MSME sector continues to rely on cash transactions
A total of 81% of the surveyed MSMEs expect their business revenue to increase within the next 1-2 years, out of which 34% anticipate a revenue growth of more than 15% in their businesses, according to a latest survey by MSME Insights of BSE-listed Kinara Capital.
Additionally, MSMEs are embracing formalization, with 51.7% of the surveyed reporting that they are now GST-registered.
The MSME Insights is a comprehensive data analysis of current trends of micro-small-medium enterprises (MSMEs) based on firsthand input from business owners. MSME Insights also delved into the behavioral patterns within the MSME sector and the analysis uncovered a striking pattern across all sectors https://www.bseindia.com/.
However, MSMEs still depend significantly on cash transactions, even when not accounting for UPI usage, according to the survey. Over 84.3% of the surveyed MSMEs stated that between 25%-to-100% of their business transactions are conducted with actual cash—underscoring the need for deeper digitization efforts across the sector https://www.nseindia.com/.
Sharing her perspective, Hardika Shah, Founder & CEO, Kinara Capital, said on 27 June, “On the occasion of World MSME Day, it is encouraging to witness the strong optimism shared by India’s MSMEs. The fact that 81% of respondents in our recent MSME Insights survey expressed confidence in their growth prospects speaks volumes about the sector’s resilience and ambition http://commerce.gov.in.
“This optimism is rooted in improved access to formal credit, which enables entrepreneurs to focus on expansion. However, the sector’s continued reliance on cash transactions highlights the need to accelerate digitization. Embracing digital payments can enhance financial transparency and significantly boost access to formal credit. Ultimately, digitization holds the key to reaching underserved MSMEs and closing India’s Rs.30 lakh crore credit gap https://sbi.com.in/.”
Key findings of the fourth edition of the MSME Insights:
• MSMEs are upbeat about their business growth: More than 81% of the respondents have indicated that they are expecting varying degrees of growth in their revenue. Of these, 47% of the respondents expect their revenue to witness a 5%-15% growth, 26.1% anticipate a growth of 15%-25% and 7.9% are optimistic of more than 25% growth in revenue. Only a small proportion, i.e., 1.1% foresee no growth.
• Cash is King for MSMEs: Overall, 84.3% of the surveyed MSMEs reported relying on cash (excluding UPI) for 25%-to-100% of their business transactions. While only 7.4% of the MSME respondents relied on cash for more than 75% of their business transactions, 30.5% depended on cash for 50%-to-75% of their business transactions. This outcome indicates that a shift to digital payments, though underway, is far from reaching its full potential.
• Formalization is on an Upswing: MSMEs are increasingly recognizing the benefits of Goods and Services Tax (GST) compliance. According to the survey, 51.7% of respondents are GST-registered and file returns regularly. Of these, 29.4% expressed interest in GST-linked loan products that offer better interest rates or flexible tenures. Regular GST filings not only reflect consistent business activity but also provide a verifiable financial history that enhances credit eligibility. Additionally, GST registration reduces the overall tax burden through input tax credits and offers MSMEs the ease of doing business across state lines with a unified tax structure.
The fourth edition of MSME Insights is based on an extensive multilingual survey of 9,314 MSMEs from Manufacturing, Trading, and Services sectors conducted across Andhra Pradesh, Gujarat, Karnataka, Maharashtra, Tamil Nadu, Telangana, and the Union Territory of Puducherry.
Kinara Capital is a leading fintech driving financial inclusion of the micro-small-medium enterprises (MSMEs) in India with the innovative use of tech-enabled solutions and AI/ML data-driven credit decisioning. With its multilingual myKinara App and omnichannel customer service, the company is delivering fast and flexible access to formal credit to MSMEs across 100+ cities in India. Fiinews.com
