MSMEs see recovery in 3-6 months; adopt ways to sustain product, services demand

Nearly half of micro, small and medium enterprises (MSMEs) negatively impacted by the coronavirus disease 2019 (Covid-19) pandemic expect to recover in three to six months as they implement strategies to sustain the demand of their products and services, a survey result indicated.

Michelle Llorente, policy analyst at United Nations Development Programme (UNDP) in the Philippines, bared the result of the second MSME value chain rapid response survey conducted by UNDP Philippines on July 13 to July 23 indicating the Covid-19 impact on operations of the MSMEs.

“With the majority of the population encouraged to continue staying home despite the lifting of the ECQ (enhanced community quarantine), 81 percent of total respondents confirmed that demand for goods and services remains sluggish,” she said in a webinar organized by UNDP Philippines and Philippine Disaster Resilience Foundation (PDRF) through the SIKAP MSME Recovery Hub.

Llorente said all respondents from the creative arts and entertainment industry experience reduced demand for their services, while other sectors that had the highest percentage of reported lower demand were accommodation, administrative support services, agriculture, food and beverage, and other service activities.

The second round of the survey was conducted to 285 MSME respondents, majority of them are from the National Capital Region (NCR), Caraga, Central Luzon and CALABARZON (Cavite, Laguna, Batangas, Rizal and Quezon). Seventy nine percent of them are in operation for zero to 10 years.

On the supply side, Llorente said MSME respondents identified factors that prevented them from continuing the delivery of their products and services, including logistics, temporary closure of distributors, the government guidelines on businesses allowed to operate, and shortage of raw materials due to lack of stocks from suppliers.

To address these challenges, Llorente added the survey result found that MSMEs have started implementing adaptive measures, foremost of these is digitalization, followed by diversification of products and services, and provision of non-cash payment options for their customers.

“In terms of the general business measures, the top responses were cost reduction, request for private financing, and pivot into new business. As we can see, all these measures showed that MSMEs continue to find ways to adapt to the current circumstances to keep their businesses afloat,” she added.

Llorente said 80 percent of the MSME respondents had business continuity plans focused on new ways of conducting day-to-day operations (60 percent), risk assessment (40 percent), and impact analysis (33 percent).

The number is much higher compared to the result of the first round of the survey indicating that 50 percent of the respondents did not have any business continuity plan, she added.

The UNDP Philippines conducted the first MSME value chain rapid response survey to 315 respondents in May 1 to 15 during the time there was still a strict lockdown. Majority of the respondents were from the NCR, CALABARZON, and Central Luzon.

Despite these challenges, Llorente said 45 percent of the respondents in the second round of the survey expected to recover in the next three to six months, while only 12 percent expected to permanently close shops.

Considering the result of the survey, she added UNDP Philippines urged the need to widen firms’ reach of financial intermediaries by maximizing the government’s MSME credit guarantee scheme, improve awareness and knowledge of MSME on green and sustainable business practices, strengthen supply chain management and integration of local suppliers, and provide digital training to firms and expanding their
internet connectivity.

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