Decoding the Biggest Hurdle for MSMEs

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Micro, small, and medium-sized firms (MSMEs) are the hidden engines that drive economic expansion, innovation, and job opportunities. They are a part of the complex web of economies that exist all over the world. These smaller enterprises, which are frequently ignored by their larger competitors, are the ones that lay the groundwork for the economic resiliency and vibrancy that the economy currently possesses. It is abundantly evident that small and medium-sized businesses (SMEs) confront a multitude of hurdles that prevent them from attaining their full potential and put their long-term viability at risk, despite the fact that their significance is obvious.

With the purpose of throwing light on their existence, their current landscape, and the significant challenges that they confront, we will investigate the fundamental hurdle that micro, small, and medium-sized companies (MSMEs) face in this article. 

In order to achieve our objective of developing more efficient techniques to empower micro, small, and medium-sized enterprises (MSMEs) and to build an economic climate that is more inclusive and strong, we will be delving into the complexity of MSMEs.

Know about MSMEs

MSMEs are the businesses that people and towns want to start, and they help the economy grow and society improve. MSMEs, on the other hand, tend to work in smaller, more connected areas. They help local economies grow, protect cultural traditions, and create jobs where they are needed most.

MSMEs, like small restaurants and IT enterprises with shared offices, are flexible. Their natural strengths help them weather market storms and seize new opportunities. They may innovate, adjust their strategies, and adapt their products to customer needs, making them adaptable economic players.

Because they provide jobs to women, youth, and rural residents, MSMEs help promote fair growth and reduce income disparity. MSMEs spread economic activity and empower local groups, promoting social security and balance.

MSMEs contribute greatly, yet they confront several challenges that make growth and survival difficult. These companies struggle due to limited money, technology, legal, and competitive barriers. Understanding ecological dynamics and limits is necessary for MSME-focused solutions that maximise potential.

What is the current situation?

Today, there are a lot of possibilities and difficulties for small and medium-sized businesses. The economy has changed because of globalization, new technologies, and changing customer tastes. This is both good and bad for MSMEs.

Small and medium-sized businesses (MSMEs) can now reach more customers and use global supply lines because markets are more linked than ever before. 

Digital platforms and e-commerce outlets have made markets more accessible to everyone, so even small businesses can show off their products to people all over worldwide.

There are, however, big problems that come with these chances that could stop MSMEs from growing and being strong. Multinational companies and big businesses are becoming more of a threat to smaller players’ market share and ability to stay in business. 

Rapid changes in technology also require constant learning and adapting, which adds to the problems that MSMEs already face when they don’t have a lot of resources.

MSMEs have a hard time because of changing market conditions, global unpredictability, and financial changes. These problems make MSMEs more sensitive to economic downturns and supply chain breakdowns. 

The COVID-19 outbreak, in particular, showed how weak MSMEs are by showing how much they depend on old ways of doing business and how unprepared they are for digital transformation.

Also, people are becoming more aware of sustainability and social duty, and they want businesses to be more open, do good things, and make items that are good for the earth. People are becoming more picky about brands that are compatible with their values and beliefs. MSMEs that don’t change with the times risk falling behind.

With all of these factors at play, small and medium-sized businesses (MSMEs) have to find a delicate balance between taking advantage of growth possibilities and lowering the risks to their survival. 

Small and medium-sized businesses (MSMEs) that want to do well in an economy that is constantly changing need to be able to adapt, come up with new ideas, and plan ahead strategically.

The Economic Backbone

  • MSMEs are very important to economic growth, especially in growing and rising economies.
  • Their speed, creativity, and ability to change with the times in the market all make the economy more dynamic as a whole.
  • Small and medium-sized businesses (MSMEs) create a lot of jobs and give people, including those outside of society, the chance to work.
  • Especially in rural and semi-urban places where more prominent companies may not have a strong footprint, they help growth that benefits everyone.
  • MSMEs help regional development by spreading out economic activity and encouraging people to start their own businesses in places that aren’t well-supplied.
  • To help reduce poverty, they provide jobs and ways to make money for individuals and regions with low incomes.
  • MSMEs are hubs for innovation and entrepreneurship, leading to new technologies, a more comprehensive range of products, and changes in the market.
  • Their quick responses to market needs and willingness to try out new ideas encourage economic growth and an entrepreneurial spirit.
  • MSMEs are able to bounce back from setbacks and changes in the economy.
  • They can handle uncertainty and quickly change direction to take advantage of new possibilities because their organizational structures are open, and they have strong ties to the areas where they work.
  • MSMEs are an important part of supply chains because they provide important items and services to big businesses and end customers.
  • They increase the economy’s total strength by processing, making, and customizing raw materials and secondary goods to make them more valuable.


Identifying the Core Challenge

#1. Access to credit

The most significant obstacle that micro, small, and medium-sized enterprises (MSMEs) face all over the globe is limited access to credit.

