How to revive sick Small & Medium Enterprises (SMEs) and sail through the pandemic?

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Small and medium enterprises (SMEs) are businesses whose employee numbers fall below certain limits. The acronym “SME” is used by international companies such as the UN, World Trade Organization, and the European Union.

The start of the pandemic has affected every level of the economy. Small and medium-sized enterprises (SMEs) are in an exceptionally difficult situation. The government has executed a substantial number of plans aimed at addressing the needs of SMEs. The plunging command has forced them to lay off laborers, and many of them don’t have the assets to live in this climate. In many nations, up to one-third of SMEs could shatter in three months of when the pandemic began in their nations. But their possibility will be critical to any post-crisis recovery. The SMEs account for two-third of international employment and half of the GDP. A failure to save them could put the entire world economy at high risk. SMEs have the ability to be an economic and employment engine after the hardship, but successful government feedback now will be critical. The hope of an eventual recovery depends on it.

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Importance of SMEs :
In almost every section, SMEs are an important part of the financial system; they are not only proprietors however additionally customers to larger corporations across the supply chain. Their survival and capacity to proceed with operations rapidly are a bellwether for the financial system as a whole. SMEs account for 45% of total employment in emerging countries and around 70% in OECD countries. The sudden, dramatic loss of demand seriously influences the capacity of SMEs to operate, and therefore shutdown increases unemployment.

These actions are very essential, in order to maximize their impact, policymakers might take into account four supplementary actions:
1. Easing SME access to government support.
2. Authorizing the support scheme through an ‘SME nerve center ‘.
3. Sharpening target on building a viable and resilient system

India is managing the consequences of the Covid-19 pandemic using new public health and economic measures. With adverse outcomes looming massively on the economy, relief interventions will have to be compelled to minimize permanent injury to lives and livelihoods. Among the many parts of the economy that require immediate attention and assistance are the micros, small and medium enterprises.

Given the clampdown on economic activity in the past few weeks, it is unquestionable that a vast number of these units will be choked, possibly to the point of perpetual closure.

  • Measures to diminish impact On SME labour workforce:

99% of the SME sector enterprises are categorized as micro, it is very clear that a large percentage of the 11 crore people employed in this sector work in these vastly informal enterprises. Remuneration support could be made available to workers employed in such sectors. In the case of Brazil, the government has decided to pay a part of the salaries of micro and small units. Countries such as Canada and New Zealand have offered salary subsidies (capped) for a fixed period of three months.

  • Measures For Self-Employed Or Owner-Managed Enterprises:

It will be analytic that the self-employed SMEs tend the security net needed to navigate this crisis. There could also be room to compensate self-employed businesses who can prove a decrease in turnover. The government can approve such compensation subject to demonstration of reduced income, as an example, by way of documented decline in predicted revenue thanks to canceled orders, restricted movement of products and labour, etc.
The framework could also make it imperative for businesses to draw up income forecasts for a way they’re going to operate if compensation were provided for a hard and fast time period. The policy framework must account for self-employment separately since this includes hawkers, small shopkeepers, those offering private services like plumbers, electricians, drivers, etc. who don’t fall under the regular or casual salaried workers in other enterprises. Germany and New Zealand have offered direct subsidies to one-person businesses and micro-units.

  • Measures To Defer Utility And Social Security Payments:

Treatment of economic electricity, water, and other utility bills might be examined especially during a scenario where lockdown is extended further. it’ll be extremely beneficial for units to be offered deferment or be required to only partially pay property taxes, rent, and other utilities so as to avoid further costs and liquidity shortfalls since payment of employee’s salaries should be a priority for enterprise owners. Many countries have introduced such interventions for little businesses; Singapore, China, and Belgium for instance.

In India, the government has currently proposed to pay the workers Provident Fund contribution for businesses having 100 workers, where 90% of those employees earn but Rs 15,000 per month. Such contributions amounting to 24% of wages are going to be credited to PF accounts for the subsequent three months. While this is often estimated to profit 80 lakh employees and incentivise 4 lakh establishments to retain their employees, it’s unclear thanks to lack of data during this regard, what percentage MSMEs will enjoy this measure. The Miscellaneous Provisions Act is presently applicable to businesses with 20 employees or more whereas most of the small and micro-businesses that contain 99% of all SMEs are known to possess between 5–10 employees. This makes most small, informal economic units ineligible to possess PF accounts for his or her workers and thus are excluded from availing this relief measure.

  • Measures to reinforce access to credit:

The formal credit channels like NBFCs and banks will have to play a way huge role in making capitalism easily available to the present sector. MSME credit forms a really small percentage of total outstanding bank credit with credit growth to the present sector portraying signs of decline quite before the pandemic struck.
While SIDBI could play a task in encouraging banks to lend to SMEs, a feasible lending model for this category has got to be determined, one where banks are encouraged to change with lending strategies and practice due diligence. This may be only possible as long as lending to the present sector is formed a core commercial activity for banks, and isn’t just at the instruction of priority sector lending norms where PSBs focus 60% of such lending only at micro-segments.
Structural changes to lending practices for this department are well behind schedule. It’s time to broaden the role of finance lenders. Given the present financial climate, digital finance lending platforms are going to be better suited to supply unsecured loan products given most enterprises within the micro and little business spectrum will have higher risk profiles. Since these platforms use historical cash flows and check future enterprise potential, it’s time that they’re allowed to be further embedded within the lending ecosystem for the SMEs. The Economic Survey 2019–2020 highlighted the necessity for PSBs to embrace fintech lenders and collaborate with them to form faster and safer lending choices using the analytics tools the latter utilise to assess the creditworthiness of small businesses, enhance rotate time in application processing and disbursal processes.

