Positive Changes to Drive the Growth of SMEs in Future

Positive changes for SMEs are occurring at a slow pace. However, experts predict that few indicators show a brighter future for the SMEs. Several trends that have emerged with time show that a tremendous growth path for the SMEs is being laid out.

Increased spending

There are around 29 million small businesses in the U.S. They form an integral and vital part in shaping the economy. More than 99% of the total employer firms in the country are the SMEs. They are responsible of creating more than 60% of all the new jobs. However, this industry is blown by tight credit markets, limited spending and slow sales.

But things are changing now. Small enterprises have started to spend more on technological solutions. As per a recent report given by Wells Fargo/Gallup Small Business Index survey, around 71% of small businesses are anticipating that their financial position will strengthen in a year. Besides, 25% of the companies also agreed that new employees will be expanding their teams.  

Growing performance gap

It is also noticed that the performance gap is widening between the businesses that adopt modern technology and those which are reluctant towards it. The SMEs are making use of low cost, simple but impactful technological solutions to arrange their data in a systematic manner, become more efficient and lower the overheads. The widening performance gulf will create a strain on the businesses and will compel them to resort to technological solutions as much as possible.

Banks adopting innovations

These days, banks have started to lay focus on better consumer experience. They are adopting new solutions to enhance their connectivity with their customers. In the previous year, there was a boom of credit monitoring tools, personal investment services and spending trackers. Banking companies, these days, are in search of new innovative ways to apply financial technology for the market of SMEs.

The SME industry will greatly benefit from these solutions as they will find it simpler and safer to link real-time transaction data and third-party solutions such as QuickBooks, Xero and other applications. These new connections will give birth to quick decisions, wider opportunities and improved services for SMEs. As banks will apply new solutions along with their lending process, the SMEs associated with them will also adopt these greatly.

These latest trends clearly indicate that the small business sector is witnessing a lot of vital changes that will increase with time. The new opportunities will truly revitalize the way things are done in these businesses and thus expedite their growth process.

SEBI to ease SME Listing Norms

With an aim to promote the ever-growing three year old segment, the Securities and Exchange Board of India (SEBI) will soon review the norms related to trading and listing of SMEs.

Expected changes

As per stock exchange officials, this step is taken after the market participants demanded a reduction in the trading lot size of  Rs.100,000 after being listed. SMEs feel that the current amount discourages a lot of genuine investors and thus should be revised. They have also asked SEBI to review the listing requirement of 25% minimum equity dilution as there is a huge gap between the valuation of niche companies of SMEs and their urgent funding requirements. Merchant bankers want it to be reduced to 10%.They suggest that when SMEs wish to shift to the main board, 25% public float should be applicable.

After being listed for more than 2 years, companies can shift to the main board. It has been over 2 years that the SME segment was launched. Hence, companies like SRG Housing Finance Ltd., Bronze Infratech Ltd., Anshu Clothing Ltd., etc. have given an application to get on the main board of BSE.

SEBI wants the issuers and investors to greatly benefit from SME segment. At an investor seminar held in mid-January, whole-time member of SEBI Rajeev Agarwal informed that the regulator wants many SMEs to feature in the list and be able to explore the capital market for funding.

SME platform

SEBI has been dedicatedly working to assistthe SMEs. It had announced simpler norms for listing for the SMEs in the past too. Later, in March 2012, both Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) rolled out distinct SME platforms. At present, there are 83 SMEs listed on BSE’s SME platform and 6 on NSE’s platform.

Stock Exchange suggestions

The stock exchanges are of the opinion that the investors’ class should be widened. It should include wealthy individuals, corporate bodies, non-institutional investors and merchant bankers unlike the current rule that allows only institutional investors to invest in companies listed on the SME platforms. 

Some experts suggest that SEBI should also consider lower underwriting levels, which are appropriate safeguard for liquidity and investor protection. SMEs are allowed to choose from BSE and NSE and be listed in either of the two. They should be able to choose both. Besides, BSE suggested that the current market making period of three years should be extended to 5-10 years.

