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How can we help small service impacted by the COVID-19 crisis?

Jun 17th 2020, 4:11 pm
Posted by candidasan
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Challenges facing small companies

How big is the coming wave? The world as a whole is most likely to participate in an economic downturn in 2020, according to newest price quotes from the International Monetary Fund (IMF) ². Some sectors will suffer more than others, with the travel, lodging and food services sectors being struck particularly hard. Services themselves are most likely to take a trip through a four-phase procedure: shutdown, supply-chain disruption, demand anxiety and finally, healing. The intensity and disturbance triggered by each phase of the procedure will depend upon the policies adopted by governments. We understand the impact will be extreme; what we do not know is the length of time the crisis will last.

As they move from shutdown to recovery, MSMEs will face a mix of dangers to their survival:

1. Collapsing demand and access to liquidity. Demand has actually plunged for business and business owners we support-- even in commodity sectors-- and some purchasers are slowing payments for orders currently received. MSMEs have little money reserves, and for that reason fail initially in a liquidity shock. Businesses who trade worldwide are particularly susceptible, as they depend upon access to increasingly scarce US dollars to fund a range of their expenses.

2. Accessing inputs and handling stock. MSMEs regularly source inputs from abroad, significantly so as supply chains have actually become longer and more complicated. For the garment companies we work with in North Africa, for instance, as orders have actually collapsed key inputs, such as materials from China, have also vanished.

3. Managing the workplace. For producing MSMEs in lockdown circumstances, staying open is challenging as factory floors are not developed for social distancing. Massive outmigration from cities has indicated employees have actually disappeared and they might be challenging to remobilize. Lots of countries have suspended assistance to farmers even as the farming calendar continues.

4. Policy uncertainty and disrupted supply chains. Policies are evolving fast. MSME managers frequently work alone and can not develop crisis groups to track changes. One of our customers reports having a delivery of fresh produce grounded at an airport due to the fact that guest flight has actually stopped. Supply chain interruptions such as grounded airline companies create substantial liabilities.

5. Accessing emergency assistance: A lot of the small companies we support are on the edge of the formal economy or trade informally. They seldom make use of government assistance and fairly few take part in networks of government support organizations. As governments assembled emergency situation support, reaching these companies and discovering ways to assist might be difficult.

Reactivating service linkages

When the crisis passes, our beneficiaries will anticipate us to be prepared to help them reconnect with buyers, re-hire personnel and re-launch production. It is too early to draw lessons but these are our recommendations, based upon early advice from the field:

Customize the playbook (and listen). Like other technical help companies, numerous of LCGC's projects assisting MSMEs have stiff targets and work strategies that did not prepare for de.itsbetter.com such a shock. We need to customize these strategies, listen closely to MSME supervisors and governments on what they require-- and find methods to get it done. For example, our colleagues are already working with an apparel industry association in Africa to develop a recovery strategy, with the active assistance of the funder.
Be ready with information. Global value chains represent a substantial percentage of trade and link to millions of MSMEs. LCGC is utilizing networks within these chains to measure the effects of the crisis and is making the analysis offered to choice makers and business. The key is to time studies so they do not interfere with partners while they address instant concerns.
Build (re-build) the ecosystem.

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