MSMEs have played a key role in the job creation procedure on a long-term basis. It has helped the employments sector grow from 23 million to 110 million by the year 2020. The MSMEs are the second largest employers after agriculture. With the potential of enterprises lead by women globally, there are strong chances of generating 150-177 million fresh jobs in the coming years (Bain, 2019). MSMEs are certainly important to raise the participation rate of India’s low-slung female labor. However, amongst the 62 million registered MSME enterprises in India, only 20% of enterprises are led by female entrepreneurs (MSME Annual Report, 2019-20). Unfortunately, COVID-19 affected 73% of the women-owned businesses. The pandemic-induced losses in the revenue, but 90% of the female entrepreneurs are assertive that they will overcome these challenges. Here are some of the challenges that triggered immediate crises during the COVID-19 pandemic:
- Loss in Income
In the pre-COVID-19 times, women-owned enterprises were working in segments severely hit by the pandemic – 35% in personal services, 31% in clothes and textiles, and 15% in food, beverages, and other services. Subsequently, 82% of enterprises had to face temporary closures directly after the national lockdown, in March 2020-21 and half of them stated these closures would be permanent. Female entrepreneurs had to deal with a lot of struggles because of the leftover inventories due to order cancellations and the expensive raw material. Research by Nikore Associates with jute entrepreneur’s states that the women-owned enterprises had to bear with massive income losses, up to 60-70% of the annual income nearly wiped out because of the cancelation of physical exhibitions and fairs.
Working Capital Crisis
The MSMEs have had a credit gap of $260-330 billion historically. Financial accessibility has been a key challenge for MSMEs. Although women-owned businesses have higher profit margins than male-owned enterprises (31% vs. 19%), still the female entrepreneurs in India have to face rejection (19% vs. 8%) and get only 5% of total MSME lending from the public sector banks. The giant financial institutions depend on the credit history and collaterals to evaluate the creditworthiness, female entrepreneurs in India are underprivileged due to partial land proprietorship.
COVID-19 further amplified the gap of financial accessibility for women entrepreneurs. After the first lockdown, another survey stated that 55% of small businesses have no cash reserves and 60% of the businesses have dipped into their personal saving to continue the business operations. Most of the female entrepreneurs also claim that they were unable to pay their loans.
Measures to overcome the challenges and pave the path to Long-term Growth
Directed measures to simplify the continuous growth of women-owned businesses are vital. For resilience during the pandemic, almost 50% of the women entrepreneurs have either shifted their business models or have transformed their means of business for the sustainability of their businesses. To further empower their business and recover for long-term sustainability, Central and State government should consider some targeted sustenance measures:
- Amplify the provisions of credit. The Central government can set the capital investment targets for businesses registered under MSME on the basis of gender. The government schemes should assist businesses in their budding stages.
When you look at a global scale there are some great efforts observed in COVID-19 policy responses, Colombia stated a $4.8 billion credit line for women entrepreneurs.
- Innovative fiscal products. To help women entrepreneurs with credit access, agencies that execute under government schemes should collaborate with public organizations and industrial relations to fulfill the requirements of the women entrepreneur. The government can also provide incubation to the women entrepreneurs by offering various training sessions in the field of marketing, development, and other technical fields. The pieces of training can help them to save their businesses.
Through the COVID-19 lockdown, the Mann Deshi Foundation gave low-interest loans for a smartphone. After research with women entrepreneurs, they decided to help 80% of women to buy their own smartphones and enabled a digital platform for their business.
- Incentivize sector expansion. Central and State governments should introduce additional fiscal incentives for the enterprises led by women to enhance their contribution in different sectors.