How did India’s Women Enterprises Fare during the COVID-19 Lockdown?

Much has been discussed about employment and entrepreneurship in the immediate aftermath of the COVID-19 pandemic, which led to nation and statewide lockdowns starting in March 2020. The lockdowns were characterised by several factors that put India’s 6.33 crore micro, small and medium enterprises in jeopardy—closure of mandis and wholesale markets, transport restrictions, disruptions in supply chain and lack of procurement (Tankha 2020). Urban self-employed people were the most affected by the lockdown (Azim Premji University 2020). Enterprises faced a large drop in earnings, low sales and low customer footfall (Mint 2020).

The lockdowns left an approximate 17 million (Misra and Patel 2021) to 19.3 million women (Abraham et al 2021) unemployed in the immediate aftermath, between March and April 2020. It is noteworthy that the highly impacted sectors such as trading and services are dominated by women. Personal and non-professional services, comprising operators of small-scale enterprises such as tailors, dressmakers, petty shopkeepers, barbers and beauty-parlour owners, as well as domestic helps and part-time workers witnessed relatively high volatility compared to other sectors. The effect of the lockdown was clearly evident as male employment fell by 30% of its pre-lockdown level while female employment fell by 43% (Abraham et al 2021). 

While the impact of COVID-19 was disproportionate, recovery has also been skewed in favour of men. With men’s employment levels recovering by August 2020, in comparison to women for whom the likelihood of being employed was 9.5 percentage points lower than men when compared to the pre-pandemic period (Deshpande 2020). In fact, women were eight times more likely to have lost their jobs as compared to men, after controlling for factors like caste, religion, age, level of education, employment arrangement, industry, and state of residence. Self-employment may have served as a “cushion” for those who lost jobs—both in the formal and informal sector (World Bank 2020). Self-employed people were more likely to report “no effect” of COVID-19 on the state of their employment, ahead of temporary-employed and casual wage workers (Abraham et al 2021). Of those who had formal or informal jobs before the pandemic, about 20% shifted to self-employment (World Bank 2020). As a result of this unprecedented pattern of employment transitions, the overall composition of employment in India shifted noticeably. 

Women-led enterprises in rural areas, in contrast, have been known to be resilient during economic shocks in the past. However, what India witnessed in terms of long-drawn lockdown was unprecedented, and little is known about the impact of a complete closure, especially when women are faced with the burden of increased unpaid care work and limited cash reserves at a household and enterprise level. 

Looking at the financial scenario of enterprises during the pandemic, more (72%) women-led enterprises reported cash shortages than male-led (53%) enterprises (Buteau and Chandrasekhar 2020). More women entrepreneurs (69%) reported postponing loan repayments as compared to men (50%). However, two studies (Buteau and Chandrasekhar 2020; Chawla et al 2020) found that women were also more confident of full recovery of their businesses than men. In fact, they showed signs of adapting to changes brought by the pandemic, with more than 54% having already made a “business shift” like adding new products and services. Another 24% planned a business shift by the end of 2020 (Sunil 2020). 

Notwithstanding this optimism, and even as the economy recovers and enterprises get back on track, women entrepreneurs are facing several challenges. Women’s domestic workload has increased, thereby increasing their share of unpaid work (Salla 2020). Over 70% of women entrepreneurs reported increased household conflicts, compared with 53% of male respondents (Buteau and Chandrasekhar 2020). Women are also less likely to know about any government relief packages (76% as compared to 54% for men).  Moreover, several support services for entrepreneurs have shifted online, cutting access to those entrepreneurs who are not financially and digitally literate, skills that are found to be wanting among women.

Survey of Women-based MSME Entrepreneurs

Between the months of April and May 2020, the Government of India had announced four phases of lockdown to control the COVID-19 pandemic. Phase 1 (the very first of a series of lockdowns) lasted approximately three weeks (until mid-April) and was a national top-down approach with strict protocols to contain the movement of people, freight operations and daily businesses. Most businesses across a spectrum of scale and size reported closures/non-activity during this phase and its extension into Phase 2 (Kapoor et al 2020). Subsequent lockdowns were localised and offered more lenient protocols aimed at preparing the economy for gradual reopening. By the beginning of June, formal unlock processes were initiated nationally.