Loans and credit lines may be difficult to get for micro, small, and medium-sized enterprises (MSMEs) since traditional lending institutions often see them as high-risk clients.

The funding gap for micro, small, and medium-sized enterprises (MSMEs) gets worse by the presence of collateral requirements, high interest rates, and challenging loan application procedures. This is especially true for MSMEs that operate in informal sectors or do not have a credit history.

#2. Technology adoption in MSMEs and Digitalization 

MSME challenges 2024 (Many micro, small, and medium-sized enterprises) have successfully implemented and utilized technology because of a lack of knowledge, resources, and technical experience.

However, barriers such as high upfront expenses, limited infrastructure, and worries about cybersecurity are preventing micro, small, and medium-sized enterprises (MSMEs) from achieving digital transformation. Digitalization is becoming more important for MSMEs to stay competitive and reach new markets.

#3. Market Access and Distribution Channels

In many cases, micro, small, and medium-sized enterprises (MSMEs) have difficulties while attempting to reach markets that are located outside their local or regional limits.

They are unable to scale up their operations and reach a wider range of consumer groups due to the limited market knowledge, regulatory restrictions, and distribution networks that they do not have.

Many micro, small, and medium-sized enterprises (MSMEs) may not possess the essential skills and infrastructure to properly exploit e-commerce platforms, despite the fact that these platforms provide potential avenues for market development.

#4. Skill Development and Human Capital

Skill mismatches and shortages provide substantial issues for micro, small, and medium-sized enterprises (MSMEs), especially in industries that need specialization in technical skills or specialized knowledge.

Increasing the productivity, creativity, and competitiveness of micro, small, and medium-sized enterprises (MSMEs) requires making investments in staff training and development.

The attempts to upskill people and establish a competent workforce are, however, limited by restricted access to training programs and resource restrictions.

#5. Compliance with Regulatory Frameworks and Administrative Burdens

MSMEs suffer from managing complicated regulatory frameworks and administrative burdens, which waste time, resources, and energy.

The presence of cumbersome registration processes, tax compliance requirements, and regulatory confusion all contribute to the creation of barriers to entry and hinder the development of potential businesses.

Reducing the regulatory hurdles for SMEs and promoting a situation that is more favorable to business requires the simplification of regulatory procedures and the streamlining of compliance requirements.


Regulatory Hurdles for SMEs: Navigating the Maze

It is necessary for policymakers, regulatory agencies, associations of micro, small, and medium-sized enterprises (MSMEs), and other stakeholders to collaborate in order to efficiently streamline processes, simplify compliance requirements, and improve enforcement mechanisms in order to successfully navigate the regulatory maze. 

We can encourage micro, small, and medium-sized enterprises (MSMEs) to survive, innovate, and contribute to the development of a sustainable economy by providing a regulatory framework that is more favorable.

Government Initiatives

A brief synopsis of the several government support for small businesses in areas including social welfare, technology, regulation, market access, capacity development, and financing.

Government Initiatives An explanation
Credit Guarantee Schemes Programs backed by the government that lower the risk of giving to small and medium-sized businesses by guaranteeing some or all of the loans given to those businesses.
Capacity Building and Training Training seminars, entrepreneurship courses, and mentorship to improve MSMEs’ management, technical, and entrepreneurial skills.
Regulatory Reforms Simplifying company registration, compliance, and MSMEs’ ease of doing business, including reducing licensing processes and adopting single-window clearing systems.
Technology Adoption in MSMEs Academic grants, technology parks, and incubation centers encourage MSMEs to embrace and innovate technology, collaborate with academic institutions, and get tax benefits for research and development expenses.
Financial Inclusion Programs Promoting MSMEs’ access to banking, microfinance, and alternative financing platforms such rural banking infrastructure, mobile banking, and digital payment systems.
Export Promotion Support MSMEs’ internationalization via export promotion programs, trade missions, market growth, trade facilitation, and export credit insurance.
Social Protection Implementation of healthcare, insurance, and pension systems for MSME workers and their families.
Procurement Policies Implementing procurement strategies that favor MSMEs’ products and services, increasing their access to government contracts and procurement opportunities.
Financial Assistance MSMEs get discounted loans, R&D grants, and investment incentives to develop, innovate, and expand.


Expert Opinions

We have compiled the opinions of a few experts on the choices mentioned above. Listed below are these. Micro firms who were facing difficulties in obtaining the knowledge and resources needed to comply with GST would find this a welcome development, says Rajan Raje, chair of the MSME forum at the Bombay Chamber of Commerce and Industry and group chief executive officer of Nichem Solutions. 

