For SMEs, funds and marketing are big challenges

Though SMEs are considered the growth engines of any economy, including India, the challenges and opportunities the sector faces are far larger than their size — from quality to compliance, manpower to funding, branding to marketing.

“But the biggest challenge for SMEs is growth,” was the unanimous note that speakers struck at a panel discussion on ‘Tapping into Global Trade – Challenges and Opportunities,’ organised by BusinessLine in association with ICICI Bank here last week.

S Soundararajan, Managing Partner, Falcon Toolings, said emphatically that “growth is crucial for SMEs. For this, we have to find the means; the sector will need to innovate on financials, innovate on systems, quality, manpower and above all invest in human resource personnel.

“All this would be possible only if the owner motivates himself. And that could be the biggest challenge.” However, to grow, the sector needs funds and for this, it depends mainly on banks, which according to Codissia President Ramamurthy, “has never been an easy proposition.

SMEs have enormous potential. But banks apply the same lending norms for both large corporates and small enterprises. This has to change in the present scheme of things. Access to funds is a serious issue. We have sought a separate MSME policy.”

At this juncture, S Prakash, of See Change Consulting, intervened, pointing out that SMEs by and large managed with support from friends and family.

Suresh Mutyala, Deputy General Manager, Elite Trade Relationship Group, ICICI Bank, cited that inefficiencies in SMEs’ balance-sheet made access to bank finance difficult for them. “Bank debt is not the only source of finance at present; there are other options such as venture capital funds, private equity and so on. SMEs should explore all options. A business needs to be nimble, make money by embracing technology, keep financial papers clean and think big.”

Prabhu Damodharan, Convenor, Indian Texpreneurs Federation, said: “Financial management is core to any business and so is market intelligence. The enterprise will have to factor in future disruptions, infuse technology and be open to co-operative competition”.

Marketing challenges

As much as funds, marketing also was a challenge for SMEs.

Prakash did not mince words when he said that “it is a non-existent component among MSMEs. The sector is rich technically, but lacks marketing knowledge, has no clear succession plans or leadership building capability.” He felt that there were eight key areas that SMEs should focus on for sustained growth such as converting profit centres into SBUs (strategic business units), looking for low-cost funds, marketing, HR, process, products, succession plan and export value chain.

Stating that his enterprise had benefited immensely from participating in trade fairs, Soundararajan said that “giving the right product and tapping the right market is the key.”

Ramamurthy conceded that SMEs were unable to brand their products in the international market due to lack of knowledge and expertise on export procedures. While Codissia is helping SMEs tackle such issues, the ITF Convenor said that the Federation created a market intelligence platform to aid members share data, collaborate and usher a change in their mindset.

The panelists signed off stating that “systems for SMEs should evolve in a better way”.

N Madhavan, Associate Editor, BusinessLine , moderated the session.

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