Good news at last - MSMEs ‘bounce back stronger’ after COVID -19 shock

Indian MSMEs have shown remarkable resilience in overcoming the crippling challenges and rabid uncertainties unleashed by the COVID-19 pandemic over the past two years, summarises a study by fintech lender NeoGrowth Credit.  

The study, titled ‘MSME Insight Report 2022’ said that with “timely support”, small and medium scale businesses have been able to “bounce back stronger”. According to a report in The Economic Times, the study assessed 40,000 MSMEs from 25 cities across 88 industries to evaluate their responses to four research questions:  

1. Challenges faced by MSMEs during the study period between March 2020 and March 2022 

2. Impact of support measures on their recovery 

3. Shift to digital payments in this period 

4. How they have remained resilient  

The study included both discretionary and non-discretionary MSMEs (i.e.,non- essential and essential products and services respectively) in demand oriented businesses. The three major consequences of the pandemic on MSMEs included restricted movement due to the nationwide lockdown imposed, reduced consumer demand and uncertainty over recovery, the Economic Times report said, quoting the study.   

While 46% of MSMEs needed financial support, the demand for assistance was more in the non-metro cities as compared to the metros. The study measures loan demand as the number of enquiries received for loans from NeoGrowth’s customers and is not indicative of the size of the loan, says a report in Mint, quoting the NeoGrowth Credit study. Loan demand was back to pre-pandemic levels of 99% in non metros, as compared to 81% in metro cities, the Mint study says. Of the six metro cities, only Chennai and Bengaluru showed high credit demand, at 102% and 124% respectively.  

 MSMEs in Maharashtra were the most impacted, with close to 50% of them in Mumbai and Pune needing financial help. The number of MSMEs in non-discretionary industries who applied for financial assistance was lesser compared to those in essential ones.   

In the second wave of the COVID-19 pandemic, MSMEs adjusted to the newer business environment and required lesser support to tide over the crisis, as only 30% of them required financial assistance, a report in The Financial Express said, quoting the study.   

Coming to the sector-wise analysis, credit recovery was fastest in the infrastructure industry, with loan demand levels exceeding the pre-pandemic figures by 114%, followed by FMCG and retail at 103%. Demand is yet to increase in other sectors, the Mint report said, quoting the study.   

Explaining the resilience of MSMEs, the study said that MSMEs were quick to adopt digital technology, such as digital payments and lending, adopted new skills and expanded their customer base, all of which contributed to a faster pace of recovery.   

Despite the hardships faced by MSMEs due to fall in consumer demand that led to an inability to repay loans, MSME borrowers were “inherently honest and willing to pay back”, NeoGrowth credit Director and CEO told The Economic Times.   

To help MSMEs overcome these difficulties, the fintech lender introduced a special programme called Sanjivni, a knowledge sharing initiative where NeoGrowth worked closely with customers to understand their needs and offered expert advice to tackle them.