Q1. What is the impact of COVID19 outbreak on the Indian economy, especially the small & medium businesses?
Global quarantines and 5-week nationwide lockdown in India, to contain the coronavirus outbreak, have impacted industries across and operations have literally come to a standstill. These are unprecedented times with domestic and external demand shock, production shutdowns and job losses in some sectors. The pandemic is likely to wipe-out 100+ bn USD from the Indian economy
The effect is even more amplified in the MSME sector in India which is second largest employer after the agriculture sector and is the backbone of the economy. There’s been a 90% drop in domestic sales across categories and supply chain disruptions & labor issues are putting millions of jobs at risk, resulting in millions of tonnes of commodities like wheat, pulses & rice and perishable essentials getting wasted and risking food inflation levels at record highs.
Recently at SOLV, we conducted a study with SMEs on our platform and found that most of them are contemplating severe measures like headcount reduction, further adding to their woes. If the current scenario continues, over 90% of the SMEs have cashflows to sustain them only for 3 months and a significant number of them who are already indebted, will perhaps not be able to service their current liabilities.
Q2. What should be done to save the SME sector and help them weather the crisis?
The Covid crisis is perhaps once in a century black swan events that all of us together need to tackle. Governments & institutions globally like the World bank & IFC along with other major public & private sector banks have announced major stimulus packages to help the SME sector retain their labor and sustain their operations for at least 6-month. In India, the Finance minister announced a slew of debt relief measures for the MSMEs and the RBI has announced major credit easing and liquidity infusing measures and has also directed banks & shadow banks to open emergency credit lines. There are several other significant measures that need to be taken in this regard by the policymakers like incentivizing financial institutions to extend penalty-free interest payment, make interest subventions on working capital to diligent SMEs and adopt alternate credit scores to assess this segment in these extraordinary times. SMEs also need to have timely access to finance. Development finance which is being directed towards India now, needs to be channeled effectively into the SME sector. Additionally, in order to ensure timely payments & collections from large firms across, they must be incentivized/ mandated to onboard on the TReDS platform similar to how it has been done for Rs. 500 cr+ turnover cos in the apparel segment.
If an adversity can be turned into an opportunity, there cannot be a more opportune time than now. A big push, by the government, to address fundamental issues such as credit flow, manpower issues, poor infrastructure and technology and digital gaps will not only support the SMEs in this crisis but will also help them emerge stronger.
Q3. What should SMEs do?
Most SMEs have already begun adopting measures to become leaner and more innovative, to protect cash flows by stopping all discretionary spends, and finding technology solutions that can help them increase their outreach and acquire new customers and scale. It is an opportune time for SMEs to connect with each other digitally and first & foremost be aware of what’s going on in their sector, policy measures being put in place and how they can leverage these to make the best of the situation. Also, it’s a great time for SMEs to leverage alternate lending and improve their credit profiles for growth capital that may be extended soon.
Q4. What is a B2B digital platform like SOLV doing to help SMEs?
The very premise of SOLV’s existence is to help SMEs grow. SOLV is a commerce platform connecting small businesses across the country and helping them trade with each other by supporting them with a platform, payments, logistics and end-to-end fulfilment.
We understand that our service to this community is imperative in times like these. One of the related impacts of the COVID-19 lockdown has been the shortage of essential supplies. Millions of citizens are concerned about how they would meet their everyday essential needs. While e-commerce players are trying their best to cope with the sudden surge in orders, many small kiranas have also opted for an online-offline hybrid model of operations. They are leveraging platforms like SOLV, which support them with the business services they need acutely at this time.
For small kiranas, tapping into large supply chains of products is a challenge at the best of times and especially so in this time of crisis. So are procuring transport and labour, which are in very short supply now. When India went into lockdown in the battle against COVID-19, access to essential goods, such as groceries, fresh produce and medicine, was disrupted. India’s supply chains were impacted and small local retailers and grocers were unable to procure supplies without connections to larger manufacturers, traders and wholesalers. For small kiranas, tapping into large supply chains of products is a challenge at the best of times and especially so in this time of crisis. So is procuring transport and labour, which were in critically short supply during the COVID-19 led shutdowns and continue to pose a problem as the economy slowly limps back from the lockdown.
SOLV has been constantly innovating to address these challenges by leveraging its B2B commerce platform for SMEs in new ways. We are using the strength of our networks and resources to connect to sourcing units like tier 2 manufacturers and villages on the one hand and delivery channels on the other, to deliver essential goods to kiranas, RWAs, NGOs and small hospitals. More than 20,000 families have been supplied essentials through our SMEs every day.
SOLV also conducted 1:1 interviews with MSMEs on the platform soon after the lockdown was announced and published the findings of the study (which was also quoted by The Times of India). This study helped unveil a lot of insights about the impact of the COVID-19 crisis on the MSMEs and highlighted challenges like an acute shortage of credit. SOLV was then able to implement solutions for such challenges within a short period of time.
SOLV also announced a partnership recently with FICCI-CMSME to launch a COVID-19 Emergency Credit Line Program for MSMEs that are helping the nation fight the COVID-19 pandemic. The nation-wide lockdown has badly hit business sustainability for the MSME segment due to the lack of cash-flows to meet their fixed cost. In this scenario, the COVID-19 Emergency Credit Line is aimed at easing the financial pain being faced by the MSME sector.