Supporting small businesses through COVID-19 crisis

27Jun 2020
The Guardian
Supporting small businesses through COVID-19 crisis

The UN General Assembly in April, 2017 declared 27th June as Micro, Small and Medium-sized Enterprises Day, recognising the importance of Micro, Small and Medium-sized Enterprises in achieving sustainable development goals and in promoting innovation, creativity and sustainable work for all.

Small businesses, including those run by women and young entrepreneurs, are being hit hardest by the economic fall-out of the pandemic. Unprecedented lockdown measures enacted to contain the spread of the coronavirus have resulted in supply chain disruptions and a massive drop in demand in most sectors.

To continue playing their crucial role in creating decent jobs and improving livelihoods, small businesses depend more than ever on an enabling business environment, including support for access to finance, information, and markets.

Let's not forget that these enterprises, which generally employ fewer than 250 persons, are the backbone of most economies worldwide and play a key role in developing countries.

According to the data provided by the International Council for Small Business (ICSB), formal and informal Micro-, Small and Medium-sized Enterprises (MSMEs) make up over 90 per cent of all firms and account on average for 70 per cent of total employment and 50 per cent of GDP.

That is the reason why the General Assembly decided to declare 27 June the Micro-, Small and Medium-sized Enterprises Day to raise public awareness of their contribution to sustainable development and global economy.

These types of enterprises are responsible for significant employment and income generation opportunities across the world and have been identified as a major driver of poverty alleviation and development.

MSMEs tend to employ a larger share of the vulnerable sectors of the workforce, such as women, youth, and people from poorer households - populations with high vulnerability in times of COVID-19. MSMEs can sometimes be the only source of employment in rural areas. As such, MSMEs as a group are the main income provider for income distribution at the “base of the pyramid”.

Smaller businesses can be agile in response to a changing world. We have seen multiple examples during the pandemic, but their size also makes them vulnerable. Access to finance is a primary obstacle. Identifying international market opportunities and navigating trade-related procedures can be harder for small businesses than for their larger competitors.

Small and medium-sized enterprises (SMEs) or small and medium-sized businesses (SMBs) are businesses whose personnel numbers fall below certain limits. The abbreviation SME is used by international organisations such as the World Bank, the European Union, the United Nations and the World Trade Organisation (WTO).

In developing countries, smaller (micro) and informal firms, have a larger share than in developed countries. SMEs are also said to be responsible for driving innovation and competition in many economic sectors. Although they create more new jobs than large firms, they also suffer the majority of job destruction/contraction.

Micro financing in Tanzania started in 1995 with SACCOS (savings and credit cooperative organisation) and NGOs. It has since then contributed to the increasing success of international micro financing. Microfinance stills remains a relatively new in Tanzania since it has not penetrated yet. Since 1995, microfinance has been linked to poverty alleviation programmes.

The government made efforts to ensure commercial banks have continued to provide financial support to the small entrepreneurial business. However a microfinance National Policy was implemented in 2002 to encourage and support microfinances in the country.  Since the implementation, micro financing was officially launched and recognized as a poverty alleviation tool. Due to its increase exposure and use in the nation, commercial banks have developed interests in to offer microfinance. There are various microfinance banks that functions as supporting institutions in the country that usually provide microfinance services.