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‘42% of MSMEs and small businesses are in direct risk of failure in the next 6 months and irrespective of an economy’s level of development’
A staggering 96% of micro, small and medium enterprises (MSMEs) in Bangladesh lost income during the Covid-19 pandemic, according to a recent study.
MSMEs in the country reported a median loss in business of 82% during the “national holidays” and customer footfall reduced by an average of 67%, it added.
The findings of the study were disclosed in an online workshop, titled Assessment of the impact of Covid-19 on MSMEs in Asia and Africa, on Thursday. The workshop was supported by Swiss Capacity Building Facility (SCBF) and MicroSave Consulting (MSC), said a press release.
The study was conducted by MSC with support from the Bill and Melinda Gates Foundation, MetLifeFoundation, Swiss Capacity Building Facility, and Mastercard Foundation.
At the workshop, MetLife Foundation Financial Health Strategy Lead Evelyn Stark remarked that one of the biggest coping mechanisms observed during the pandemic is an increase in savings into more formal products such as mobile wallets and credit unions.
Furthermore, there has been a decrease in the demand for credit from the masses, but an increase in the demand for credit from MSMEs as they look to restart their businesses.
Payal Dalal, senior vice president (social impact, international markets) at Mastercard Centre for Inclusive Growth, said: “42% of MSMEs and small businesses are in direct risk of failure in the next 6 months and irrespective of an economy’s level of development, size, geographical location, women have been disproportionately more vulnerable to the economic consequences of this pandemic.”
Mike McCaffrey, East and Southern Africa regional manager of UNCDF, and Mark Napier, CEO of FSD Africa, were also among the panellists. The workshop was moderated by Graham AN Wright, group managing director of MSC.
The MSME sector in Africa and Asia will need a three-pronged approach to kick start the road to recovery. The support will need to come from governments, regulators, and financial service providers as well as private sector players, said the press release.
Reports from Kenya indicate MSMEs were showing signs of recovery once the markets reopened. Measures taken in Kenya that could show the way for Bangladesh include the reduction of SME Turnover Tax from 3% to 1%, an increase in the cap for those liable to pay the levy from $50,000 to $500,000 and exemptions for small-scale businesses with annual sales less than $5,000, according to the panellists.
“The Covid-19 pandemic has been a huge test on financial inclusion and there is an urgent need from donors, private sectors and governments to really focus on supporting the low- and moderate-income populations and MSMEs on their journey back to recovery to avoid the risk of them falling back to the vicious cycle of poverty and indebtedness,” they added in the press release.
(DT)