In order to remain competitive, they will have time to learn about the advantages of GST compliance.-

According to Vidit Aatrey, Founder & CEO of Meesho, millions of tiny units, such as workers, boutiques, and mom-and-pop businesses, will have the ability to sell online for the first time because to this revolutionary initiative. Currently, almost five crore MSMEs are unable to do so because of mandatory GST rules. 

Bringing the smallest of micro, small, and medium-sized enterprises (MSMEs) online will have a significant impact on the economy by providing prospects for employment and economic growth in underserved regions. 

According to the source, these suggested policies would have a significant positive impact on the unorganized sector, particularly in rural and semi-rural areas of the nation.

According to Shalini Mathur, Director of the Tax and Economic Policy Group at EY India, larger companies have benefited from the benefits of GST, including a unified market, less tax cascading, lower compliance costs, and a technology-enabled transparent tax structure. In contrast, micro, small, and medium-sized enterprises (MSMEs) have been facing many compliance requirements and budgetary restrictions.

Claiming the input tax credit may be difficult for MSMEs due to the need to match invoices. Ms. Mathur has provided the following recommendations. Among these, you can find the following: 

  1. a) A reduction in the rate of composition scheme from three GST rates—1% for traders, 2% for manufacturers, and 5% for restaurant service providers—to one rate of 1%.
  2. b) An end to the current quarterly refund system and the beginning of monthly provisional refunds for small traders. 
  3. c) The exemption of the e-way bill procedure for turnovers up to 1.5 crore rupees.

The Institute of Cost Accountants of India has proposed several changes to streamline GST for the micro, small, and medium enterprise (MSME) sector. These include: 

  1. a) Reversing input tax credit
  2. b) Clarifying whether a bundle of supplies is a composite or principal supply
  3. c) Interlinking payment and return
  4. d) Reducing maximum ceilings to 10 crores from 25 crores. 

Wrapping It Up

We can promote inclusive development, economic prosperity, and the release of entrepreneurial spirit by acknowledging the essential function of MSMEs and executing comprehensive initiatives to solve their fundamental difficulties. 

If we care about the long-term health of our economies and communities, we must do what is morally right and support micro, small, and medium-sized enterprises (MSMEs). Let us resolve all of these obstacles and clear the way toward a more inclusive and resilient future for everyone as we identify the biggest challenge in dealing with MSMEs.


  1. What is the issue that the MSME sector is dealing with?

Securing sufficient and timely funding is the biggest challenge for MSMEs. Obtaining loans may be a daunting task for businesses due to the intricate processes, collateral requirements, and exorbitant interest rates.

2. How can my MSME field get better?

Find out what the necessary technical levels are and where the technology is at in different sectors. To make it easier the transfer of such technologies, develop information centers, a bank for innovations, and supporting institutions. Use the innovations and technology that micro, small, and medium-sized enterprises (MSMEs) may successfully implement.

3. Why are MSMEs important?

Micro, small, and medium-sized businesses (MSMEs) are very important for economic growth, creativity, and job creation. They make a big difference in local businesses, help bring people together, and speed up the development of the area.

4. What are a few problems that most small businesses will have in 2024?

MSMEs face many problems, such as limited loan availability, issues with implementing new technology, trouble managing complicated rules, and problems getting markets outside of their local or regional areas.

5. How can government programs help MSMEs?

In order to help small and medium-sized businesses (MSME) overcome problems and make it easier for them to grow and stay in business, the government needs to do steps such as financing guarantee programs, changes to the law, technology adoption in MSMEs programs, and financial aid.

6. Why do MSMEs financially struggle in small businesses with credit?

Financial struggles in small businesses because financial institutions see them as high-risk, they need security, the interest rates are high, and the loan application process is complicated. This is especially true for those who work in unregulated industries or don’t have a credit background.

7. Which technology adoption challenges can MSMEs overcome?

Small and medium-sized businesses can get around problems that make it hard for them to use technology by engaging in technical know-how, resources, and knowledge, asking the government for help with digitalization programs, and working together with tech companies and institutions.

8. Why do small and medium-sized businesses have to deal with regulations?

Small and medium-sized businesses (MSMEs) have to deal with legal loads. To improve processes and make compliance requirements easier, lawmakers, governmental bodies, and business players must work together.

9. What are the advantages of market access for MSMEs?

Without market access, MSMEs wouldn’t be able to grow, meet more customers, or do business with more people. However, MSMEs often can’t get into new markets because they don’t know enough about the market, there are rules that stop them, or their marketing networks aren’t good enough.

10. Why are social protections important for MSMEs?

Healthcare, insurance, and pension plans are examples of social protection measures that provide safety nets for MSME workers and their families. These measures improve employee health and output.

author avatar
Shraddha Vaviya Content Writer
With several years of experience, I am deeply passionate about writing and enjoy creating content on topics such as GST, tax and various finance-related subjects. My goal is to make complex financial matters understandable for readers by simplifying them.

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