Essay topic: COVID-19 Impact on Micro, Small and Medium Sized Enterprises (MSMEs)

By: L.L.Rupnarain

The COVID-19 pandemic is among the deadliest contagious diseases to have emerged in recent
history and its economic ramification has been felt by micro, small and medium sized enterprises
(MSMEs) worldwide. MSMEs are the backbone of many economies worldwide that provide
income and employment generation to a large number of people around the globe. This essay
focuses on the main influential factors that have contributed to the closure of many micro, small
and medium sized enterprises (MSMEs) worldwide due to the increasingly rapid spread of the
novel corona virus (COVID-19).

Many small businesses were faced with the challenge of transacting business under strict
regulations due to the spread of the novel corona virus. “The corona virus pandemic is causing
large-scale loss of life and severe human suffering globally” (OECD, 15 July 2020). With deaths
and new cases increasing worldwide, strict lockdown was enforced upon citizens. Was this
action consequential? Will people be able to cope with this unprecedented lockdown? Will
businesses survive? These are the questions we need to ask. It is undeniable that hard choices lie
ahead. While the statistics on the COVID-19 contagion show differences across countries and
regions, the deep economic consequences of the health crisis are without question. As a result,
micro, small and medium-sized enterprises (MSMEs) are suffering around the world, including
in geographic regions not (yet) heavily affected by the virus itself.

Studies done have confirmed that more workers and customers were staying indoors and supply
chains disrupted by the lockdown, almost half of MSMEs economic activity have either been put
under stress or totally affected. Small Businesses provide 70% of jobs globally and nearly 9 out
of 10 are experiencing shortage of cash. According to ITC Covid-19 Business Impact Survey,
indeed, small businesses are particularly vulnerable: they tend to have fewer assets and limited
cash reserves to cushion the lockdown-induced liquidity shortages. The ITC COVID-19 Business
Impact Survey gathered evidence on how the pandemic affected 4,467 companies in 132
countries. Analysis of this data collected from 21 April –2 June 2020, shows that the pandemic
has strongly affected 55% of businesses (International Trade Centre SME Competitiveness
Outlook, 2020).

Moreover the pandemic-related challenges add on to the existing, well-known trade obstacles
encountered by MSMEs, and therefore undermine progress towards more inclusive trade.
Nevertheless, it is quite clear that enterprises around the globe are experiencing the significant
impact of COVID-19 outbreak on their businesses. We argue that major victims of COVID-19
outbreak are the micro, small & medium-sized enterprises (MSMEs) because MSMEs, in
comparison to large enterprises, usually do not possess sufficient resources, especially financial
and managerial, and are not prepared for such disruptions likely to go longer than expected
(Bartik et al., 2020; Prasad et al., 2015). Governments around the world implemented measure to
safeguard its people from Covid-19. Can the government do it alone? It is in everyone’s interest
that regulations are adhered to and that common safe practices guidelines are implemented in
every MSMEs enterprise to help reduce the impact of this pandemic.

Besides COVID-19, many epidemic outbreaks had occurred globally such as SARS, MERS,
Swine flu pandemic (2009 H1N1), 2014 Ebola outbreak, ZIKA outbreak among others (Auzzir
et al., 2018; Eggers, 2020; Kim et al., 2020). These crises have a significant impact on the
society, economy and MSMEs; moreover, these events not only cause economic losses but also
create a severe threat to business continuity. Further, Prasad et al. (2015) argue that due to
natural disasters, the disruption of supply chain occurs globally, and in case of significant
disruptions, the MSMEs enterprises are adversely affected even if they are not directly affected
by a disaster.

In addition, since MSMEs are financially fragile, smaller in size and resources, they are more
vulnerable to the environmental crisis than their counterparts, i.e. large enterprises (Asgary et al.,
2020; Bartik et al., 2020; Eggers, 2020; Prasad et al., 2015; Samantha, 2018; Williams and
Schaefer, 2013). MSMEs tend to be vulnerable when there is a global disruption such as
pandemics and economic crisis because they have fewer resources with which to adapt to a
changing context. Hoorens, S., Hocking L., and Fays, C. (2020) state that this crisis is worse
than we have seen since the 2008 global financial crisis and the 2015 oil price crash.
Governments tried their best to offer reliefs, put guaranteed loans, reduce interest rates on
lending and directing lending facilities but despite this MSMEs were unable to ramp up
productions because of disruption to workers and supply chains due to lockdown and restricting
the movement of people. Both supply and demand side for MSMEs have been affected and this
adds to help cripple the ability of businesses to remain viable or even sustain their operations.
Arunachalam and Crentsil (June 8, 2020) highlights that although measures were put in place to
contain the spread of COVID_19, such as lockdowns and quarantines, it have also led to further
affect the availability of labour and movement in the supply chain which intern affect
production.

I did however had the experience of witnessing the drastic impact of covid-19 on businesses in
my country. Working in the tourism industry has given me the opportunity to interact and
communicate with businesses and customers. My department focuses on helping small
businesses to sustain their business and providing services to those desperately in needs. What I
found out is that many businesses embarked on furloughing employees while some had to
completely layoff some. Also, Government was not prepared to look at individual industries to
provide direct relief but did provide an across the board relief for citizens.

The reasons above substantiate the fact that Covid-19 pandemic will bring about several changes
to business operations. Many MSMEs will cope with the economic fall-out from Covid-19 by
reducing their production of goods and services to match demands. MSMEs are also negotiating
wage modifications with employees, revised payment with banks and suppliers and diversifying
their sales channels or products to help reduce the effects of this crisis.

In concluding, Covid-19 has really impacted heavily on MSMEs by disrupting jobs, supply
chains and permanently closing outlets but businesses are riding the economic tides by making
hard decisions and working in partnership to cushioning the impacts and recover. Despite the
significant struggles that MSMEs face, the government response to the COVID-19 pandemic can
help nurture a positive, resilient, and sustainable future for small businesses around the world.
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