A number of government reforms and initiatives have been introduced with the aim to bring about a huge change in the country’s financial system. SMEs and MSMEs play an important role in improving the economy and are considered as the backbone of the Indian economy. Therefore, the development and progress of these small and medium firms are a top priority. However, issues like roadblocks in the company’s expansion, untimely credit scores and delayed payments from the bigger firms stand as obstacles in the growth of SMEs.
Studies have shown that while many small and medium enterprises found the procurement of credit mechanisms a big obstacle, others felt comparatively less impacted by it. This impact varied with cities. The other major issue faced by SMEs is delayed payment. As per a survey conducted in 2014, 35% of the MSMEs received payments after 90 days or sometimes even later. This posed a problem in managing their cash flows and in turn affected the firm’s liquidity. Delay in payments is a big challenge for business sectors that are involved in manufacturing and services, as they are required to make investments much before the payments come in. Payment delays even go up to 120 days at times, making it difficult for these companies to cope with the problem.
Innovation Through Digital Payments
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October - November 2019