September 29, 2023

COVID-19 and MSMEs: Impacts and Options

Image by Vektor Kunst from Pixabay

This article has been updated.

Alicia Nicholls

Businesses which fall under the category of micro, small and medium-sized enterprises (MSMEs) are among the most impacted by the economic and financial fall-out from the COVID-19 pandemic globally.

These businesses, while not large participants in international trade, are significant contributors to national economic activity and employment. For instance, SMEs account for 93 per cent of enterprises in non-high income, non-OECD countries, while MSMEs comprise over 95 per cent of all enterprises in OECD countries according to the WTO’s World Trade Report 2016. Moreover, according to this same report, in “a sample of firms from 99 emerging and developing countries (World Bank Enterprise Surveys), SMEs accounted for two-thirds of formal non-agricultural private employment”.  

With the pandemic’s growing impact on the global economy, its concomitant impact on MSMEs cannot be ignored – whether it is a ‘mom and pop’ corner shop experiencing declining footfall, the catering company which lost out due to a cancelled event or a hotel facing increased guest cancellations.  

This article briefly looks at the possible impacts of COVID-19 on MSMEs and what options these businesses could consider to help mitigate the impact. It also briefly discusses some policy measures governments could put in place to assist MSMEs during this difficult period.

Possible impacts on MSMEs

The possible direct and indirect impacts of the COVID-19 pandemic on MSMEs differ according to the individual business and sector, but it is likely that those businesses in ‘high contact’ sectors– such as the hospitality and retail sectors – will be the most adversely affected.

There is, of course, the human impact, such as the loss of productivity due to increased sick leave and the loss to the business of know-how, expertise and skill where a valued and skilled employee dies from the virus.

Reduced sales due to a fall in demand, whether locally or from international customers, could also affect businesses’ ability to make payroll and their bottom-line.

Supply chain disruptions could lead to difficulty sourcing final products or inputs for final goods, with knock-on effects for fulfilling contractual obligations.

Another possible impact has been the increase in panic buying by consumers, generating increased sales in the short-term, but possibly causing inventory shortfalls, especially where supply chains have been disrupted.  

For many small business owners around the world, there is the real fear of having to lay off staff, closing temporarily or completely going out of business.

How can MSMEs cope?

Because of their size, MSMEs generally face greater challenges and resource-constraints than larger businesses, like multinational enterprises (MNEs). Limited access to capital can often constrain MSMEs’ ability to respond to, and weather crises. However, there are steps that these businesses, regardless of size, can put in place.

Below are some of the main ones.

  • Protect health of employees

Employees are a business’ most valuable asset. As such, protecting the health of your employees must be foremost, especially those businesses in ‘high contact’ sectors. This is particularly so for frontline workers, such as receptionists and cashiers who interface with the general public, placing them at higher risk. Unlike other workers, frontline workers do not have the luxury of working from home. Therefore, they should be equipped with adequate supplies to keep themselves safe, such as hand sanitizer and wipes, as they go on about their jobs.

In compliance with the social distancing advice given by WHO and national health authorities, many businesses globally have started reducing the number of employees working in the same space, instituting ‘work from home’ policies and remote meetings where possible, cancelling meetings which involve bringing in persons from abroad, and restricting non-essential employee travel, especially to affected countries.

Protecting the health of employees also includes their mental health as well. Where lay-offs are an inevitability, employers should adopt a humane approach. Ensure any lay-offs are done in accordance with the law and that the employees’ rights are not violated.

  • Follow national and international best practices as they evolve

According to the WHO, COVID-19 is a highly contagious virus and is particularly problematic for those persons with compromised immune systems, such as the elderly and those with existing illnesses. It should be noted that here in the Caribbean, we not only have a growing senior population, but a high and increasing incidence of persons with Chronic Non-Communicable Diseases (CNDCs), such as diabetes and hypertension.

Businesses should formulate customized organization policies aimed at preventing and reducing transmission.  Your office protocols should be informed by the guidelines developed by your country’s national public health agency and the WHO. They should be updated regularly. Check out in particular WHO’s “Getting your workplace ready for coronavirus” pamphlet.

