How banks, NBFCs post pandemic can help MSMEs achieve growth in new normal

 With exceptional public health and economic initiatives, India is handling the impact of the global Covid-19 pandemic. With detrimental effects on the economy looming, relief measures would have to mitigate irreversible harm to lives and livelihoods. Micro, small and medium-sized businesses are among the many segments of the economy that need urgent attention and succour. Given the clampdown on economic activity over the past few weeks, it is unquestionable that a substantial number of these units, probably to the point of everlasting closure, would be suffocated. MSMEs account for almost 30% of India’s gross domestic product and nearly half the country’s exports. The government, business leaders, as well as other important stakeholders will play a critical role in helping MSMEs solve this crisis and revive small businesses.

Technological  Aid

Fintech firms obviously need to help restore the national economic engine of which SMEs and MSMEs form the critical backbone by promoting comprehensive alliances, resource sharing and technical optimization to rejuvenate the ailing ecosystem of small businesses. The rapid growth of new technology and platforms for e-commerce has helped companies survive the post-pandemic ordeal. Financial players are cementing the road to a renaissance for MSMEs globally by strategically leveraging the vast network of their company capital, tech advances, and network partners. Online training modules for small business owners have also been catalysed by the digitisation of work processes and operating modules by e-forums to improve companies. Various segments such as crisis management, financial planning, and marketing communications can be included in the online training and mentorship programmes to streamline business processes in the set of standards.
In addition to technical advances that can enhance the ease of doing business for MSMEs, initiatives such as more sovereign guarantee-based programmes and the government’s liquidity boost for small and medium-sized NBFCs can help investors provide  MSMEs with last-mile financing in the near future, and make it easier for them to access instant business loans.

Financial Aid

A number of MSME revival initiatives have been announced, such as INR 3 Lakh Cr collateral-free loans, backed by government guarantees, making it easier for lending institutions such as banks to provide small businesses with credit support in the form of small business loans and instant business loans.

In order to determine the creditworthiness of MSMEs better, lenders should deploy advanced technologies which can help them distinguish cash flows before and after Covid. By significantly reducing the paperwork and red tape, this will make the loan application and disbursement processes more efficient. By offering convenient access to credit for vulnerable companies, it will protect lenders’ interests and reduce the rate of delinquency. For MSMEs that struggle to access credit from formal lending networks, this is particularly helpful, as it tell themes exactly what documents are required and reduces the stress of business loan documents

In order to help disadvantaged MSMEs and give them a fighting opportunity by building a technology-enabled entrepreneurial ecosystem, efforts are being made by the government, industry leaders and other key stakeholders. Initiatives such as the conduct of video KYC, as approved by the RBI, have greatly helped lenders give small business owners fast and simple remote small business loan services. 

The MSME sector is the backbone of our economy, creating employment opportunities for more than 100 million people, contributing to nearly third of the county’s GDP, and predicted to contribute to about half the GDP by 2025 . In addition to policy reforms, digital transformation requires an hour to enable MSMEs to recover from the economic crisis caused by the Covid pandemic and unlock their potential and help them succeed by being more agile, productive and resilient, and provide them with all the aid they require, including small business loans and instant business loans. Technology therefore provides an enormous opportunity for MSMEs in India to drive growth.