Over 50% of microbusinesses had no mechanisms to cushion Covid impact: Study

A study on the impact of Covid-19 on microbusinesses in India has found that nearly 40 per cent of them were denied loans (both formal/informal) as they did not have sufficient collateral or lacked positive credit history.

According to non-profit organisation 'Global Alliance for Mass Entrepreneurship' (GAME), which conducted the study, 21 per cent of the microbusinesses lacked requisite documentation for the application.

The report, titled 'Road to Recovery: Examining the impact of Covid-19 on microbusinesses in India', released recently, is a nationwide study on how the Indian MSME (micro, small and medium enterprises) sector managed the pandemic period lockdowns, GAME said.

The survey conducted among MSMEs during and post the lockdown period delves into major problems faced by entrepreneurs regarding financial impact, business confidence, and stress management, it said.

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The study conducted over 2020 and 2021 in two rounds, each across 1955 micro businesses, pointed out that over 50 per cent of enterprises reported having no coping strategies or mechanisms to cushion the pandemic's impact, GAME said in a statement.

GAME Founder, Ravi Venkatesan 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 per cent were aware of schemes launched under the 'Atmanirbhar Bharat' initiative, he said.

"As 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", Venkatesan said.