Editor’s note: This article originally appeared in NextBillion as a part of the series “Recovery 2021,” which explores how businesses, development initiatives and the communities they serve in low- and middle-income countries are building greater resilience for a post-pandemic future.
At the worst moment during the early months of the pandemic, Catarina Bié figured she’d have to shut down her business, a small carryout food kiosk in Maputo, Mozambique. The COVID-19 crisis was still new, customers were scared, and the government had enacted tough measures to prevent the spread of the disease. As a result, Bié had seen her sales vanish nearly overnight. “There were days that we didn’t have any sales, and it became more and more difficult to cover the business’ basic expenses, such as electricity,” she said.
However, a year later, her business was still up and running. Customers came and sat at tables that Bié placed outdoors to provide them with a safe place to eat. She tested new recipes and products, and improved the business’ signage to attract more customers.
But while Bié adapted to keep her business alive, she still faces real challenges. Mozambique’s gross domestic product fell for the first time in decades in 2020, and the recovery has been slow. And with spiking COVID-19 case counts and deaths — and very low vaccination rates — the country is now facing a fresh round of restrictions.
In putting together TechnoServe’s report on the impacts of COVID-19, we were struck by the fact that Catarina Bié’s story is unfortunately typical of many entrepreneurs in developing countries. Drawing upon a series of surveys conducted with more than 700 owners of micro and small businesses in 13 countries across Latin America and Africa between July and December of last year, the report shows that while the situation improved over time, entrepreneurs continued to confront serious obstacles. But understanding the evolution of these challenges also helps us to develop strategies to address them and help businesses lead the recovery.
A Year of COVID-19 Impact on Small Businesses
Small businesses faced an acute crisis in the initial months of the pandemic. When surveyed last July, 67% of male entrepreneurs and 65% of female entrepreneurs reported that were experiencing declining sales as they dealt with an array of challenges.
In that month’s survey, 64% of firms faced reduced demand, 54% faced challenges with access to supplies, and 38% faced challenges with access to finance. Demand and market-access issues were related to restrictions on movement and store opening hours, customers’ fears of visiting store locations, and economic uncertainty. Challenges in access to supplies often resulted from border closures and slowdowns, production delays, transportation restrictions, and currency fluctuations that made it costly to buy imported materials. Commercial lenders severely limited their small business loans, which they considered risky amid the pandemic, making it more difficult for entrepreneurs to access finance.
Over time, however, public health restrictions eased in most places, agencies and organizations were able to provide technical assistance, and entrepreneurs adapted to the changing circumstances. By the end of 2020, the share of entrepreneurs citing demand challenges had fallen from 64% to 27%, while those reporting supply issues had fallen from 54% to 15%. Finance challenges fell less dramatically — from 38% to 20% — as reduced and uncertain cash flow continued to affect businesses.
Responding to the Crisis
While these challenges have slackened in many places, they have not disappeared. To help entrepreneurs continue to persevere and recover in this environment, the development community must provide effective support that addresses the obstacles they face. The report highlights a number of strategies that TechnoServe has found to be impactful in our programs.
One key innovation has been the use of a crisis toolkit, drawing upon our past experience working with businesses in difficult situations. This eight-step approach helped entrepreneurs take stock of the situation, conduct a business model assessment to identify new opportunities, and prioritize key actions needed to weather the crisis. Many of the entrepreneurs we spoke to mentioned that our team’s first step — checking in and letting the business owners know that they were not alone — was the most significant.
It was the crisis toolkit that helped Catarina Bié, a participant in the Business Women Connect program, make the changes needed to save her business. Other entrepreneurs experienced similar benefits from this support: In Peru, small- and medium-sized businesses in one TechnoServe program had increased their sales by 81% within two months of starting to use the crisis toolkit. We saw that the approach opened the door to new opportunities for entrepreneurs in the country, enabling them to capitalize on changes, like the rapid shift to e-commerce, that have emerged from the pandemic.
The Value of Digital Tools
The effective digitization of our support is an important part of this response as well. Even in places where eased restrictions have enabled in-person training and advisory efforts to resume, digital tools will allow us to provide training to more people, more efficiently and more conveniently for entrepreneurs. But it’s important that we focus on the quality of this training, constantly testing and refining it to ensure that it delivers the right information in the right format, tailored to the entrepreneurs’ degree of digital engagement. At TechnoServe, we’ve been continuously testing approaches to effectively drive behavior change through digital delivery. The results to date have been very encouraging, and we’re preparing for a larger-scale randomized control trial with academic research partners over the next two years.
Digital tools are also important for addressing access to finance. Digital lending provides a way to quickly disburse emergency grants or loans to entrepreneurs; coupled with technical assistance, this can be a highly effective tool for helping entrepreneurs weather the crisis. To that end, the mSPARK program, a partnership with the Mastercard Foundation and 4G Capital, is providing digitally enabled loans and basic advisory services to more than 30,000 micro-retailers in Kenya. Interim data showed that the repayment rate was four times higher than it was for loans distributed to similar entrepreneurs without training.
It’s been a difficult 15 months for small businesses — a time that has tested the resilience of entrepreneurs around the world, particularly in emerging markets. But these businesspeople are no strangers to adversity, and they’re not prone to quitting. As Bié put it, “Even with so many challenges, I did not cross my arms and give up.” There are millions of entrepreneurs like her around the world who, through their hard work and innovation, have kept their businesses afloat.
If we apply what we’ve learned during the crisis, we can ensure that, for these entrepreneurs, this year will be better than the last.
Subscribe to our newsletter to learn more about how TechnoServe leverages technology to help small business owners in the developing world increase their incomes and improve their lives.