Some simple measures can go a long way in creating a low-transmission environment. These include providing hand sanitiser dispensers, sticking up posters on good respiratory etiquette and hygiene, requiring sick employees to remain home, encouraging employees to regularly sanitise their personal work spaces, adequately stocking the company’s medicine cabinet with infrared thermometers, masks, gloves and alcohol, and increasing the frequency of scheduled work place cleaning.  

Businesses should also formulate humane and non-discriminatory policies and protocols on what should be done in case of suspected or confirmed incidents of COVID-19 among employees, or where employees come into contact with an infected customer. What support systems, such as counselling, will be put in place where an employee dies as a result of the virus, bearing in mind the impact the death could have on the morale and well-being of other employees?

Other good resources are the Coronavirus Guidelines for Business published by the International Chamber of Commerce, as well as the guidelines published by your local or national small business association or chamber of commerce.

  • Fight ‘fake news’ by keeping employees and customers informed

Businesses must also battle against rumors and misinformation about the virus being spread on social media. Combating ‘fake news’ requires keeping your clients/customers informed of the current state of your operations and the measures you have put in place to prevent or deal with any transmission. Rely on information from trusted sources, such as the national public health authority, the Caribbean Public Health Agency (CARPHA), Pan-American Health Organisation (PAHO) and the WHO.

  • Manage your risks

Now is the time for your business to either prepare or review/update your contingency and business continuity plans.

An essential part of preparation is reviewing your current contracts with suppliers/purchasers and examining whether a COVID-19 outbreak would impact your ability to perform your contractual obligations.

Managing risks also might require diversifying your sourcing in the event your usual supplier goes out of business or is otherwise unable to fulfill your order request.

Many businesses have some form of business interruption insurance. Speak to your insurance agent about what is covered and not covered in your policy. For businesses in the exporting business, they should also review their insurance coverage.

  • Consider Capital Access Options

Businesses should consider beforehand their capital access options in cases where drops in demand could negatively affect their cashflow and ability to meet obligations. These options may range from a loan from a family member or friend, to commercial bank loans to special loan schemes provided by Government. Those in the exporting business should review their trade finance options.

  • Refrain from price gouging

Businesses should refrain from engaging in price gouging, which can reduce public ‘goodwill’ towards your business and drive customers to your competitor.

How can governments assist?

Policymakers around the world are increasingly cognizant of the important economic role played by MSMEs and have sought to find ways to assist businesses during this challenging period. In the US, affected small businesses in some states impacted by COVID-19 can access low-interest federal disaster loans, while the European Commission hasset out a coordinated response to counter the economic impact of the Coronavirus, particularly on SMEs.

In some Caribbean countries, direct support, through the provision of concessional loans and grants to SMEs, may or may not be an option depending on the Government’s fiscal constraints. However, there could be indirect support such as delaying payment of taxes, debt forgiveness, and other measures to assist SMEs facing cashflow difficulties. Other policy interventions Governments could consider include providing support for employees affected, including those laid-off or placed on ‘short time’. Governments can also temporarily suspend tariffs on the importation of needed medical supplies to make it easier for businesses and the public at large to more cheaply access these goods.

In this period of much uncertainty, it is doubly important that Governments and the private sector keep open channels of communication and continue to work hand in hand on current preparation and mitigation efforts to reduce both the economic and human impact of the outbreak.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international trade and development consultant. You can also read more of her commentaries at  and follow her on Twitter @LicyLaw.

DISCLAIMER: All views expressed herein are her personal views and do not necessarily reflect the views of any institution or entity with which she may be affiliated from time to time.


The Caribbean Trade Law and Development Blog is owned and was founded by Alicia Nicholls, B.Sc. (Hons), M.Sc. (Dist.), LL.B. (Hons), a Caribbean-based trade and development consultant. She writes and presents regularly on trade and development matters affecting the Caribbean and other small states. You can follow her on Twitter @LicyLaw. All views expressed on this Blog are Alicia's personal views and do NOT necessarily reflect the views of any institution or entity with which she may from time to time be affiliated.

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