Conventional underwriting models will undergo a quiet requiem after the COVID-19 pandemic, teaching us a few lessons along the way, he said.
Nearly 50 per cent of micro, small and medium enterprises (MSMEs) have witnessed a 20-50 per cent impact on their earnings due to the disruptions caused by the COVID-19 pandemic, according to a survey. Even within the MSME sector, smaller-sized firms’ earnings were more affected by the pandemic, according to a joint survey conducted by non-banking financial company Magma Fincorp, and business school Bhavan’s SPJIMR.
The findings are based on responses from 14,444 MSMEs. The survey, conducted in the second half of May 2020, focussed on the financial impact of the pandemic on MSMEs and their outlook towards the earnings. “Almost half of the micro and small firms stated that the impact of COVID-19 on earnings was between 20-50 per cent,” the survey said. Both essentials and non-essential manufacturers and suppliers stated a similar impact on earnings, which is less than 50 per cent, it said.
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However, close to half the respondents in the non-essential sector were negative in outlook, compared to the 25 per cent for those in the essential businesses. More than two-thirds of the businesses surveyed were in the non-essentials business, and were from the southern and western part of the country.
Northern and eastern part of the country reported greater negative outlook among the geographical regions, it said.
The survey showed that the respondents seem to be far more positive about their own financial health, with 76 per cent rating themselves average or above average.
“Nearly 53 per cent of the respondents had availed of the government’s moratorium either from Magma or from other lenders. Around 51 per cent stated that they did not need to borrow,” it showed. Of the industries, health care, telecom, oil & gas, pharmaceuticals and fast-moving consumer goods (FMCG) displayed the highest positive outlook, while tourism and hospitality, gems and jewellery, power and utilities, and textiles and electronics displayed the highest negative sentiments, the findings showed.
The tourism and hospitality sector appears to be the worst affected in terms of impact on earnings, while the pharma sector is the least affected. Magma Housing Finance and SME Business MD and CEO Manish Jaiswal said, “The report is the revelation of the deep transformation that will be required in the underwriting standards, which will need to deploy a plethora of data trails and data emerging from multiple variables arising out of structured and unstructured transactions which have been ignored hitherto.” Conventional underwriting models will undergo a quiet requiem after the COVID-19 pandemic, teaching us a few lessons along the way, he said.