COVID-19 and the state of small businesses in the developing world in 2021

TechnoServe’s COVID-19 Impact Report examines how the pandemic disrupted key sectors of emerging economies and the livelihoods of those who work in them. Our third feature in our blog series on the report highlights the challenges small businesses faced last year and the opportunities to move toward business survival and recovery in 2021 and beyond.

Evidence of the impact of COVID-19 on small businesses is visible everywhere. Once thriving neighborhoods now feature shuttered storefronts, a solemn reminder of the continued economic toll of the pandemic. And although some semblance of “normal” is returning in some areas, the transition from business survival to recovery and resilience will be a long one.

Photo: Techno Serve

The impact of COVID-19 on small businesses in the developing world

In developing countries, small and medium-sized enterprises (SMEs) and micro-retail businesses form the backbone of local economies, providing essential jobs, products, and services to underserved communities.

In Latin America and the Caribbean, 74% of all jobs are at firms with fewer than 50 workers, and that share rises to more than 90% in India and sub-Saharan Africa. But the impact of the COVID-19 pandemic has created new challenges for these essential enterprises, changing the way they do business. TechnoServe’s COVID-19 Impact Report shows how, in the last year, many of these businesses struggled with three main challenges: a lack of access to markets, supplies, and finance.

By working with small business owners to apply a “crisis toolkit” that would improve their enterprise’s chances of survival, TechnoServe helped many of them to weather the worst of the crisis. But as these entrepreneurs look ahead to 2021 and beyond, they will need continued support to identify market opportunities, adapt their business models, and manage their finances with an eye toward business resilience and recovery.

COVID-19 creates unexpected challenges for small businesses in the developing world

Early last year, as countries around the globe enacted restrictions to stop the spread of the virus, many businesses had to make changes that significantly affected their sales, including:

  • Restricting business hours

  • Limiting the number of customers they could serve

  • Temporarily closing their doors

Consumers also altered their behavior, reducing the number and length of their shopping trips and shifting their buying preferences. In May 2020, TechnoServe found that 57% of micro-retailers surveyed in Africa reported sales as their greatest challenge.

In a global survey a few months later, nearly two-thirds of small businesses reported COVID-related problems with customer demand. As the year progressed and social and travel restrictions eased and re-tightened in different countries, sales challenges largely decreased.

Image: Techno Serve

The pandemic also disrupted small business owners’ access to supplies. Slowdowns in border inspections and international shipping made it difficult for businesses to receive imported materials, while local supplies were delayed by travel restrictions and other transportation complications. At the same time, businesses faced rising prices for many goods as transportation and production costs rose.