MSMEs: Key To Generate More Employment Opportunities In India: Amit Garg, Protium

How did you start Protim? 
Protium is the pre-eminent engineering-led, risk-focused lender in India that empowers small and medium businesses and consumers to make quick and convenient purchase decisions. Protium is a full-stack lender employs 1,400+ employees in over 65 branches in 50+ cities across 13 states around the country. Founded under the conviction that engineering can, and is, transforming finance in India, the company makes credit convenient and accessible by operating under Protium Finance, Protium Money, and Protium Sakshara, which lend to MSMEs, consumers, and educational institutions, respectively. Protium uses proprietary models to assess revenues and growth to equip its customers with financial solutions like secured and unsecured loans up to INR 5 crore to small businesses in tier 1, 2, and 3 cities and personal loans to the consumer segment. To date, Protium has disbursed over INR 3,000 crore with an NPA of less than 0.2%.

Do you think small and medium businesses in India need handholding, especially after the devastating effect of the Covid-19 pandemic? 
It’s no doubt that the whole country was affected adversely by COVID-19; obviously, MSMEs are no exception to this. In 2020, the business volumes of Indian MSMEs declined by nearly 46% due to the pandemic, and in 2021, it fell by 11 percent. At times like this, it is unreasonable to expect the sector to recover on its own, especially since this would take a considerable amount of time, which is why the Indian Government announced many relief measures to help MSMEs counter this decline. There’s a learning curve to running a business and most small business owners must go through it in order to find their footing in the market. MSMEs don’t need hand-holding per se but they do need a lot of support to be able to compete in a constantly evolving market. They need this support in mainly four ways: access to credit/working capital, digitalization, marketing and exports, and reducing compliance burdens.
 
Access to Credit
During the pandemic, new-age lending platforms became a lifeline to MSMEs. Lenders have invested in and leveraged cutting-edge technologies like advanced analytics platforms and artificial intelligence to assess transactional and alternative data. This helps them use innovative methods that can establish the creditworthiness of borrowers and evaluate risk more easily, reducing turnaround time and processing requests in as little as 24 hours.
 
These innovative and data-led lending solutions are faster and more accessible for MSMEs and can help them become the main drivers of the Indian economy.
 
Digitalization
MSMEs have generally been extremely averse to change on the whole, which is why they’ve been slow to adopt digital methods of doing business. Many MSMEs delayed digitalization, whether in terms of payments or accepting orders online. As a consequence, the pandemic brought such businesses to the verge of extinction. A lot of this hesitation to switch to digital mediums of doing business stems from a lack of knowledge and understanding but an equal part of it is due to cumbersome compliance requirements, which we’ll get into later. That’s why, as per the Federation of Indian Micro and Small & Medium Enterprises (FISME), only 10% of Indian small businesses sell online.
 
A digitally enabled MSME has the potential to grow multifold in comparison to its offline counterparts. Digitalization expands the horizon of MSMEs so such businesses can unlock new avenues of growth, and reach large swathes of customers and suppliers quickly, safely, and efficiently while serving consumers and catering to their preference for contactless digital payments.
 
Marketing and Exports
Connecting MSMEs to global markets, even when they’re smaller in scale, is a way to ensure that they see a steadier stream of business and revenue. Scaling the exports from the MSME industry is a priority for the government, as it should be for us all since it can be a driver of economic growth. Exports from MSMEs account for 40% of all exports and the goal is to raise this number to 60%, but this can be a challenge since most MSMEs don’t have the technical skills or the marketing know how to market themselves to global buyers and consumers. While all of this is happening, we’re losing out to other exporting Asian countries like China, Bangladesh, Sri Lanka, and Vietnam, regardless of whether they export tea or garments.
 
Compliance Burdens 
No matter the size or turnover, if MSMEs want to sell online, they must get registered for GSTIN, but in cases of offline-only MSMEs, only businesses with a turnover of over INR 40 lakhs need to register under the current GST system. This unequal playing field is another deterrent for MSMEs from selling online. Thus, there is a dire need to simplify the GST system to ensure ease of doing business for MSMEs. They are further dissuaded by the added workload, such as filing monthly returns and other periodical compliances that are required by law for the MSME to keep running its business.
 
How does your company help small and medium-scale businesses? 
The easiest way for small and medium businesses to grow is through financing because most of these businesses do not have the additional cash flow to focus on anything beyond their day-to-day business activities, hence their profits will plateau. Having access to much-needed credit in the form of working capital can change everything for these companies, since they can go beyond their daily business operations in order to scale, whether it's in terms of offering new products/services, hiring more employees, or expanding to a new location. Without these innovations, their profitability will always be limited, and that is where we can help.
 
We have a wide range of financing products that caters to small and medium-sized businesses and other consumers, be it Loans Against Property, Business Loans, Line of Credit, and even Machinery & Equipment finance. What perhaps makes Protium even more multifaceted compared to other players in the industry is the ability to service loans at any ticket size from INR 10,000 to INR 5 crore. We’re a one-stop-shop for our customers’ financing needs.

How can small businesses contribute to India's economic growth?
MSMEs have always played a vital role in our country’s economy because of the sheer scale of the sector’s contribution to our GDP and because of the employment it generates, which is second only to agriculture. The sector, having struggled and desperately worked towards regaining pre-COVID momentum, is ready for the next surge in its growth. As of now, MSMEs account for 29% of the country’s GDP, give or take. Such businesses employ 110 million Indians and they will be key in generating even more employment opportunities for India. They already contribute to 50% of our exports. All of these numbers can be scaled should the sector be given an impetus, which is why the government is betting big on MSMEs. We may still have a chance at making India a $5 trillion economy by 2025.
 
What is the current status of small businesses in India?
As per data from the MSME Ministry, as of March 24, 2022, there are 7,870,246 registered MSMEs of which 7,485,412 (95.11%) are micro-enterprises, 349,129 (4.44%) are small enterprises and midsized enterprises at 35,705 (0.45%). It is also estimated that India has over 63 million MSMEs in total. These numbers point to a vast gulf between registered and total MSMEs in the nation which means that a large portion of MSMEs might be missing out on key benefits of registration, such as the payment for invoices to a registered MSME is assured within 45 days under the MSME Act. The government has launched multiple schemes in the last two years alone to fully support the sector which the many challenges they face to stay competitive and profitable.
 
What can we expect from your company in 2022?
Though we're all still making up lost ground from the last couple of years, we're excited to be doing business without the shadow of COVID-19 hanging over the industry. Protium is planning to expand its physical presence by increasing the number of our branches located around the country to over 100 from the current 60+. By our estimates, we should be able to service over 15,000 pin codes through these branches. This growth is so that we're that much more accessible to our customers, which are the small and medium businesses that contribute up to 80% of India's GDP.
 
We are also looking forward to building out our innovative range of financing products even further so that we can provide tailor-made solutions to small businesses, much like our Early Settlement+ program that is currently solving for the working capital needs of over 1,000 sellers on Flipkart.