Only 15% Indian MSMEs Can Access Formal Credit: Ravi Venkatesan, Game

It is difficult for most entrepreneurs who do not have collateral to get loans from a bank or a non-banking financial company (NBFC). Only 15 per cent of micro, small and medium enterprises (MSMEs) can access formal credit, said Ravi Venkatesan, Founder, Global Alliance for Mass Entrepreneurship (Game).

Venkatesan said that among the factors that could boost entrepreneurship in India, a growth-oriented ‘entrepreneurial’ mindset amongst MSMEs is the most significant.

“There are also delayed payments and infrastructure challenges. For all these reasons, businesses don't grow. However, all these variables are exogenous,” he said, adding that more attention needs to be paid to the endogenous factors, which is an entrepreneurial mindset, or lack thereof.

Talking about MSMEs and Indian economic growth, Venkatesan elaborated on the ‘missing’ entrepreneurial mindset: "Too many of our entrepreneurs have a victim mindset. However, if you look at our first-generation entrepreneurs in the last 20 to 30 years, those who built pharma businesses or our ecommerce guys, they also had formidable challenges. They, nevertheless, found a way to power through.”

Then, there’s complacency when people are content after achieving a certain level of success. They do not want to grow. With growth come more problems, so they think they should stay at that level, ideally under the radar and live a comfortable life, he added.

“We need to work as much on this mindset issue as on everything else. That’s completely missing in the narrative today,” said Venkatesan, adding that there are also soft issues like the small business owner not knowing how to delegate authority and being completely involved in the day-to-day operational issues, so there is no time left to focus on growing the business. 

On the question of India seeing more entrepreneurs tapping into the services sector and the fundamental difference between the services and manufacturing ecosystems, Venkatesan opined that it may have much to do with most of role models being IT entrepreneurs. He added that challenges such as land acquisition, labour regulations and logistics are unique to manufacturing businesses.

“Generally, there is more capital available if you’re going to start a services business because it’s less capital intensive, so it requires less money than putting up a plant and machinery and having physical inventory,” he explained, adding that entrepreneurs in two-wheeler manufacturing and pharmaceuticals are today's role models, who’d become investors and may lobby the government to help improve the policy environment. “We need to create this flywheel in sector after sector.”

On India trying to integrate with the global value chains (GVCs) of large manufacturers and incentivising ‘Make in India’ through the production-linked incentive or PLI scheme, Venkatesan said the worldwide experience with manufacturing and cluster development show that the biggest differentiators are improvements in infrastructure and human capital.

“Making it easier to plug and play in terms of land, energy, digital connectivity and roads makes a profound difference. The only other thing that makes a profound difference is investment in human capital. So, the government can do less by focusing on these two things. The evidence is very mixed globally and in India about how much difference other policy interventions make,” Venkatesan elaborated.