Income loss, expenses hurt MSMEs most during lockdown

MANILA, Philippines — Liquidity and supply problems hounded micro, small and medium enterprises (MSMEs) the most during the lockdown, according to a survey conducted by the Philippine office of the United Nations Development Program (UNDP).

A total of 315 businesses nationwide responded to the MSME Value Chain Rapid Response Survey conducted by UNDP Philippines in May using online communication and data mining tools.

Most of the respondents were micro businesses (66.7 percent), followed by small and medium enterprises (22.9 percent and 7.9 percent, respectively). Only 1.2 percent of respondents were large businesses.

More than half of the businesses (60 percent) were in the National Capital Region and Calabarzon, where most MSMEs in manufacturing and retail were located.

“The results of the survey confirmed the vulnerability of MSMEs‘ liquidity,” said UNDP Philippines.

Seventy-seven percent of respondents reported income reduction during the lockdown, as well as financial strain from continuing expenses such as rent, taxes, salaries and unpaid loans.

Mobility restrictions meant to curb the spread of the new coronavirus compelled businesses to temporarily suspend operations or continue at limited capacity beginning the third week of March.

Seventy-one percent of the respondents reported closing their businesses because of the lockdown.

Businesses that continued to operate were burdened with lack of supplies and issues with logistics and transportation. More than half of the respondents also had no alternative local suppliers for their foreign suppliers.

MSMEs in the manufacturing sector reported the most business closures and transportation problems.

Those engaged in farming reported the most issues with market access, reduced manpower and access to finance.

“In the early days of the community quarantine, there had been reports of farmers almost disposing of their produce because buyers could not pass though the checkpoints, placing an additional burden on the agriculture sector and posing a threat to food security,” said the report.

MSMEs responded to the challenges by “quick and manageable solutions” such as moving their sales online and forming skeleton staff.

Considering the results of the survey, UNDP Philippines urges government policies that would provide MSMEs with quick and affordable financing to keep their businesses afloat.

“The government may also consider providing extended tax relief measures for MSMEs until they are able to recover from business losses due to the COVID-19 pandemic,” the report said.

UNDP Philippines also urges the government to work with MSME groups on how the movement of goods can be improved in the event another severe community quarantine takes place in the future.