40% micro businesses denied loans during pandemic due to insufficient collateral: Report
New Delhi, Nov 28 (KNN) About 40% of the micro businesses were denied loans (both formal/informal) as they did not have sufficient collateral or lacked positive credit history, said a report by the Global Alliance for Mass Entrepreneurship (GAME).
Nearly 21% of the businesses lacked requisite documentation for the application while applying for loan.
The report is a nationwide study titled as 'Road to Recovery: Examining the impact of Covid-19 on microbusinesses in India' and is supported by IKEA Foundation and LEAD at KREA University.
It looks at how the Indian MSME sector managed the pandemic period lockdowns.
The study conducted over 2020 and 2021 in two rounds, each across 1955 micro businesses, pointed out that over 50% of enterprises reported having no coping strategies or mechanisms to cushion the pandemic's impact.
Ravi Venkatesan, Founder, GAME, said, “There is a dire need for building adequate knowledge of bank managers, field officers, and banking correspondents on bank and government schemes.”
He said this study shows that of those surveyed only 31% were aware of schemes launched under the Atma Nirbhar Bharat initiative.
“As part of the package, financial institutions introduced a credit product for MSMEs whose loan accounts were categorized 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,” he added.
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. (KNN Bureau)