The General Assembly of the United Nations has devoted 27 June 2020 to celebrate Micro, Small and Medium-Size Enterprises (MSME Day). Around the world, MSMEs make up over 90% of all firms and account, on average, for 70% of global employment and 50% of GDP.
Coronavirus has hit MSMEs hard, not just in the UK but globally. From supply chain disruptions, and a dramatic drop in consumer demand, to cashflows drying up, the challenges faced by entrepreneurs and SMEs is extraordinary.
But everywhere we look, we see examples of creativity and innovation, with MSMEs finding unique ways of reaching and supplying their consumer base during lockdown. Restaurants have been delivering takeaways, independent bookshops have supported customers with online reading groups, and manufacturers have discovered new markets.
Sadly, not all MSMEs will survive the damage wrecked by the global pandemic. And many who do make it through will carry the scars of redundancies and abandoned projects. Furthermore, according to the United Nations:
“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”. “
For this reason alone, it is vital governments and communities come together to support what is the backbone of the world’s economy.
What MSME’s around the world need to survive
The International Labour Organization has identified five things MSMEs need to protect their business and employees:
- Better access to finance and working capital to help with short term cash flow. This can be via grants, loans, and/or tax exemptions.
- Boosting demand for products and services, such as supporting shifting production to Covid-19 necessities.
- Protecting employment and providing social protection in the form of wage subsidies and/or training programs.
- Support to help businesses adapt to the new normal after the virus has been contained.
- Encouraging social dialogue and social cohesion to help employers and employees find the resilience to face difficult times together.
Although it is natural for governments to face (often well-deserved) criticism surrounding its decisions, the UK government put these five elements in place quickly and efficiently when it became clear the country would have to shut down to contain the spread of the virus. It implemented a £60 billion Coronavirus Job Retention Scheme (the furlough scheme) to help employers retain their talent. Much needed cash was made available through the Coronavirus Business Interruption Loan Scheme (CBILS) which provides loans of up to £5 million and bounce-back loans of between £2,000 and £50,000, the latter of which ensures cash is available within days of an approved application. Hundreds of manufacturing firms responded to the government’s call to make PPE, sanitisers, and ventilators. The two-metre social distancing rule has been reduced to one metre to make it viable for hospitality businesses such as pubs and cafes to reopen on 4 July 2020. And phrases such as “pain sharing” have helped landlord and tenants and suppliers to hard-hit organisations find ways to negotiate payment agreements on overdue rent and invoices.
What does the future hold for MSMEs?
As economies open up across the world, MSME’s will need further support to adapt to changing markets and consumer needs. The Federation of Small Business (FSB) has provided a wealth of information on its website, from carrying out risk assessments, obtaining funding, reassuring customers, and looking after the mental health of employers and employees.
The United Nations makes clear that MSMEs are crucial to achieving one of its most ambitious projects – the 2030 Agenda for Sustainable Development. The UK was a key influencer in developing the 17 Global Goals and has committed to playing its part in achieving them. The goals are:
- No Poverty
- Zero Hunger
- Good Health and Well-being
- Quality Education
- Gender Equality
- Clean Water and Sanitation
- Affordable and Clean Energy
- Decent Work and Economic Growth
- Industry, Innovation and Infrastructure
- Reduced Inequality
- Sustainable Cities and Communities
- Responsible Consumption and Production
- Climate Action
- Life Below Water
- Life on Land
- Peace and Justice Strong Institutions
- Partnerships to achieve the Goal
Regarding the contribution MSMEs will play in achieving these goals, the UN states:
“Given their global prevalence, and their huge importance to social, economic and environmental development, the future of work will be bleak if we do not support SMEs to unlock their full potential.”
This is why governments and communities must support MSMEs in their recovery from the Coronavirus pandemic. And it is why celebrating them on 27 June 2020 is essential to us and future generations to come