Nano Entrepreneurs in India: Small Businesses with Big Impact

Micro, small, and medium enterprises (MSMEs) are a vital segment of the Indian economy. They drive local and grassroots development and entrepreneurship, and contribute to job creation, innovation, and economic growth. As the smallest subset of MSMEs, nano entrepreneurs often have different needs when it comes to financing. There is a critical need for customized solutions addressing the segment, which has an estimated credit demand of Rs 1,24,71,47 crore ($150 billion USD).These are small businesses with the potential for big impact.?

This is what our Country Director Geeta Goel has to say about the segment.

Who is a Nano Entrepreneur?

• Nano entrepreneurs are a distinct segment within micro, small, and medium enterprises (MSMEs), with? annual revenue ranging from Rs 10 lakhs to Rs 1 crore ($12,026.98 USD to $120,269.80 USD).?
• Despite their smaller scale, they are a major contributor to the Indian economy. Collectively, MSMEs contribute approximately 30% of the country’s GDP.
• Presently, there are more than 1.1 crore (11 million) nano entrepreneurs in India, with the potential to employ over 2 crore (20 million) people.

Dive Deeper:

When it comes to applying for a loan, most nano enterprises have “thin files,” meaning there’s limited data on their collateral or total income. It can be challenging for financial institutions to determine their creditworthiness using traditional models, and as a result, nano entrepreneurs are often unable to access the resources they need to grow their businesses.

Institutions are starting to respond to this untapped opportunity. For example, some of our partners have been on the cutting edge of developing new underwriting models to expand access to financial services - and nano entrepreneurs have been found to have impressive credit ratings and consistent repayment rates.

LISTEN: Learn more about the nano entrepreneur segment in this podcast episode featuring Sharon Buteau , executive director at LEAD at Krea University .

Partnering for Impact

We work with our partners to design and scale up customized solutions for the nano entrepreneur segment.?

LEARN HOW

Three Steps to Empowering Nano Entrepreneurs?

1. Define the Nano Entrepreneur Segment. It’s time to recognize nano enterprises as a distinct subset of micro-enterprises and track their market linkages and loan acquisition abilities accordingly. This can help change how traditional financial institutions perceive the sector through longitudinal studies on financing and asset quality.
2. Enable Access to Credit. Promoting digitization will generate more data and visibility for nano entrepreneurs. While developing new underwriting models will enable financial service firms, including non-banking financial companies, to offer customized products like credit lines that can be utilized as needed.?
3. Encourage Public + Private Collaboration. Sustaining the growth of nano enterprises requires collaboration between the financial ecosystem and the government.?

KEEP READING: Check out this article in The Financial Express to delve more into the ways we can help empower India’s nano entrepreneurs.?

Meet Lukman, Nano Entrepreneur

Lukman Ramjan is a 42-year-old bangles manufacturer and retailer based out of Toda Bhim, a small town 100 kilometres from Alwar, in Rajasthan.?

Lukman's small shop serves as the only source of income for his family of five, as he manufactures and retails bangles. He recently invested the INR 1.2 lakhs ($1,450.50 USD) loan he received in purchasing fresh stocks of capital and bangles. However, to cover his monthly rent and hire additional part-time employees, Lukman requires additional funds.

Many other stories like Lukman’s inform the ‘Impact Of Access To Finance On Nano Enterprises’ 2023 report, which consolidates results from 2,250 borrowers across 169 districts in seven large states of India, to drive policy discourse and market support toward nano enterprises. Click here to view the report conducted by LEAD at Krea University .

The Way Forward?

In India, the ingenuity, vision, and limitless potential of nano entrepreneurs represent a tremendous and largely untapped opportunity, but there’s a way forward. The government's 2023 budget includes a credit guarantee program of which can unlock loans worth INR 9,000 crore ($ 108 million USD), INR 2 lakh crore ($24 billion USD) for MSMEs. Allocating some of these funds specifically for nano enterprises and structuring guarantees to incentivize simple registrations, direct bank linkages, reduced interest costs, and consolidated credit needs can greatly improve their credit access. This will give them the opportunity to grow and flourish.?

Grassroots businesses like Lukman's hold immense potential and play a vital role in the economy. It is time to shine a spotlight on this segment and seize the opportunity that nano entrepreneurs present for the country's future.

Together with our valued partners, we are humbled to witness the transformational impact that touches lives across India.?