In an effort to examine the impact of COVID-19 on women-led MSME enterprises, we conducted a study over a duration of approximately six weeks (8 June–18 July 2020). The study involved a survey of over 2,083 non-agricultural enterprises across four states: Bihar, Chhattisgarh, Madhya Pradesh and Odisha. Specifically, the survey reached rural women entrepreneurs in the intervening period when the first of the unlock measures was announced in June 2020 followed by Phase 2 in July 2020. Small women-led enterprises for the purpose of this survey were defined as enterprises which are run from an establishment or from individual households, fall in the micro category of MSMEs and have women registered as owners. We employed a stratified random sampling approach to study our population of interest. MSMEs were classified according to the nature of operations (refer to Table 1).

Table 1: Number of Enterprises Surveyed According to Nature of Operations

Note: Figures in parenthesis are percentages.

Our findings highlight some of the financial and social distresses faced by these entrepreneurs at an individual, household and enterprise level. We acknowledge that our study has the limitations of a phone survey conducted during the lockdown. First, our study suffers from potential selection bias and positively skewed income and closure variables since entrepreneurs with lower household-level stress, or better business performance are likely to respond to survey calls. Additionally, not all information could be triangulated since the information was self-reported. Second, the survey was conducted at a time of peak stress across families and hence the responses on questions regarding time use and stress levels, even among those who consented to the survey, are likely to be over-reported. We also acknowledge that the pandemic may be a contributing factor to business outcomes, but cannot be attributed as the sole reason for business performance. With this caveat, we would also like to clarify that the intent of the survey was to capture market sentiment among women entrepreneurs while understanding the household dynamics at play. 

Eighty-percent Revenue Drop in Three Out of Four States

Revenues of most businesses reduced significantly during the lockdown months, with median revenue for April being reported as zero across businesses.¹ Given the survey was fielded as soon as unlock guidelines were announced, there was an improvement in revenues with most businesses reporting a median revenue of ₹800 between June and July. This however was still 72.5% lower than the median revenue reported for February (₹3,000), which has been assumed as a proxy for pre-COVID-19 income levels (Figure 2).

Three out of four states reported over 80% drops in revenues. With supply chains disrupted, production units saw the largest decline in revenue, with most reporting zero revenue for April, May, and June. Trading enterprises seemed to fare much better than others—they did not report zero incomes for any of the months. This can perhaps be attributed to most trading enterprises being kirana stores in our sample, which by virtue of their nature fall under the essential commodities category and were thus exempted from some of the lockdown guidelines.
At the time of our survey, most businesses had sufficient cash reserves and revenue to last them approximately 29 days, given their monthly business expenditures at the time. 

Women-led Enterprises and Closures

One of the unintended and adverse consequences of the lockdown was business closures. In our entire sample of 2,083 women-led enterprises, for most businesses the operations were only partially interrupted (44.6%) or temporarily closed (36.0%), our study found that 10.9% of women-led businesses had permanently closed down during the initial lockdown itself (April-May 2020).² As the lockdown restrictions slowly began to ease in June-July, the permanent closures marginally increased to 11.5% of the sample. 

Nearly 46% businesses that were permanently closed had no intention of starting another business, 27.8% of businesses were unsure, and 26.4% were affirmative in their intentions of starting a new business (refer to Figure 3). It was alarming that almost one in two permanently closed enterprises reported no intention of starting a new venture in the foreseeable future (refer to Figure 3). 
This is of relevance because it depicts the potential impact market shocks (in this case induced by a pandemic) on further marginalising women’s representation in the entrepreneurial ecosystem. With limited social capital and sudden disruption in business operations, business outlook was severely affected. Promisingly, however, of those permanently closed enterprises that wished to begin a business again (nearly one in two), most anticipated starting a new business within a week (23%), signalling market optimism among some (refer to Figure 4).

Increased Time and Care Burden Resulting in De-prioritisation of Business

Undoubtedly, the impact of this pandemic was disproportionately higher for women than their male counterparts, both within the household, and outside of it in an enterprise setting. Wenham et al (2020) state that worldwide closures to control the spread of the coronavirus might have had a compounding impact on women's physical and psychological health, as they bore additional caretaking responsibilities in addition to doing other household chores, with little to no support from male members of the family. 

