Hi I am Eduardo Tugendhat, Director of Thought Leadership at Palladium. I focus on our Inclusive Growth Framework, especially helping corporates anchor the transformation of their business ecosystems
Our first questions today:
Q1. How can short-term COVID-19-related support measures for MSMEs be built on and further leveraged in the longer-term? Where do the greatest opportunities lie?
My name is Mario E. Gonzalez, I am Responsible Business Advisor at CEMEX, based in Monterrey, Mexico. I support our global operations to develop projects and programs that create business and community impact.
Hi - I’m Kammy Naidoo and I run the Making Access to Financial Inclusion Programme at UNCDF, based in South Africa. As MSME’s are the pulse of the real economy and critical for inclusive growth, I’m looking forward to today’s discussion.
Hi, I’m Katharine Teague, I lead AB Sugar’s global approach to sustainability, Global Mind Local Champions. Creating more inclusive and diverse supply chains in partnership is one of our goals.
Thank you BFP for a great report…
It is crucial that we link short term-support measures to the world we want to see in the long term. This crisis can be an opportunity to build back better, which involves targeting support measures in such a way that they help create a strong ecosystem of enterprises, large businesses and intermediaries. We need to create opportunities for these players to work with each other, and overcome the shortcomings that are aggravating the crisis today. No stakeholder – or indeed group of stakeholders – can do this alone. The incentives to work together must be strengthened – and this involves a change of mindset from corporate intrapreneurs, investors, enterprises and funders alike. In terms of opportunities, we would love to see both 1) concrete initiatives on the ground that provide support to MSMEs and strengthen the underlying ecosystem and 2) global platforms that change thinking about cross-sectoral collaboration and catalyse innovation
Hello there. This is Daniel Nowack, Managing Director at Yunus Social Business. We have been investing in social businesses in LATAM, Africa and India for a decade now. We also work with corpoarte partners to connect them to social businesses or build their own impact ventures.
Looking forward to this conversation! Thanks to the team from BFP for setting this all up.
Financial resources: public donors, private companies and investors have stepped up to support MSMEs with funding. First, these funders can check how the solutions they provide can enable more long-term change. For example, can extended payment terms become a permanent solution to support cash flow constraints of MSMEs. Second, funders should look around and tie activities together to arrive at more systemic solutions. For example, using grants of the public sector to set up long-term solutions for credit / working capital.
The global pandemic has led to a surge in additional support to MSMEs from different sectors. We have seen development finance institutions and government donors increasing lending facilities and technical support. Large companies directly and through partners are providing tools, information and advice to their MSME value chain partners, improving contractual terms and giving financial support in the form of cash grants and affordable loans and credit. National governments are introducing supportive policy responses and impact investors, foundations and civil society have also stepped up. These are vital short-term measures to keep MSMEs afloat but in the longer-term, its vital that all those with a stake in MSMEs do four things to build on these foundations:
Palladium is pivoting existing programs with existing partners (e.g. private company partners, supply chain managers/cooperatives, financial institutions in developing countries) to help MSMEs and farmers survive and recover. A few examples: in the Peru Cocoa Alliance, we have confirmed with end-buyer chocolate companies that their purchasing commitments are still valid despite some logistical challenges in getting the cocoa to market. Virtual meetings were organized with the aggregators and coops to help them with communicating to farmers that they should (safely) harvest the upcoming crop for which pre-payment could be arranged. The key was to arrange concessional and stimulus financing support to allow for longer and larger than normal inventories at the aggregator level. By channeling support via existing financial institutions, trust can be built between actors and relationships that can be expanded following the crisis period. New communications tools and channels are being built and leveraged globally to share information within business ecosystems by actors to “calm the waters”, especially at the community level. These are low-cost measures that can easily be continued after the crisis hits to support further transparency and information to provide enduring business services as far upstream as possible.
Hi everyone - I am Christiaan Loots, Programme Specialist for UNCDF’s global Making Access Possible programme, that focus on data and research to inform policy making as well as the private sector on how to improve financial access for individuals as well as small businesses
1/4 - First, it is vital that these short-term support activities are sustained and built on in the longer-term as MSMEs seek to re-build. For example, large companies should continue to review and develop policies and business models that ensure econ value is distributed more fairly along the value chain and workplace rights are protected.
