During Covid-19 outbreak, 14% of MSMEs closed permanently, says study

The small MSMEs have been the most severely impacted by the Covid-19 pandemic and the following lockdown. Currently, a survey by the Global Alliance for Mass Entrepreneurship (GAME) shows that over 14% of the surveyed organisations have permanently quit business as a result of the failure of proper cash flow and business.

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The small MSMEs have been the most severely impacted by the Covid-19 pandemic and the following lockdown. Currently, a survey by the Global Alliance for Mass Entrepreneurship (GAME) shows that over 14% of the surveyed organisations have permanently quit business as a result of the failure of proper cash flow and business.

The Center imposed a rigorous lockdown in March 2020 to stop the Covid-19 virus’s spread. One of the nations with the strictest lockdown, with businesses and services, stopped overnight, was India. It was observed that migrant workers were leaving in large numbers, and MSMEs found it difficult to maintain their operations. Micro units complained of discomfort two years after the lockdown, despite the fact that the central government had devised a number of initiatives to aid the sector.

The Indian Express reported and revealed that the micro units’ main problems were low sales and an evening drop-in client traffic. Up to 14% of the outlets in the survey had permanently shut down, and 38% of them cited a lack of savings and customers as the causes.

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40% of the micro units had applied for borrowing due to insufficient savings. While the encouraging result was that 85% were able to raise money, the bulk of them—92%—had initially turned to friends and family for support before turning to financial institutions for financing. For a variety of reasons, credit was denied to between 33 and 41% of the micro units.

According to the survey, contrary to popular opinion, mass layoffs were not common in micro units. Units made every effort to keep their personnel, with some even going so far as to pay them in advance. According to the report, women made up up to 55% of the laid-off workers. The poll found that micro-enterprises run by women hired more people than those led by men, and overall, 34% of the micro units had reduced their workforce.

Ravi Venkatesan, the co-founder of GAME, said, “There is a dire need for building adequate knowledge of bank managers, field officers and banking correspondents on bank and government schemes. This study shows that of those surveyed, only 31% were aware of schemes launched under the Atma Nirbhar Bharat initiative. As a part of the package, financial institutions introduced a credit product for MSMEs whose loan accounts were categorised as special mention accounts by lending institutions. While this was created to support MSMEs unable to repay loans, similarly, financial solutions can be created to encourage business modifications as a response to external challenges.” As reported by The Indian Express.