Our survey finds that while women were spending less time on their businesses, they had perhaps internalised social norms regarding unpaid work and caregiving responsibilities (refer to Figure 6). Despite women reporting a decrease³ in time spent on their own entrepreneurial efforts, most women felt that the time they spent on taking care of family members, running a household, or time spent on assisting their spouse's business had in no way changed and in fact, it had stayed the same. Others felt that the time spent on household work (43%) and unpaid work (38%) had only increased during the pandemic (refer to Figure 5). This is further corroborated by questions on stress levels, where women entrepreneurs consistently reported moderate to extremely high levels of stress regarding household responsibilities, staying locked in and household expenses (refer to Figure 7).

Another consequence of lesser time spent by women on their own businesses was the de-prioritisation of their own businesses within the household: for 48.4%, their business was the primary source of income for the household, but post COVID-19, the numbers went down to 36.2%.

Low Risk Appetite and Business Recovery 

Most of our respondents (65.6%) had no loan obligations at the time of the survey, signalling a low-risk appetite. This is corroborated by the fact that 80% of surveyed women entrepreneurs did not take enterprise related loans even during the lockdown, which was marred by limited cash reserves and low market demand. Even among loan takers, formal channels⁴ (42.5%) remained the preferred source, followed by informal channels,⁵ before seeking support from friends and family. 

Over three-fourths of the respondents dipped into personal savings (46.3%) and business cash reserves (41.9%) to financially cope. This can be possibly explained by two reasons: either most women-led businesses seeking financial assistance were unable to access emergency credit/loan facilities or unwilling to approach channels of credit that were tied to debt. Given that most businesses chose to dip into their own savings and did not use loans as a means to financially cope/support their businesses, it comes as an interesting find when women businesses were asked what form of support they would find most helpful. One out of every two women or 47.6% responded that availability of new funds would perhaps be the most helpful support that would help them achieve their pre-COVID-19 level of operations.

Although the two findings appear to be contradictory, they reveal, almost unambiguously, credit preferences of small women-led businesses. A clear use of own savings, not using loans and higher awareness (and use) of schemes related to cash reserves reveals that there is a clear preference for non-debt forms of monetary assistance. Shocks to the system perhaps make women entrepreneurs more risk averse (Byder et al 2019) to opt for financial resources that involve debt payments, instead choosing to carefully opt for financial sources that circumvent debt traps. Moreover, the loans available either offer a small ticket size if non-collateralised, or women may not have the required assets for securing a loan.

With poor social networks, and low self-efficacy affecting risk preferences (Koellinger et al 2011), this finding is pertinent as it brings to light the importance of government aid through direct cash transfers and short-term interest free loans among other low-risk financial products. It also indicates a ready market for innovative micro-insurance and flexible loan products for helping small women-led businesses tide over difficult times and hit the reset button.

Resurvey of Women with Permanently Closed Businesses 

We acknowledge that our survey was undertaken at a time when businesses were just beginning to reopen and faced an extraordinary crisis, and hence several questions on Likert-scales or psychometric parameters were avoided. In view of these limitations, we revisited enterprises that reported permanent closure (that is, 239 enterprises) during our survey in June–July 2020, and re-surveyed 205 enterprises in November 2020 to understand how they were faring after the ease of COVID-19 restrictions. 

With government efforts to ease mobility restrictions, and with markets slowly returning to normalcy, many of our respondents have resumed business operations. Around 73% women who had thought to have permanently closed their businesses have reported commencing business activity with a majority of them (97%) resuming the same business as before. This proportion was higher among women running individual-led enterprises and trading enterprises.

The key factors that were pivotal⁶ in restarting a business were an increase in demand due to festivities (60%), a prolonged period of closure with limited means for household income (44%), easing of lockdown restrictions (41%) and an increase in general demand (39%). While this is positive news, most of these decisions were a result of necessity and do not necessarily signal business outlook or keenness to grow one’s business. It is also important to note that only 1% of the respondents reported that they restarted their business because of the support received from government schemes. 

When asked about the source of motivation to reopen or start their business, 19% cited that they took the decision themselves, 20% cited they had to open to either handle the household expenses or to improve their family’s financial situation. Fifteen percent were primarily motivated by a rise in demand and/or customers getting back, including those during the festive/wedding season and 1% did so because of motivation received by their self-help group (SHG) members. 

In terms of external help, 17% responded they received some help from their SHG, 1% received help from banks, 2% received help from friends or relatives while a significant 68% reported they received no help whatsoever.

