurial endeavours.

6. In what ways can mass entrepreneurship initiatives contribute to the growth and sustainability of MSMEs within a given economy?

Imagine a thriving economy where a multitude of small and medium-sized enterprises (MSMEs) flourish. This dynamic environment can be nurtured by fostering mass entrepreneurship. These initiatives hold immense potential to propel MSME growth and sustainability, addressing some of the biggest hurdles they face.

One key challenge for MSMEs is limited access to finance. Mass entrepreneurship creates a larger pool of entrepreneurs, which becomes more attractive to investors and lenders. This translates to easier access to funding, a critical element for launching or expanding an MSME. But financial resources are just one piece of the puzzle. Initiatives often connect MSMEs with mentors, advisors, and business networks. These connections unlock new markets and distribution channels, providing MSMEs with the platform they need to reach new customers and grow their businesses.

The impact transcends individual businesses. Mass entrepreneurship fosters job creation, with many new ventures employing people from similar backgrounds. This cultural alignment fosters a sense of community and shared purpose.  Furthermore, these initiatives cultivate a culture of innovation and risk-taking. Existing MSMEs are inspired by the surrounding entrepreneurial energy, motivating them to embrace new challenges and pursue growth opportunities.

The benefits extend beyond local economies. By encouraging the creation of businesses that cater to specific local needs and preferences, mass entrepreneurship strengthens local industries. From a global perspective, a more entrepreneurial environment empowers MSMEs to tap into international markets and opportunities. This global integration fuels their growth potential and contributes to a vibrant world economy.

In essence, mass entrepreneurship initiatives create a supportive ecosystem where MSMEs can thrive, achieve sustainability, and contribute to a vibrant local and global economy.

7. How can MSMEs implement sustainability and CSR into their business practices effectively?

While regulations might nudge companies towards Corporate Social Responsibility, the true impact comes from a voluntary commitment to Environmental, Social, and Governance (ESG) practices.

Think of ESG as the “what” and “how” behind a CSR. MSMEs can consider developing a sustainable strategy with this background, engaging with key stakeholders, implementing sustainable practices supporting local communities, sharing the learnings and impact, building partnerships and alliances and continuously improving basis the outputs

8. How do you think MSMEs in India will shape up over the next few years?

 Post-pandemic India’s robust MSME sector is proving to be a key driver of the nation’s economic growth. Recognising their vital role in job creation and regional development, governments are implementing various initiatives – from subsidies and incubators to equity support. This, coupled with the growing demand for quality and diverse products from larger industries, fosters a positive environment for existing MSMEs to flourish and welcomes a wave of first-time entrepreneurs, propelling the sector’s expansion in the coming years.

Ravi Venkatesan, Founder and Chairperson, GAME, stated, “At GAME, we believe in the power of mass entrepreneurship – everyday people with extraordinary ideas building businesses that create jobs and prosperity.”

He went on to say that GAME’s mission is to harness the enormous potential of popular entrepreneurship, transforming the country into a dynamic job-creating economy.