Hello All! I hope you are doing well.
Would love to pick your brain about a problem I am having a hard time dealing with.
The unorganized textile industry faces frauds up to the tune of 5000 CR+ yearly. That’s a feature of the credit-based MSME industry.
In 2023, the structure is the same as 1980’s. Post GST people have gotten multiple GST numbers over the same businesses, taken products over credit, and never paid back. Due to the stigma and laziness of the justice system, less than 10% go the legal route, and multiple businesses face bankruptcy.
MSME’s operate under mafia culture, majority of businesses have the local leadership/law enforcement of their geography under their influence.
While the problem has been going on for decades, and with no regulatory movement, or government intervention, despite this issue being raised with relevant departments yearly. I still fail to understand how to solve this crisis, to promote ease of business in the communities and less fraud.
I was thinking of creating a crowdsourced database for people to upload their offender’s information, however, I still am unsure of the legal implications of such a strategy. Is there a way to bypass the legality of the problem, or find some form of loophole?
It could be something as simple as, the person typing an identifier (name, company name, GST number) of the person he wishes to check up on, and the result returning “as per our information, this person may have done xyz”.
If there’s a way for us to access databases for reported frauds, that I believe would be legal to present to the general public. However, if we were to compile data for the 90% unreported frauds, how can we go about it.
In terms of tech, 90% of the people in the MSME sector are uneducated and have no formal idea of how things operate. What I thought of was a simple WhatsApp API mechanism where someone goes to the chat, types in an identifier information, and if there is any such match in the database the chat returns with it.
As for collecting the data, It would need some form of human screening or verification before going into the database. So far this is the best I could come up with to solve this crisis in real-time. Providing resources to not get fraud, using better strategies, doing legal paperwork, and asking the government to step in with a better regulatory framework, are all valid notions, however, I have no resources or team to work on those aspects.
What is worse is, even if you were to legally sign paper, and the other party refuses to pay, your best bet is to go the legal route costing time, money, and resources, which a small business simply cannot afford, the added burden of the corrupt-inefficient judiciary nexus is massively exploited by evil-doers. They rely on the laziness of the system to escape accountability.
Would something in terms of advocacy of a better policy framework be feasible? Could it be something on the grounds of pushing the government to open exclusive legal corridors for MSME’s, faster or more independent judicial reforms, laws, or fast-tracked cases? or financing measures for the people who have been wronged, while the case is under trial? The business often is only a few months of working capital away from bankruptcy. Formal access to finance requires an interest payable, whereas the party owing the funds never deems it so.
I happened to meet with a young man, who migrated to Canada, because his case was in the judiciary for 5 years, after which the court directed the other party to release his funds in installments. In those 5 years, of not being paid, he wasn’t able to sustain himself, and his business went down under. Now replicate this for thousands of businesses, and you will see the harm Indian society bears due to lazy regulators and judiciary. The economic impact of the job losses, the loss of healthy ways of doing business, and the inherent environment of business-mafia gunda raj being promoted are setting us on a backward path.
SMEs are the backbone of this country. With mere operating profits of 8% or less, if nothing concrete is done to address the concerns, we will see massive closure of small businesses, much of which is underway, with the government refusing to act for the sake of smaller businesses, we have to make a play to force their hand to “act”.
Surat’s textile industry is on a decline and will be half of what it is in years to come. Yes, inefficiency, cut-throat competition, and no innovation aka no value prop are some factors, but man-made issues deeply rooted in our society are a big cause. These man-made barriers precede natural ones. It promotes a system of fear and impressions, harms our psychology when it comes to living in a fair and just society. If you were to survey why the GenZ and millennials aren’t entering traditional business and are all going for jobs, this would probably be on the top of the list. I could model a half-life formula of Indian business in the textile industry here, and their downfall.
As a society not everyone can be employed in IT/tech sector jobs. We simply cannot all be within the services sector. The MSME, manufacturing industries need significant talent, and reforms too. The current psychology is, that you have to be a Grade A evil person to do business, may that be bribe people, scamming people, or carrying a verbally abusive aggressive demeanor to make others submit under fear. I doubt anyone sees himself/herself as such a character when they aspires to grow up.
I feel it how time we start addressing these concerns in our society. I am sure the credit-lending scamming space is spread across the country, but I am watching the live destruction of one of our country’s oldest and second-largest employing industry. How can we make a movement to recover debt we are owed, get money back for our hard work, without invlolving a third party who would charge yet another premium/interest.
Edit - I met someone who happened to start a firm that would recover money from defaulters. She ended up going bankrupt, as she did rightfully recover lakhs for people, but when she sent an invoice for her services, she was never paid by the same people. I mean fraud and malpractice are so common in Indian society. These kinds of things are very well one of the true reasons why you wouldn’t see innovation bottom-up because the very nature of fair trade is always a question in our country. If we cannot rely on getting paid for simple services rendered, how do we expect people to feel confident in solving complex problems later on, when they are always wondering if they would be paid in the first place or not.