Six months into pandemic, MSMEs still hurting – ADB

by Czeriza Valencia (The Philippine Star), 30 Oct 2020

MANILA, Philippines — Six months into the pandemic, almost half of the country’s micro, small and medium enterprises (MSMEs) still suffer from diminished revenues and capital shortage, according to an assessment of the Asian Development Bank (ADB).

In a webinar yesterday, Shigehiro Shinozaki, senior economist of the ADB’s regional cooperation department, said while Asian economies moved to the recovery state, many smaller businesses in the region including those in the Philippines continue to suffer from sharp drop in demand and revenues.

The Manila-based multilateral bank conducted rapid surveys on the condition of MSMEs in four countries over a six-month period beginning from the declaration of the pandemic in March. The surveys covered small businesses in Indonesia, Lao PDR, Philippines and Thailand.

The first surveys were conducted from March to April while the follow-up surveys were done from August to September.

Key findings from the surveys showed that six months into the pandemic, more MSMEs in the Philippines have resumed operations but are doing so with heavily diminished revenues.

Around August and September, around 40 percent of MSMEs in the country still suffered from a 30 percent drop in revenues which is still expected to continue falling.

“In August and September, the number of MSMEs that temporarily closed business sharply decreased. So businesses have started reopening, suggesting the Philippine economy has moved to the recovery stage,” said Shinozaki. “However, a drop in domestic demand on MSME products and services has expanded further.”

More workers also returned to their jobs in August up to September but endured salary reductions.

Half a year into the pandemic, MSMEs in the country continued to be pressed for working capital. For most, funds for running their business will be exhausted in three up to six months.

To raise funds, most MSMEs still relied on their own funds as well as borrowings from families and friends. Toward September, however, their reliance on informal sources decreased as access to bank credit gradually increased.

On top of their immediate financial concerns were loan repayments and tax payments.

Shinozaki noted that from the start of the pandemic, most MSMEs desired financial support from the government in the form of zero interest or collateral-free loans, followed by faster approval of bank loans and tax relief.

To help businesses recover from slump moving forward, ADB urged governments in these countries to increase financial assistance for MSMEs especially in addressing loan repayments and tax payments.

The government is also urged to implement differentiated policy measures to address the specific needs of MSMEs per sector.