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Revival plan:
Apart from such measures, it is imperative that a setup needs to be drawn to permit businesses to open activity, during a phased manner and with social distancing norms. Regular and even surprise checks are introduced to enforce state pointers. Whereas, it’s necessary to currently interact with the concept of slowly restarting business operations in areas with low infection levels, albeit with necessary and very important preventative measures in place. Covid-19 could be a crisis with an associate in a nursing unpredictable ending. What’s clear although is that government and businesses both massive and small will get to work along to confirm the protection of staff, be prepared for risk management in terms of phased re-starting of business operations, and be ready and open to structural changes in business activities. German software SAP is more and more specializing in digitally remodeling small, tiny and medium enterprises SMEs in Bharat by serving to them migrate to the cloud.

In an interview, Kulmeet Bawa, president & manager of SAP Indian landmass, talks regarding the priorities of the firm, concentrate on the SME sector, and the way it’s serving to customers adopt digital technologies. Emended excerpts: “What area unit the key business priorities for SAP in India? SAP has forty-eight years of sturdy and made the history of innovation. In India, SAP has seen customers transition from the mainframe age, to the consumer server era, and currently taking onto the cloud. Strategically, I feel SAP is an associate in nursing beginning purpose of changing into a real cloud company that is additionally vital in today’s context. I even have experienced it and am a firm believer that cloud technologies area unit instrumental for businesses to form use of massive information and to develop new business models. The requirement to be a digital Associate in Nursing doing it in an agile method on the cloud is imperative. Our aim is to elevate client expertise and build it easier for them to not solely have access to the correct solutions. However, the business values that may facilitate them run higher. I’d additionally wish to add a great deal of stress on the potential of tiny and medium enterprises (SMEs). How area unit you sound into the SME segment? SAP is ready to support and change the SME market by serving to them embrace medical aid, concentrate on upskilling their manpower, and enhancing overall business worth. Our recently launched world Republic of India Program is intended to change Indian SMEs to become globally competitive by mobilizing them with digital technologies. Around eightieth of SAP India’s customers are SMEs. What we tend to wish to do is facilitate SMEs to maintain their vision, speed, and adaptability, and that we stand sturdy to support them in clutch digitalization, specializing in upskilling their manpower and enhancing overall business worth. The Global Republic of India can change SMEs to become future-ready whereas, driving larger efficiencies by adopting three initiatives: gaining access to the world marketplace, digitally expertise manpower, and digitally remodeling businesses.”

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What’s the strategy to sail through the pandemic?

Identifying trends impacting the marketplace such as supply backlogs, job posting reduction, increased e-commerce order volumes, etc. Shifting computing resources to cloud products to help customers continue running and offer digital solutions. Automation of processes and making them more intelligent.

How are you helping your customers go digital?

There are so many small and medium Enterprises that under-utilize social media. Here are some ways in which you can utilize social media in order to grow your businesses and benefit perfectly from their reach.

  1. Use the right platforms by finding out where your target audience spends their maximum time.
  2. Do not forget to do a ‘social media audit’ to ensure that your Social media marketing plan is effective and aligned with your business goal.
  3. Have a plan, set goals, and continuously do quality checks and adjustments to ensure maximum efficiency.
  4. Follow the 80/20 social media rule. According to which 80% of your social media content should inform, entertain and educate your audience. The other 20% should directly promote your business.
  5. Schedule your posts for the times you have the highest engagement.
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Here are some social media habits that drive your target audience away:

  1. Your target is based on sales and not on engagement.
  2. You are communicating with the wrong target audience.
  3. Your response time is slow.

Make sure to avoid the above habits in order to grow your SME.

What is the reason behind your low engagement rate on social media?

  1. Your content is either self-centered, un-engaging, boring, or all of the above.
  2. You are not well educated about the social media algorithm.
  3. Your content is not providing knowledge, solutions, value to your customers.
  4. Your content is not about innovation and connections.
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Good times and difficult times, everyone has to go through this cycle. All businesses desire to function at their best. Businesses need to adapt to changing markets and business models. Digital transformation was the main item on many business agendas long before covid, but the pandemic took it to the top of the priority list for virtually every organization in the world. Helping businesses succeed always starts with the customer and not technology. It is recommended to embrace a mindset shift regarding the business outcomes rather than a rapid adoption for the sake of innovation. Secondly, partnership, direction, and knowledge are the game-changers, so choose the right partner. Finally, customers need to adapt, stay agile, deliver quick time to value, and become integrated businesses.

“SMEs are the backbone of the economy and deserve urgent financial stimulus and a safety net.”

Contributed By- Vishakha Vijay Changedia, Content Writer at Mitti Ke Rang

A social venture dedicated to empowering widows and single women to overcome poverty and dependency.