Hi everyone! I am Maryanne Ochola, Senior Chapter Manager for ANDE in East Africa. ANDE is the Aspen Network of Development Entrepreneurs, a network of 280 organizations supporting entrepreneurship in emerging markets.
One of the best way to adapt to this new reality is to start using technology more. Use of digital tools and services for small business is critical in a crisis like this one. Even leveraging your mobile phone and social media could be a great tool.
That is reason why we are leveraging the power of our network and our partners to help this undeserved segment gain access to digital payment and small business platforms and solutions that are not only fast, convenient and secure but also simple to understand and use.
COVID-19 is forcing to look at things differently. We need to act quickly and decisively across sectors, understanding that measures need to have a long-term focus.
On an immediate and basic level of support, the right information and basic health and sanitation to prevent further outbreaks needs to reach to all rural areas.
To ensure things will last, we must look at this holistically. What I mean by that is we need to fully understand what new challenges smallholders and their communities are facing right now and work to develop solutions with long-term resiliency of the food systems in mind.
The bottlenecks may vary location-by-location, also depending on the crop seasons. In some cases, farmers might have harvested their crop, and not be able to access a market to sell into. In others, farmers might not be able to access the financing they normally rely on to purchase the inputs they need to plant a crop (sometimes just simply because they may not travel to the next village). The overall answer, however, is the same everywhere: the food value chain needs to work, and for this the entire ecosystem around smallholders and MSMEs needs to work (know-how, inputs, services, finance, access to markets, fair prices…).
Short-term COVID-19-related support to smallholders and MSMEs should ideally contribute to form a resilient ecosystem of solutions, rather than providing isolated sectorial forms of support.
Most MSME’s in LDC’s and developing countries are survivalist – that means that they live from day to day, functioning at the micro-level. In the shorter term, the large majority of MSME’s are focused on survival given lockdowns in country, and resulting income flow disruptions. Survivalist MSMEs need to have cash for their livelihoods in the short term. However, to strengthen MSME’s in the medium-term and build on current efforts, there will be a need for MSME’s to evolve into longer-term opportunities to better fund start-up activities like purchasing stock when they are allowed to trade again (or when the business environment recovers). Our data shows that this is the reality for the majority of MSMEs in developing countries. With the increasing support for MSME’s as a result of Covid-19, there is a lot more data to better understand and better target interventions for MSME’s based on their business focus matched against national growth priorities. Given the large levels of informalisation of MSME’s – it is an ideal opportunity to think through new formalisation processes and better targeting access to capital for MSME’s with this new understanding of MSME’s on the ground.
- It is critical to support MSMEs, and it is critical to do so now! In Africa, it is estimated that agri-SMEs sell 80% of the food produced for local consumption and generate 25% of rural employment. And yet, they are the ones that suffer the most from the crisis. Mercy Corps Global market study (https://www.mercycorps.org/research-resources/covid-19-impact-report) highlights that smaller and more informal businesses, and their workers, are uniquely vulnerable to the effects of government restrictions on movement. These businesses often lack access to reliable information, financing, and the ability to secure exemptions to government restrictions. In Zimbabwe, while large scale abattoirs are able to access movement permits, small butcheries that rely on informal transporters have not been able to access permits, compromising their ability to operate. In Indonesia, vegetable farmers with purchasing contracts are seeing an uptick in sales and income while those without contracts are struggling with strict inspections and movement restrictions that prevent them from selling their crops.
2/4 - Second, all sectors need to adopt a longer-term and more strategic perspective on tackling MSME barriers to growth with more time spent understanding the multiple root cause challenges that hold MSMEs back, analysing the landscape of different players whose actions influence the success of SMEs and designing programmes that tap into the core capabilities and incentives of different players who could and should be playing a role. Our new guide released yesterday – provides practical insights on how to adopt this approach with examples.
We have seen many small business owners start adapting new technologies to create alternative distribution channels, new revenues streams and ways to communicate with their client base.
These new technologies include ways to do delivery, curbside pickup, contactless payments, marketing with social media and messaging platforms, eCommerce, video conferencing, etc.
*Technology also helps you pivot from your current business model to this new reality
Hello All. My name is Lilian Mogoah from Invest in Africa. We focus on working together with MNCs and local corporate companies to support MSMEs in Sub Saharan Africa so that they get integrated into their supply chains. We rely on partnerships to build their capacities, create market linkage opportunities and prepare them for investment.