Growing SMEs in India

The United States of America has shown great interest in encouraging small and medium businesses across India. During his visit on India’s 64^th Republic Day, Barack Obama, the US President, announced OPIC’s support for the growth of SME’s in India. OPIC or, Overseas Private Investment Corporation is the United States’ government's development finance institution.

OPIC will be issuing loans over USD 1 billion in underserved rural and urban markets. The U.S. Trade and Development Agency has also set a target to leverage around USD 2 billion and invest it for renewable energy in India. OPIC is known to work for the development of varied sections across the globe. It boosts revenues, provides employment and offers many growth opportunities through its activities. Its initiative in India will earn around USD 4 billion. Besides, it will also give rise to many jobs in the two countries.

Contribution of SMEs

SMEs in India have a great share in the national economy. 40% of India’s workforce is engaged in the 48 million SMEs across the country. SMEs generate 45% of the industrial output and manufacture over 8000 high quality products. In international trade, 42% export is courtesy the SMEs. They also work to increase the employability. 42 million people are employed by the SMEs. Besides, they also generate 1 million jobs every year.

SMEcorner

SMEs have a wide market that is open for expansion and development. The diverse sectors present for the SMEs are manufacturing, food processing, agriculture, textiles, engineering, pharmaceuticals and retail. Technological advancement is greatly needed in this sector. The use of the internet can benefit the SMEs in a big way.

SMEcorner uses the online world to foster the growth of SMEs in India. It has a strong network with banks and NBFCs (Non-Banking Financial Companies) and assists SMEs to get easy access to loans through an online platform. Being first of its kind, this web portal encourages transparency and minimizes the risks for the SMEs.

What makes SMEcorner.com a reliable source is the expertise of its  founder and CEO, Samir Bhatia. He is a qualified Chartered Accountant and has great experience in working with leading banking companies of India. With 28 years spent in this industry, he has a great relationship with senior professionals and thus helps the SMEs in an efficient way.

SMEs Hold a Key Position in the Advancement of India's Economy

The SME sector in India is growing at an exceptional rate and has the potential to be one of the key drivers of the Indian economy. The sector is expected to outgrow as the largest employment generator in the country. It represents the true entrepreneurial spirit in the Indian business market.

Contribution of SMEs in Nation’s Economy

Small and Medium Enterprises play a vital role in the growth of Indian economy. They make up for about 45% of the industrial output, 40% of exports, and create one million jobs every year. SMEs also produce over 8000 quality products for the Indian and overseas markets. Therefore, SMEs are open to bigger challenges and better opportunities for expansion and variegation across different sectors.

The Indian economy has been witnessing a rapid growth. It is making remarkable progress in different sectors including industries like Engineering, Manufacturing, Textile, Food Processing, Pharmaceuticals, Retail, IT, and Agro sectors. SMEs are making the most of the increasing opportunities to give a boost to their business activities in these core sectors.

Potential for Growth

The SME sector is also the future of entrepreneurship development amongst the youth in India. It helps create ample job opportunities for the growing population. The Small and Medium Enterprises sector is emerging emerge as a critical tool for exploiting the demographic dividend present in this country. Owing to its underlying characteristics and strengths, the SME sector is also set to play an important role in the further growth of Indian economy.

In order to progress further, SMEs intend to go head-to-head with larger firms as far as technology is concerned. Some of the SMEs lack on the technology front in comparison to larger competitors, while other SMEs find it difficult to calculate how technology can create benefits for their firm. Even despite all these difficulties, even the smallest of companies are hopeful that they will be able to handle technology and realize its importance in profit earnings.

Central Government intends to nurture Small and Medium Enterprises to make the ‘Make in India’ a successful programmme. The government has the right intention, the right drive and the right vision to carry forward this cause. However, this transition will take some more time to reach fruition, the impact of which would be visible by 2016. Along with government initiatives, and funding by local and foreign investors, online financing platforms can further give a boost to SMEs. Free online financing platforms like SMEcorner.com are designed to make borrowing hassle-free for SMEs. Samir Bhatia, Founder and CEO, SMEcorner.com intends to assist SME companies by providing them with an easy capital raising platform that further boosts the chances of their growth and expansion.