Internet access driving SME revenue growth in smaller cities: Survey
Micro, small and medium enterprises (MSME) in Tier II and Tier III cities are on a par with their counterparts in metros in terms of digital revenue and growth in the last quarter, according to integrated solutions provider Instamojo.
Over the past year, MSMEs in Tier I cities saw annual revenue more than double while small businesses from Tier II and Tier III markets registered 75 per cent growth in turnover.
However, in the last quarter, MSMEs from Tier II and Tier III markets from the events and financial services sector have witnessed higher growth than those in Tier I cities.
“MSMEs in Tier II markets have recognised the potential of the Internet and how it can help their business grow. Businesses that have gone digital are now exposed to consumers, manufacturers, exporters and suppliers across the country. Tier II and Tier III markets have the potential to emerge as SME hubs,” said Sampad Swain, CEO and cofounder, Instamojo.
Only 32 per cent out of 52 million SMEs in India have gone online or accepted digital modes of business. Instamojo has acquired 10 per cent of the digitally active SMEs in India and enables 30 per cent of their total annual sales.
The company aims to extend its wallet share to 70 per cent by 2019 and expand its merchant base to 1 million in 2018. While SMEs in the financial and travel sectors grew two times in these cities, event facilitators saw a four-fold growth in revenue.
A recent report by Boston Consulting Group and FICCI reported that MSMEs will be the key growth driver for banks, thanks to the formalisation of the economy. Small lending solutions, implementation of the GST and digital payments will only help this category grow faster in the coming years.
“Typically, our client acquisitions are pushed through buyers who are also small-scale sellers on their own and decide to become sellers after experiencing the platform. The fact that these non-metro cities do not have a lot of other options adds to the growth in usage of such services there,” Swain added.
Headquartered in Bengaluru, Instamojo says it provides integrated solutions to 300,000 SMEs in India and claims to be the fastest growing on-demand payments firm.
A number of large corporate technology and financial solutions providers is turning to SMEs as the next big area of growth. PayPal, Facebook and SAP are just a few of the global names vying for the SME market with their services. A large pool of start-ups dealing in short-term credit, logistics and analytics is catering to this group ever since the twin impact of demonetisation and the GST.