The Covid-19 pandemic and subsequent lockdowns have hit micro, medium and small enterprises (MSMEs) the hardest. A survey by the Global Alliance for Mass Entrepreneurship (GAME) now shows that nearly 14 percent of respondents have permanently closed their business due to a failure of proper cash flow and business.
In March 2020, the center issued strict restrictions to limit the spread of the Covid-19 virus. India was one of the countries where the quarantine was the strictest and businesses and services were closed overnight. It has seen a mass exodus of migrant workers and SMEs struggling to keep their businesses afloat. While the central government has come up with a slew of measures to help the sector, micro units have been complaining of pain two years after the lockdown. showed that low sales and night-time bans were the main problem for the micro units. A full 14 percent of the units surveyed closed permanently, and 38 percent of them cited a lack of savings and customers as the reason for leaving.
The lack of sufficient savings led to 40 percent of micro-units applying for a loan. While an encouraging finding was that 85 percent of them were able to get funding, the vast majority of them – 92 percent – asked friends and family for help, but later turned to financial institutions to get credit. About 33-41 percent of micro units were denied credit for various reasons.
The survey showed that mass layoffs were not a practice in micro-units, contrary to popular belief. Units went to great lengths to retain their workers, some even going the extra mile to pay employees up front. The survey found that up to 55 percent of the employees who were made redundant were women. Overall, 34 percent of micro-units shrunk, and the survey showed that women-led micro-enterprises are firing more than men-led units.
Ravi Venkatesan, co-founder of GAME said, “There is an urgent need to build adequate knowledge of bank managers, field officers and bank correspondents about banking and government schemes. This study shows that only 31% of the respondents were aware of the schemes launched under the Atma Nirbhar Bharat initiative. As part of the package, financial institutions have introduced a loan product for small and medium-sized enterprises whose loan accounts have been categorized by credit institutions as accounts with special consideration. While it was created to support SMEs that are unable to repay loans, similarly financial solutions can be created to support business change in response to external challenges.”
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