Handmade MSMEs struggle with working capital

Approximately 78% of India’s small and medium-sized enterprises (MSMEs) that rely on handmade and craft-based production face significant challenges in obtaining the necessary working capital to sustain their day-to-day operations.

Image Credit: Shutterstock

78% of India’s micro, small, and medium-sized enterprises (MSMEs) engaged in handmade and craft-based production encounter significant difficulties in securing the necessary working capital to sustain their day-to-day business operations, according to the report Financing a Handmade Revolution.

As part of the study, a diverse range of stakeholders was interviewed, including more than 70 investors, ecosystem actors, intermediaries, and enterprises. Additionally, a pan-India survey was conducted, involving 516 craft-led MSMEs associated with retail brands and social/creative enterprises. These extensive data collection efforts aimed to gather comprehensive insights into the challenges faced by these businesses in accessing working capital and navigating the financial landscape.

Handmade and craft-based MSMEs (HCMs) refer to small enterprises that operate in the craft manufacturing and handmade sectors. These enterprises have a strong social and creative focus, employing artisans and creative producers in various fields such as fashion, home decor, cultural experiences, craft-tech, and culture-tech. Their primary focus is on producing unique, handcrafted products while also promoting social impact and creativity within their operations.

The survey reveals that out of the surveyed HCMs, only one in ten enterprises were able to secure financing when it was required, despite a high willingness (91%) to seek external funding. The majority of HCMs (88%) had to resort to self-financing methods to keep their operations running, which severely restricts their potential for growth and expansion.