Start-ups step in with innovative digital solutions for issues plaguing MSMEs

Given the constraints, both in terms of workforce and budgets, MSME units have a range of problems, which warrant technological intervention. Prashant Girbane, Director General of Mahratta Chamber of Commerce Industries and Agriculture (MCCIA) listed out regulation and the need to raise institutional finances as major areas where technological solutions can help the sector. So for an MSME, it makes sense to have a third person who can take care of its regulatory needs than employ a full-time labour or tax consultant. “Like in other sectors, start-ups which provided such solutions made inroads into the sector in more than one way,” he said.

One such start-up, TeamLease Regtech, has tapped the need for fast, secure and economical service for filing various government returns. Rishi Agarwal, the CEO of the Pune-based company, pointed out how a micro-unit has to adhere to 500-900 compliances annually, which translates to 100-140 filings a year.

“This would amount to 1.5 filings every second business day,” he said. Any company would have to deal with five to six consultants for these filings which are related to labour, direct tax, indirect tax (GST, etc), environment/health/safety measures, company secretary and a miscellaneous consultant who would look after various industrial licenses that need to be taken. “Other than money, the leadership team of the unit would spend considerable time in coordinating with the various consultants to ensure their unit does not default,” he said.

Agarwal’s company has used technology to empower the consultants to carry out the filings in a safe and quick manner. “Our solutions help the consultants, which in turn help them to serve their end customers,” he said. For instance, a company secretary who is responsible for filings to the Ministry of Corporate Affairs has little or no technological tool to help in terms of the work. TeamLease Regtech’s product helps in creation of documents and makes the process simpler. Similar solutions, Agarwal said, can help labour consultants who are an integral part of any industry and whose exposure to technology has traditionally been low. Of the 7,000-8,000 company secretaries in the country, the company already has a sizeable number using their products.

As of December 11, India has seen the registration of 60.37 lakh MSMEs of which 57.02 lakh are micro, 3.01 are small-scale and 33,399 are medium-scale industries, according to the central government’s Udyam registration portal. Maharashtra has reported 17.67 lakh MSMEs of which 15.60 lakh are micro, 1.99 lakh are small-scale and 0.08 lakh are medium-scale enterprises.

Units with investment of up to Rs 1 crore in machinery, etc, and an annual turnover of up to Rs 5 crore are defined as micro-enterprises, while small enterprises have an investment of up to Rs 10 crore and turnover of up to Rs 50 crore. Medium enterprises are those in which investment is up to Rs 50 crore and whose annual turnover is up to Rs 250 crore.

Another startup, Moglix, caters to the sector in buying and selling over 7 lakh products online. Rahul Goel, its Vice-President (Finance), said when they started in 2015, B2B (business to business) commerce was less than 2 per cent, while B2C (business to consumer) had already received great traction. “At Moglix, we work with 5,00,000 SMEs to enable them to buy and sell over 7,00,000 industrial products in 50+ categories. Moglix received positive feedback as MSMEs were also on a journey of exploring technology for scaling up their businesses. In line with the GST regulations and focus on digitalisation of the economy, Moglix saw strong growth and adoption by MSMEs,” he said.

The thirst for technological solutions notwithstanding, many start-ups are yet to rise to the occasion. Girbane said B2C gets more traction than B2B for various reasons. Agarwal listed out various reasons for this. “Adoption of technology or a product by the sector would be easy if it is easily available. This market is very price-sensitive and there should be innovative solutions in terms of billing to help the sector adopt solutions,” he said. While a purely subscription or licensing fee would not work for many, flexible payment solutions would be more than welcome. “Patience is a value for any start-up, but if they aim at the B2B segment it is a must. It takes time to monetise ideas and to hit the proverbial pot of gold in this sector,” he said.

Majority of the start-ups which cater to this sector are either in the National Capital Region, Bengaluru or in Pune. Girbane, however, said a lot needs to be done to tap this sector given the opportunities it provides. “Start-ups need to understand the way these companies work. Innovative solutions with equally innovative payment options are key,” he said.