Archive · 21 Jan 2026
India's Informal MSMEs Need Better Bookkeeping
In India, many small businesses, called MSMEs, operate informally.
This means they are not registered and find it hard to get loans or grow.
The government has schemes to help, but most of these businesses stay informal because they don't trust the system or see the benefit.
A big reason they struggle is because they don't keep good records of their money.
If they did, they could make better decisions, like knowing which products sell well or how to handle money problems.
The article suggests that teaching these businesses to keep better records could help them grow and eventually become formal, without forcing them to change too quickly.
Over 90% of India's MSMEs operate in the informal sector, making them invisible to policymakers and unable to access government schemes.
Informal MSMEs face a persistent credit gap, struggling to access capital and remaining unproductive due to limited access to better resources.
Many informal entrepreneurs prefer to operate under the radar, distrusting formal credit systems and relying on family labor and community support.
Improving accounting and bookkeeping practices can help informal businesses make better decisions, adapt to shocks, and increase productivity.
60% of retail traders in the informal sector do not maintain any records, seeing no value in detailed bookkeeping.
- Who
- Indian MSMEs, particularly those in the informal sector
- What
- The need for better bookkeeping practices to improve productivity and access to formal systems
- When
- The issue is ongoing, with a proposed solution of improving accounting practices
- Where
- India, specifically focusing on the informal sector
- Why
- To bridge the productivity gap, access capital, and make informed business decisions
- Informal MSMEs
- Over 90% of India's MSMEs
- Credit Gap
- Millions of microenterprises struggle to access capital
- Productivity Difference
- Formal businesses are more productive than informal ones
- Accounting Practices
- 60% of retail traders do not maintain records
- Solution Proposed
- Improving accounting and bookkeeping practices