Covid-19: The role of technology in reviving small businesses in India

In addition to government reforms, technology and technology services can help SMEs on equal terms.

With the help of technology, financial institutions can reduce the difficult borrowing and sanctioning processes of yesteryear.

Thanks to the India stack, there has also been a rapid growth of India’s digital payment ecosystem

 

The Covid-19 pandemic not only triggered a global health emergency, but also disrupted the global economy and posed a major threat to the survival of small businesses.

In India, factors such as low demand due to job losses and wage cuts, declining liquidity, supply chain disruptions, subsequent bottlenecks, lack of funding and labour and a general sense of uncertainty, have negatively affected SMEs.

Small businesses are also struggling with the burden of high taxes, loan repayments and interest payments. Many companies face serious business continuity challenges, while others have already collapsed under the disabling weight of the economic slowdown.

In this unprecedented crisis, government, industry leaders and other key stakeholders can play a critical role in helping SMEs cope with this crisis and revive small businesses.

A number of measures have been announced to revive MSME, such as unsecured loans INR 3 Lakh Cr, backed by a government guarantee on both principal and interest, making it easier for risk-averse lending channels, such as be banks, provide credit support for small businesses

 

 

In addition to government reforms, technology and technology services can help SMEs on an equal footing by providing them with the resources and opportunities to adapt to the new normal.

Let’s take a look at the many ways technology can help resuscitate small businesses in India.

 

How can the implementation of technology stimulate MSME growth in a post-Covid world?

SMEs are truly one of the sectors most affected by Covid-19. Small businesses, especially brick and mortar shops, are struggling to function due to the ongoing pan-India blockade and social distancing measures.

In this scenario, these companies need to embrace digital transformation and change their online business. It must also integrate technology into all critical areas of the function, such as inventory management, sales and marketing, accounting, customer service, and more, to optimize business performance, maximize efficiency, and stimulate business growth.

But digital transformation requires significant investment. At a time when almost all small businesses are facing liquidity crises, lending institutions such as banks and BNFCs, policy makers and other stakeholders can make a huge difference by adopting technology that can help businesses to receive capital without problems of endless waiting.

With the help of technology, financial institutions can reduce the cumbersome processes of soliciting and sanctioning old loans by digitizing the entire process. Innovative technology solutions can help automate small business risk assessment, which will greatly speed up lending processes.

 

Lenders can leverage data to create comprehensive credit profiles for potential borrowers and to identify potential risks.

Solutions such as AI and ML can help obtain information such as cash flow forecasts, loan repayment behavior, digital payment behaviour and so on for borrowers, especially those without a formal credit score.

Lenders also need to implement advanced technologies, such as ML-based cash flow analysis, which can help them differentiate pre- and post-Covid cash flows to better assess the solvency of SMEs. This will make loan application and payment processes more efficient, drastically reducing paperwork and bureaucracy. It will protect the interests of creditors and reduce the crime rate, providing easy access to credit for needy businesses.

This is especially useful for SMEs struggling to access credit through official credit channels.

 

In addition, it is encouraging to see the efforts of government, industry leaders and other key stakeholders to support vulnerable SMEs and give them a chance to fight by creating a technology-enabled entrepreneurial ecosystem. Initiatives such as the production of RY-approved KYC videos have greatly helped lenders to provide fast and easy remote integration services to small business owners.

A revolutionary government initiative that is revolutionizing India’s digital lending infrastructure is India Stack. As part of the Digital India initiative, it can help creditors provide credit to debtors, especially small businesses, through quick, hassle-free Aadhar-based authentication by reducing reliance on normally required financial documents such as account statements, statements taxes, GST deposits, credit history and so on. India Stack has also pioneered the introduction of account aggregation that facilitates the collection and sharing of consent-based financial data between customers and financial service providers for easier and more secure customer diligence.

 

Thanks to India Stack, there has also been a rapid growth of the digital payment ecosystem in India, with more and more companies adopting digital payment solutions. Therefore, it is time for credit channels to invest either in the digital transformation of small businesses or to partner with the right fintech platforms to help SMEs stay competitive.

 

In addition to technological innovations that can improve the ease of doing business for SMEs in the near future, measures such as more sovereign guarantee programs and increased liquidity to small and medium-sized BNFCs by the government can help investors provide last-mile financing. cash -MMSE hungry.

 

 

The MSME industry forms the backbone of our economy, generating jobs for over 100 million people, contributing about 29% of India’s GDP, which is poised to reach 50% by 2025. The digital transformation, along with reforms It is time to enable SMEs to recover from the economic crisis caused by the Covid pandemic, as well as to unlock their potential and help them thrive by becoming more agile, efficient and resilient. Thus, technology presents a huge opportunity to stimulate the growth of MSME in India and there has never been a better time to make the most of it to make our economy truly autonomous.

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