June 29 :As India marks MSME Day, it is important to recognise that the country’s MSME ecosystem has evolved into one of the strongest engines of economic growth, entrepreneurship and employment. Millions of small businesses are driving innovation, strengthening domestic supply chains and creating opportunities well beyond metropolitan centres. As this ecosystem expands in scale and sophistication, ensuring access to timely, affordable and inclusive finance will be critical to sustaining its growth trajectory.
While the government has taken several progressive steps to strengthen the sector through initiatives such as the expansion of the TReDS ecosystem, mandatory payment timelines and continued regulatory support, delayed payments remain one of the biggest constraints on MSME growth. Working capital continues to be locked up in receivables, limiting the ability of businesses to invest, expand operations and create jobs. Wider participation from large buyers and faster adoption of digital invoice financing can significantly improve liquidity across the ecosystem.
At the same time, India’s next wave of entrepreneurship is emerging from smaller towns, informal enterprises and deep-tier supply chains, where access to formal credit remains limited. As these businesses become increasingly integrated into organised value chains, the demand for flexible working capital and deep-tier financing is growing rapidly. Bridging this credit gap will require financial solutions that move beyond traditional lending models and are designed around the unique cash flow cycles of MSMEs.
Encouragingly, India’s rapidly evolving digital financial infrastructure – from account aggregators and digital public infrastructure to embedded finance and alternative credit assessment models – is transforming how MSMEs access capital. By enabling faster underwriting, data-driven lending and seamless financing across supply chains, technology is making formal credit more accessible to businesses that were previously underserved. Building on this momentum will be essential to creating a resilient financial ecosystem where every entrepreneur, regardless of size or location, has the confidence and capital to grow, ultimately accelerating India’s journey towards Viksit Bharat.
Although lending options have expanded, nearly 85% of India’s 64 million MSMEs still depend on informal credit due to collateral requirements and lengthy loan processes. As a result, many businesses borrow at high costs simply to manage operations. While India’s digital financial ecosystem is also introducing new financing models that reduce reliance on collateral-heavy lending. Platforms like TReDS are helping MSMEs convert approved invoices into immediate liquidity instead of waiting months for payments.
Commenting on this shift, Mr. Sundeep Mohindru, Founder & Promoter, M1xchange, said,
“As India celebrated the Entrepreneur spirit of the MSME, it is important to recognise that the country’s MSME ecosystem has evolved into one of the strongest engines of economic growth, entrepreneurship and employment. Millions of small businesses today are driving innovation, strengthening domestic supply chains and creating opportunities well beyond metropolitan centres.
the government has made numerous progressive moves to enhance the sector by increasing the TReDS ecosystem, mandatory timelines and regulatory support, collecting dues on time or before time from their customers have been one of the reason for the growth of the MSME industry. Simultaneously, the future of entrepreneurship in India is coming up from small towns, informal businesses and deep-tier supply chains where access to credit is low. As these small businesses begin to get involved in the organized value chains, there has been a sudden increase in the demand for working capital and deep-tier financing.
Fulfilling this need for credit can only happen if there are financial solutions that not only go beyond conventional loans but are based on the cash cycle of MSMEs. Creating a financial ecosystem that ensures easier and inclusive access to capital would help countless entrepreneurs grow their business and make a significant contribution to the journey of Viksit Bharat.”
Beyond receivables financing, embedded finance is also improving access to short-term liquidity by integrating credit directly into supply chains, while alternative data-led underwriting is reducing reliance on traditional collateral requirements. Speaking on the same, Pallavi Shrivastav, Co-founder, Progcap, an MSME Fintech, said,
“To realise India’s Viksit Bharat vision, we must build a credit infrastructure tailored to the modern MSME. The traditional banking system struggles to address the ₹30 lakh crore MSME financing gap due to rigid collateral requirements. Today’s global economic volatility and supply chain disruptions are severely stretching working capital cycles for Tier-II and Tier-III enterprises. The solution isn’t just more credit; it is smarter, embedded credit. By digitising corporate supply chains and leveraging alternative transaction data, as an MSME Fintech, we are building credit rails for small retailers, much like UPI built rails for payments, delivering agile, short-term liquidity that aligns perfectly with their seasonal cash-flow realities.”
Commenting on this Deepak Gandhi, Director, Business Head, Exports, Drip Capital added,
“India has enormous potential to expand its exports, but realizing this opportunity will depend on our ability to empower millions of micro, small, and medium enterprises (MSMEs) to participate in global trade. Today, the biggest constraint for many exporters is not a lack of international demand. Instead, they struggle with limited access to overseas markets, difficulty in identifying credible buyers and suppliers, inadequate market intelligence, constrained access to finance, and insufficient tools to manage trade risks.
Many businesses are capable of winning international orders but are unable to fulfill them because of working capital shortages, concerns over payment security, or the complexities of cross-border logistics and compliance. As global supply chains diversify and international buyers increasingly look toward India as a trusted sourcing destination, we have a unique opportunity to integrate millions of small businesses into the formal export ecosystem. By improving access to finance, digital trade infrastructure, logistics, market linkages, and risk management solutions, India can unlock a new wave of export-led growth, job creation, and entrepreneurship.”
Commenting on the same Munindra Verma, CEO, M1 NXT said,
“India’s MSMEs have demonstrated their ability to participate in global trade, with MSME-linked products contributing nearly half of the country’s merchandise exports. However, their ability to scale remains constrained by challenges related to market access, credit availability, and delayed payments. Addressing these gaps will be critical as India seeks to expand its export base and strengthen its position in global value chains.
For exporters, delayed payments and extended credit terms are not merely operational concerns. They often determine whether a business can take on its next order, negotiate better terms with suppliers, or enter new markets. A trade finance ecosystem supported by digital processes, risk assessment, and access to institutional capital can help MSMEs manage cross-border trade cycles more efficiently.
As global supply chains continue to evolve and businesses look to diversify sourcing destinations, India has an opportunity to bring a larger share of its MSME sector into international trade. Unlocking this potential could not only expand the country’s export footprint but also support employment generation, manufacturing growth, and broader economic development over the long term.”
Commenting on the same, Anand Kumar Bajaj, Founder, MD & CEO, PayNearby said,
“MSMEs are the everyday engines of India’s growth. From kirana stores and small service points to local manufacturers and neighbourhood entrepreneurs, they keep commerce moving, create livelihoods and serve communities across Bharat. Their contribution to the economy is significant, but their real strength lies in how deeply they are embedded in India’s local markets.On MSME Day, it is important to recognise that the next phase of MSME growth will be shaped by three enablers: digital confidence, access to formal credit and stronger last-mile support. The next leap will come from helping them move from informal resilience to formal, scalable growth. This means making digital tools simpler, credit more accessible, and assisted support more available at the last mile.“
Tier-II and Tier-III cities will drive India’s next wave of growth, but digital adoption alone isn’t enough. If delayed payments persist and working capital stays slow and costly, MSMEs will continue to be held back. India has strong digital payments infrastructure; the next step is a similar system for working capital.