This archive report was first published on 25 June 2020.
As the Covid-19 pandemic continues to ravage the world, small and medium-sized enterprises (SMEs) are facing unprecedented challenges. According to the World Trade Organization, SMEs represent over 90% of the business population, 60-70% of employment, and at least half of GDP in many countries.
Published on June 25, 2020, a recent survey by the Organization for Economic Cooperation and Development highlights the economic impact of Covid-19 on SMEs, with supply chain logistics, inadequate working capital, decline in revenue, and uncertainty over the pandemic's duration being major concerns.
However, beyond these financial interventions, SMEs will need to work hard to safeguard key relationships with important stakeholders such as customers, employees, financial partners, investors, communities, and government. These stakeholders have a role to play in ensuring the sustainability of a business.
Customers are the oxygen of a business, and SMEs will need to re-define and re-align their business models to survive the pandemic. This may involve exploring new areas of business, such as the manufacture of personal protective equipment, or re-thinking employee engagement models to optimize human capital resources.
Managing the expectations of creditors, debtors, and shareholders is critical to the financial viability of the business. SMEs should take advantage of goodwill among financial stakeholders to ensure the business has enough cash to ride the crisis.
Compliance with government directives on preventing the spread of the coronavirus is imperative. SMEs should identify and assist vulnerable groups in the communities in which they do business, acquiring goodwill and social licence that is vital for surviving Covid-19 and future crises.
Mr Njoroge, the managing director of Faulu Microfinance Bank, emphasizes the importance of SMEs' resilience in the face of economic upheaval. 'SMEs are not just businesses but also sources of livelihoods for many Kenyans. Ensuring they survive the pandemic is, therefore, key to protecting many vulnerable households from 'livelihood shock' if they collapsed.'