Around 55% of the businesses reopened within two months of ease of lockdown restrictions (1 July onwards). While the businesses have shown resilience and have restarted operations, around 58% of women reported that although there has been an increase in their income since the last time we spoke to them, business activity has not reached previous year levels. Eighty-three percent reported that business level was lower compared to last season. This comparison to the previous year's sales was to account for the festival of Diwali, which also marks the peak sale season for most businesses.

Conclusion: Interventions and Support Needed 

Special measures were announced in the COVID-19 stimulus package for the MSME sector in May 2020. The government had announced a broad-spectrum of support in the form of collateral-free automatic loans (with moratoriums), credit-guarantee scheme,⁷ subordinated debts for promoters, equity support through mother–daughter funds, changing the definitions of MSME to be more inclusive of slightly larger firms, promoting e-market linkages (due to the inability to have trade fairs given the pandemic) and even banning foreign tenders for government procurement⁸ to promote and support local Indian businesses. The RBI too offered its support by strengthening financial institutions⁹ that lent to these enterprises and infused much needed capital into the cash-strapped sector¹⁰ (Borpuzari 2020).

Promisingly, many of these COVID-19 measures have been taken forward into the budget of 2021 and have been expanded to better support the MSME sector. The allocation of the budget this year towards the MSME sector itself has been doubled from last year (to ₹15,700 crores) and a lion’s share¹¹ is allocated to one scheme that the government initiated during the COVID-19 pandemic—the GECL (the Guarantee Emergency Credit Line)¹² (Khan 2021). This scheme aimed at reassuring risk-averse banks (or member-lending institutions) to restart lending to these stressed businesses with a 100% credit guarantee.

These measures are a welcome step to support businesses; however, there have been concerns of neglect of micro enterprises, given that many of these measures can only be availed by businesses of a certain size, scale, and agency (Ghosh 2020; Sharma 2020). More specifically, small businesses in the unorganised sector, perhaps the most in need of assistance at a time like this, may not have the resources or skills to avail the benefits of these schemes. 

This year some of the schemes that have seen a budgetary cut have supported the small, rural and traditional enterprises. Schemes that fall under the development of Khadi, Village and Coir industry have seen a 40% drop in outlay, the Scheme for Fund for Regeneration of Traditional Industries has seen a drop of ₹63.42 crore year on year and the ASPIRE scheme (for promotion of Innovation, Rural Industries and Entrepreneurship) has also seen its allocation halved (Khan 2021). Although it does make sense to reallocate the budget to the GECL given that the beneficiaries of the credit guarantee scheme are far greater than these schemes (MSME Annual Report 2020: 7) it does leave room for thought to retrace the vast map of the medium, small and micro enterprises landscape in India, the position of women entrepreneurs in it and where does it leave them. 

As per the 73rd round of the National Sample Survey (2015–16), overall women make up 20% of the total MSME landscape and 99% of the MSME enterprises are in the micro category.¹³ Within the MSME landscape, women make up 20% of the micro enterprises, and only 5% and less than 3% of small and medium enterprises respectively (MSME Annual Report 2020: 295, Table 2.4). The extent of unregistered businesses is also generally agreed to be above the 90% mark, as per various sources (Pandey and Pillai 2020; Mehrotra and Giri 2019). This is in fact also corroborated by our study, where over 81% of women businesses were unregistered. 

This brings us back to the agency problem of women-led businesses. Many women entrepreneurs may find themselves unable to actually avail the benefits of these schemes and/or may not find these schemes designed to aid them. Our study found that while awareness of any COVID-19-related government (state or central) scheme stood at 96.3%, the actual application/availing of these schemes was only 35.9%. In fact, the schemes that most women were aware of and availed of were the ones related to direct cash transfers. Many women (53.7%) did take advantage of support from SHGs and financial assistance in the form of loans from SHGs was the most sought out form of support from SHGs (42.6%),¹⁴ which shows that women are perhaps tapping into the micro ecosystem to support their businesses. Perhaps there is merit in a greater need to study, understand and design financial instruments that specifically cater to the needs and risk-appetite of women entrepreneurs, most of whom fall in the micro-unregistered sector. 

The intersectionality of gender and entrepreneurship has received much attention in recent years, but there has been less progress when it comes to offering solutions with a gender lens. As markets return to normalcy, and the economy inches towards growth and recovery, it is important to acknowledge this gender dividend and the social and economic potential they hold the key to.