Micro, Small, and Medium Enterprises (MSMEs) have long been recognised as the pillars of the Indian economy. Most MSMEs operate at the grassroots level. Domestic businesses require financial support, sound financial protection through insurance, adequate working capital, skill development, marketing support, and, most importantly, technological upgradation in an increasingly digital era. India’s economy is resilient, withstanding global tensions and tariff hikes, thanks to steady growth, next-gen reforms, and a stable inflation rate despite the global crisis and trade pushbacks. But to stay ahead of the curve, technology and innovation must be integrated at each step of the business cycle. Embedded finance addresses these issues by leveraging alternative data, such as transaction histories, sales performance, and supply chain activity, to assess creditworthiness. With the integration of embedded finance and insurance, B2B platforms are especially offering value-added services for their MSMEs.
But MSMEs have yet to embrace digital engagement widely.
Huddles Faced By MSMEs
The government has recently unleashed the stimulus by reducing GST and boosting private investments to improve GDP growth. From the MSMEs’ standpoint, this development assumes significance as India’s MSMEs contribute over 30 per cent of the country’s total economic output. However, Indian MSMEs still face unique challenges in driving business operations, solidifying their supply chain, and maintaining a strong overall market presence. Notable barriers include workflow management, recruitment and salary management, product and raw material procurement at competitive costs, and other operational infrastructure issues. Traditional MSMEs have laborious processes, and their employees often lack basic computer skills. Furthermore, because conventional companies usually rely on manual operations to sell their products, there is a high likelihood of human error across workstreams, increasing risk and reducing precision. Despite significant progress over the years, MSMEs still lag in innovation. In the absence of digital literacy, conventional SMEs also lack ways to attract customers. Since most buyers go online and use their smartphones to make purchases today, traditional SMEs find it challenging to attract them. They often lack the resources to accept online payments or issue e-invoices, further hampering profitability. With these challenges at hand, it is crucial to nurture a technology ecosystem that is designed to address all business and social challenges comprehensively.
How Tech and Innovation Ensure Seamlessness For MSMEs for Businesses
With various Government initiatives, such as the Udyam Registration Portal, Udyam Assist Platform, MSME Champions, and PM Vishwakarma, among others, the country stands at the cusp of immense possibilities. Technology is truly the enabler that can put Indian SMEs ahead of the curve. New concepts such as cloud computing, gen AI, and upskilling alone are enabling cooperative sharing of resources, allowing smaller firms to leverage advanced technologies. Adopting omnichannel strategies offers sustainable benefits for MSMEs, allowing them to reduce operational disruptions and enhance agility and resilience. Moreover, analytics-based solutions can provide a rich, micro-market-level understanding of each sector/segment and enable appropriate customisation of offerings. A robust tech-led ecosystem can help millions of MSMEs who may be new to the internet come online and navigate the future of business by allowing simplified engagement with stakeholders and making key business processes competent and inclusive. Newer technologies, such as cloud computing, IoT, and consumer analytics, will enable MSMEs to scale their businesses and set them on the road to recovery. While the government has taken meaningful steps to improve the ease of doing business for MSMEs, there is a need to further support them in adopting efficient, tech-driven business practices.
Role of Embedded Finance
Fintech and InsurTech firms can play a crucial role in introducing innovations in business practices. Embedded finance integrates lending, payments, and treasury management into business platforms, enabling dynamic credit scoring based on real-time sales data and inventory patterns rather than traditional collateral assessments. Simultaneously, embedded insurance offers contextual protection that activates based on specific triggers, automatic cargo coverage during shipments, weather protection for agri-businesses, or cyber liability that scales with transaction volumes, all delivered through micro-insurance products within systems without complex purchasing processes.
As India moves toward its $5 trillion economy vision, government-compliance norms for digitisation create the data infrastructure necessary for these embedded solutions to thrive. Unlike expensive global SaaS offerings, these integrated platforms are tailored to local contexts with multi-language support, UPI integration, GST compliance, and MSME-friendly pricing models. This embedded ecosystem enables them to access working capital and risk protection seamlessly while focusing on innovation rather than administrative overhead. With proper integration of embedded financial services, regulatory support, and technology partnerships, India’s MSMEs can evolve into digitally native, resilient enterprises that drive financial inclusion and form the backbone of a sustainable, innovation-led economy.
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