Micro, Small and Medium-sized Enterprises (MSMEs) are the growth drivers and the basis of livelihoods of millions of people around the world. MSMEs are manufacturing and service sector businesses, which generally employ less than 250 people. They often play a key role in the development of entrepreneurial skills and innovation.
Enterprises that fall within MSMEs category should be growing into thresholds that assure employment generation (by the adoption of labour intensive production), increased income/earnings and, ultimately, poverty reduction and economic prosperity.
Countries on the continent adopted a number of containment measures to curb the spread of the virus, including the closure of schools, restrictions on internal and international travel, use of hand sanitizer, improved handwashing stations, social distancing, and even lockdown, among others. While these measures may have contributed to the successful reining in of the virus, those same restrictions have hit business operations hard.
A recent survey carried out by UNCDF in West Africa among service providers of financial and non-financial services, indicates that the harshest consequences of the crisis will be experienced by MSMEs.
In West Africa, Micro, Small and Medium-sized Enterprises have experienced the effect of COVID-19 pandemic in many ways, from health and safety of employees and customers to supply chain and production activities. Unfortunately, these conditions have been unattractive to MSMEs in Africa which are made up of self-employment outlets and dynamic enterprises that are involved in several activities mainly focused in urban areas.
The UNCDF survey results shed some light on the specific barriers and challenges the private sector faces while highlighting the various initiatives these service providers have launched for their clients to adapt to the new normal.
Companies predict insufficient demand will be very problematic and anticipate that sustained difficulties of cash flow could eventually lead to bankruptcy. Although these constraints will most probably remain until the COVID-19 pandemic is over, the longer the virus lasts, the more risks businesses will face. Predicting that continued insufficient demand will be very problematic and anticipate that sustained difficulties of cash flow could eventually lead to bankruptcy. In the same way, the risks of layoffs, delays in reimbursements and reduced access to capital could arise. All of these risks threaten the existence of services providers that are active in rural areas and/or servicing MSMEs in agriculture and commerce.
For countries in the region to be able to compete effectively in the increasingly globalized environment and health challenges, its Micro, Small and Medium-sized Enterprises should grow and transform into thresholds where they will be able to adopt efﬁcient digital solutions. Use of technology for access to credit should also be escalated during this crisis. For instance, mobile money and other e-platforms can simplify loan application processes and reduce turnaround times of MSME loans.
To minimize the decrease in demand and revenues, businesses should launched a variety of new initiatives. In order to provide smooth access to their services, most businesses should be working on developing new marketing strategies, which indicate a strong desire to make a digital shift. In addition, building new partnerships allow retails businesses to increase sales through e-commerce platforms while helping overcome the difficulties that small producers face in selling their stocks. Online sales and cashless payments combined with home deliveries are developing across the region and could support the continuity of business for MSMEs.