Home Entrepreneurs MSMEs: 50% of micro firms had no coping strategies, 40% denied loans during pandemic

MSMEs: 50% of micro firms had no coping strategies, 40% denied loans during pandemic

by Ozva Admin
BENGALURU: Global Alliance for Mass Entrepreneurship released the report of a nationwide study on how India’s MSME sector handled lockdowns during the pandemic period. The survey carried out among MSMEs during and after the confinement period delves into the main problems that entrepreneurs face in relation to financial impact, business confidence and stress management.

The study carried out during 2020 and 2021 in two rounds, each in 1,955 micro-enterprises, indicated that more than 50% of the companies reported that they did not have coping strategies or mechanisms to cushion the impact of the pandemic. In addition, the study highlights that almost 40% of microenterprises were denied loans (both formal and informal) because they did not have sufficient collateral and/or lacked a positive credit history, while 21% of companies lacked the Documentation needed for the application.

Ravi Venkatesan, Co-Founder of the Global Alliance for Mass Entrepreneurship (GAME), stated: “There is a dire need to develop proper knowledge of bank managers, field officers and bank correspondents on bank 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, the financial institutions introduced a credit product for MSMEs whose loan accounts were classified as special mention accounts by the credit institutions. While this was created to support MSMEs unable to repay loans, similarly, financial solutions can be created to encourage business modifications in response to external challenges.”

About Women’s Entrepreneurship

The report released to commemorate Women’s Entrepreneurship Day provides information to policymakers and other stakeholders to better understand the difficulties microenterprises face and create viable solutions. The research was conducted by LEAD at Krea University and was supported by the IKEA Foundation.

Overall, stress levels increased over time, with more than 20% of entrepreneurs saying they felt stressed almost every day for a year after the pandemic. When looking at the impact on gender, the patterns differed between men and women. Looking at those who reported not being stressed at all and those who were stressed almost every day, women appear to have been more stressed than men in the initial phase of lockdown. Female entrepreneurs also reported being more stressed than men in the initial phase of the lockdown in 2020.

This trend, however, did not appear after 6 months. Among employees laid off during the 2021 pandemic phase, 55% were women.

The study also noted that women entrepreneurs tend to employ women in their businesses compared to those owned by men. The research found that 80% of workers in micro-enterprises run by women were women, while only 14% of employees in micro-enterprises run by men were women. The data shows that micro-enterprises run by women owners witnessed higher layoffs overall.

There are 489.3 lakh people employed in various micro-enterprises in urban areas, of which 20% are women (NSS 73rd round, 2015-16). These microenterprises comprise 99% of the country’s MSME segment. Its average productivity, which is gross value added (GVA) divided by the number of workers, stood at Rs 60,544 in 2010-11, however, it was below the overall MSME sector average. This suggests how the micro segment of companies is at the Base of the Pyramid, employing a large majority of workers.

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