NextBillion - A WDI Publication

India has achieved something genuinely remarkable over the past decade. Millions of people who would once have run businesses entirely outside the formal system now have an enterprise identity. Starting a business has become easier. Registering one has become easier. Access to credit and government programs and markets has widened.

But there is another number worth looking at: Out of nearly 95.2 million enterprises registered in the country, over 99% are micro.

As of September 9, 2026, the Ministry of MSME Dashboard reported 95,236,393 enterprises across the Udyam Registration Portal and Udyam Assist Platform, which aim to give MSMEs a formal identity and registration number, along with access to lending and other benefits. Of these, 94,651,631 were classified as microenterprises — about 99.4% of the total. 

However, the word “micro” needs some care here. Under the revised MSME classification effective from April 1, 2025, a microenterprise can have investment of up to ₹25 million (~US $265,000) and annual turnover of up to ₹100 million (~$1.06 million). So being classified as micro does not, by itself, tell us that a business is tiny. What the numbers do tell us is that the overwhelming majority of registered enterprises (about 73 million) are still at (or technically “under”) the first rung of the MSME (micro, small and medium) classification. They are classified as “nano,” a subset of “micro” that includes businesses with less than ₹10 million in annual turnover. These enterprises are mainly cash-based and family-run, and the majority of them are rural. They have the capacity and aspiration to grow, but no dedicated ecosystem to help them transition and scale.

India has clearly become very good at bringing enterprises into the formal system. What we have not become equally good at is helping viable enterprises move beyond micro and into their next stage of growth: becoming large enough to attract formal investment.

The Gap Between Nano and Investable

At the end-point of that journey sits the Self-Reliant India Fund. The fund was set up to channel growth equity to MSMEs through a Fund-of-Funds structure. According to government data from July 30, 2026, 766 MSMEs had been assisted between the fund’s launch in 2021 and June 30, 2026, with more than ₹30 billion invested ($316 million) by the government. An additional $900 million of government funding is yet to be deployed.

Put these two numbers next to each other and the gap becomes hard to miss: Tens of millions of enterprises have entered the formal system. But just hundreds have grown large enough to obtain equity funding from a government platform designed to provide them with easy access to this support.

What happens to everyone in between?

That question has stayed with us through much of our work with rural and semi-urban businesses. At Quiver Catalyst, a rural enterprise scaling platform, we work with growth- oriented entrepreneurs who are ready to move beyond day-to-day survival. Our support combines practical mentorship, business support and advisory, investment readiness, and growth capital in the form of micro-equity — because we have found that capital alone rarely addresses the barriers that emerge as a business grows. 

We conducted a year of fieldwork with more than 850 enterprises across four states of India, combining the findings with national data to produce our latest white paper, “Beyond Survival: Unlocking Growth Pathways for India’s MSMEs,” which examines the transition from microenterprise survival to sustained growth. In the process, we’ve seen that many Indian enterprises are not struggling to survive. They have customers. They sell something people are willing to pay for. Some have been around for years. The entrepreneur has already done the difficult work of getting the business off the ground.

And yet, when the time comes to grow beyond the nano stage, things begin to get complicated. The books that were perfectly adequate for running a nano business may not be enough for an investor trying to understand its margins, working capital or cash flow. The entrepreneur may know exactly how to sell within her district but have no idea whom to call when she wants to expand into the next one. A large order can look like an opportunity until the business realises it does not have enough working capital to fulfil it.

Then there is the question of the money itself: The business may have outgrown the microloan that helped it get started, but that doesn’t mean it is unbankable. It may just be too large for the smallest loans and still too small, informal or unstructured for many institutional investors. For instance, it may need $5,000 or $25,000 to make the next jump, not $50,000 and not $1 million.

This is where a lot of businesses get stuck.

Other Obstacles Faced by Growing MSMEs

These MSMEs also face an obstacle less visible than finance. In a small enterprise, the founder is often doing almost everything: speaking to customers in the morning, buying raw material in the afternoon, checking production, following up on payments and somehow maintaining the accounts in between.

As the business grows, the decisions this entrepreneur must consider start to change:

• Should I hire someone now or wait?
• Can I afford more equipment?
• If I sell through a distributor, what margin do I give up?
• Can I take this loan if my sales drop for three months?
• How much stock should I hold before the main selling season begins?

