Unlocking Online Market Place For SME’s In Rural India

Indian Small and Medium Enterprises (SMEs) are highly affected by the ongoing Coronavirus pandemic, especially after the deadly second wave. However, it still holds the power and capability to play an important role in the development of the Indian economy, particularly in rural areas. 

According to the World Bank estimates, SMEs represent about 90 per cent of businesses and more than 50 per cent of employment worldwide.  

Sanjeev Kumar, Chief Executive Officer (CEO) Spice Money said, "MSMEs are one of the strongest pillars in driving growth for India’s economy. There are more than 63 million MSMEs in India providing employment to almost 100 million people residing in remote areas." 

After the digital revolution in India with Prime Minister Narendra Modi's 'Digital India,' MSMEs in rural areas can leverage an online marketplace for business growth, which can further boost, rural economy.

While talking about leveraging online marketplace, Kumar said, "Leveraging online marketplace has become a necessity for MSMEs to ensure that their products reach customers living in far-flung areas of the country. The increased penetration of mobile and internet connections in rural and semi-urban areas has enabled customers to buy products online simply with a click on their smartphones. Its potential was clearly visible during the pandemic induced lockdown when the purchase on e-commerce websites grew at an exponential rate."

Formal SMEs contribute up to 40 per cent of national income (Gross Domestic Product, GDP) in developing economies. If World Bank's estimates are to be believed, 600 million jobs will be required by 2030 to absorb the growing global workforce, which makes SME development a high priority for many governments around the world.

"The online marketplace model can also help MSMEs to increase exports of the products manufactured by them across the world. Even with the existing benefits of the online marketplace model, very few MSMEs are selling and exporting their products online owing to the lack of digital skills and the scepticism to adopt newer business models. A majority of companies refrain from sharing data with the online marketplace. Along with this, lack of transparency in dispute resolution processes further stands as a challenge for the adoption of online marketplace models amongst MSMEs," Kumar said.

Apart from road connectivity, rural India also needs to have digital connectivity, by which they can expand their businesses. As per the World Bank, India had 20.95 ATMs per 100,000 adults as of 2019, very low when compared to other countries. While over 65 per cent of the Indian population resides in rural India, rural areas account for only 20 percent of all ATMs in India. 

“Strategic partnerships between the government and fintech players, especially those focussing on rural areas, can help in coping with these challenges. Additionally, it is crucial to set up training programs for the MSME sector to bridge the existing gap. Some countries have already introduced policies encouraging small firms to use online platforms and we should also take necessary actions to accelerate the process. The initial results may be limited but it will help in increasing the growth potential for the sector in the long run,” Kumar said.