The Covid-19 pandemic has largely been framed as a public health crisis, over one and a half years since it hit Kenya. However, its economic impact has been severe and widespread. The effects have been felt across the economy, significantly afflicting all sectors and households.
In all this, irrespective of industries, the Micro, Small and Medium-sized Enterprises (MSMEs), have been particularly hard hit by reduced customer footfall and disruptions in supply chains, among other biting effects of the pandemic. The widespread job losses and income cuts have also meant depressed demand for MSMEs’ goods and services, due to reduced purchasing power.
This has left MSMEs struggling and barely surviving. A survey by the Kenya Private Sector Alliance (Kepsa) in October 2020, indicated that about 64 percent of MSMEs had experienced a high or very high negative impact on their businesses from Covid-19. This included loss of customers, liquidity challenges, high cost of operations, inability to pay salaries, and reduced labour productivity.
The MSMEs’ typically limited liquidity, financial flows and reserves, has left them more vulnerable, compared to the larger corporates. Thus, the pandemic, like any other shock, is guaranteed to throw them off balance in a very short time, effectively putting their survival in jeopardy.
This is cause for concern, considering the integral and strategic role that MSMEs play in the economy. This ranges from creating employment opportunities to supporting value chains across industries. It is, therefore, important that these businesses are cushioned from such negative effects, are supported to ride the wave of the crisis, and are enabled to succeed.
When MSMEs thrive, the ripple effect snowballs and is more widespread, inclusively, and sustainably across the economy. Jobs are protected and quality of life enhanced for more households, among other economic benefits.
Of all the kinds of support that businesses require to cushion themselves during such rough patches, the financial kind ranks top. This effectively puts the financial services sector, particularly, in the driver’s seat, to protect these businesses from the harsh effects of the pandemic.
Throughout the pandemic, banks have gallantly stepped up to the frontline, cushioning the economy. Across industries, businesses and individuals have had their loans restructured to give them more time to repay among other measures.
However, there is need for banks and other players in the sector to go the extra mile in protecting MSMEs, the lifeblood of the economy. With the uncertainty surrounding the fast-evolving pandemic, it is still unclear […]