In a larger company, there are people whose entire jobs are built around answering questions like these. For a first-generation entrepreneur, they can become decisions that determine whether the business grows at all. And where the entrepreneur is located changes how difficult it is to find those answers.

Ambition is not a Mumbai privilege — Access is

For instance, we have repeatedly seen that MSMEs located outside of major population centres face unique challenges that aren’t shared by their urban counterparts. This is not because entrepreneurs in smaller towns lack ambition or capability. It is because the networks that support business growth are far less dense and often much harder to access outside India’s major commercial centres. These enterprises are hampered by the three Ls: location, missing market linkages and lack of leverage.

Consider what an entrepreneur’s journey can look like in a major city like Mumbai (India’s financial capital) compared to a small, remote Indian town. At different points in this journey, a growing business needs a banker who understands it, an accountant who can help put the numbers together, a distributor willing to take a chance, a mentor who has solved the same problem before, and a network that can provide connections to investors and buyers.

In places like Mumbai, many of these people are relatively close. In a small town like Gadchiroli, the entrepreneur may have to travel much further — both socially and physically — to cover each of these needs.

Supporting MSME Growth in India Requires More than Just Capital

The question then is: What would make that distance shorter?

Expanding access to incubators and accelerators is clearly one part of the answer. Jagriti Enterprise Centre – Purvanchal, PRIME Meghalaya, Villgro and a growing number of incubators use different models, but all point to a simple need: Entrepreneurs outside the large business centres need access to mentors, markets, knowledge and networks, not only classroom training.

But incubation cannot end with a workshop and a certificate. An entrepreneur trying to grow a business needs someone to turn to when the distributor does not pay, when the margins change, when new equipment suddenly looks necessary, or when the loan that looked affordable on paper begins to feel very different in an off-season.

Finance needs some rethinking too. A rural agricultural processor can have a perfectly healthy business over the course of a year, and still have very uneven cash flows within those 12 months. But a fixed installment payment does not care whether it is peak season or lean season: The monthly repayment amount remains the same.

Government programmes have done a great deal to expand formal credit and credit guarantees for small businesses. But access to credit and access to the right kind of capital are not always the same thing. For some businesses, revenue-linked or cash-flow-linked structures may make more sense. For others, debt may still be the right answer. The larger point is that the financing has to understand the business rather than forcing every business into the same repayment pattern.

And even the right capital will do very little if the enterprise has nowhere new to sell.

Market access sounds like a broad development-sector phrase until you sit with an entrepreneur and realise it can mean something as simple as finding the first reliable distributor outside her district.

Government channels have opened useful doors for businesses navigating the challenges of growth. The Public Procurement Policy for Micro and Small Enterprises sets a 25% annual target for the amount of goods procured from MSEs across Central Ministries, Departments and CPSEs, while the MSME Ministry’s Procurement and Marketing Support Scheme is intended to help MSMEs improve marketability and reach new markets. But getting through those doors still requires documentation, quality control, working capital, competitive pricing, fulfilment capability and relationships.

That is why we have slowly come to believe that the transition from nano to investable cannot be solved by capital alone.

Sometimes the business needs money. Sometimes it needs six months of better record-keeping before taking on that money. Sometimes it needs a distributor, someone to sit with the entrepreneur and work out whether buying that new equipment will actually improve the business. And sometimes the most useful thing for an entrepreneur is simply helping her understand how an investor or lender is likely to perceive her business before she sits across the table from one. We have therefore started one step earlier than the question, “How much capital does this business need?” We ask: “What is actually preventing this business from growing? What needs to change before more capital can genuinely help?”

The answers to these questions are different for every enterprise. That is precisely the point. Every MSME faces its own challenges in moving from nano to small and medium-sized. India needs to do a better job of addressing those obstacles if it hopes to see its successes in formalising MSMEs translate into actual, sustainable business growth and job creation.

Quiver has embarked upon a journey to develop a new capital stack led by risk capital, along with an enabling system to help transition these enterprises. But India needs tens (or hundreds) of like-minded organisations to join us, if we hope to scale the country’s millions of nano enterprises. 

Read our full white paper at https://www.quiver.in/insights

Pranshu Chhabra is a development professional working with Quiver, Rudra Midhun Kumar is part of Quiver’s Diligence Team, and Chiropriya Dasgupta is the Director of Investments at Drishtee Foundation and Co-Founder of Quiver.

Photo credit: Quiver