September 28

Analysis: The Precarious State of MSMEs: Understanding the Impact of COVID-19 and Opportunities To Support Their Recovery

By Aeriel Emig, Lauren BraniffKatia Huayta Zapata, Shradha Modi,

Imagine you’re a small business owner in March 2020. You support your household with a food stall at the local market and have just hired your first two employees to meet increased demand. You’re able to put some of your income into savings, building a comfortable financial cushion for your business and your family. As the COVID-19 pandemic begins to reach your community, the market shuts down to prevent transmission of the virus and your previously healthy business income disappears nearly overnight.

Without the income the market normally provides, you cannot afford to continue paying your employees, so you let them go with a promise to bring them back after these temporary measures have passed. As it becomes clear that the pandemic will continue far longer than anticipated, you dip into your savings to pay necessary household expenses. The market eventually reopens, but with strict capacity restrictions and fewer customers than ever, and you cannot yet afford to hire either of your employees back. Months later, your savings have been exhausted, your income is a fraction of what it once was, and you find yourself skipping meals so that your children can eat. You turn to loans to keep your household and business afloat, but often skip loan payments in favor of paying household bills. Your once-thriving business is now barely able to keep you and your family housed and fed, and there’s no end or help in sight.

Source: Center for Financial Inclusion (link opens in a new window)

Coronavirus, Finance, Impact Assessment
financial inclusion, MSMEs