The Precarious State of MSMEs: Understanding the Impact of COVID-19 and Opportunities to Support their Recovery

MSMEs — particularly micro and small businesses — have been severely impacted by the COVID-19 pandemic, resulting in financial instability, business closures, and lack of employment for many low-income people. The financial outcomes of a shock, such as a pandemic, for micro and small enterprises can have consequential effects, as losses can directly impact MSME owners’ household finances, community employment levels, and the ability to recover from future financial shocks or crises. MSMEs have been dramatically affected by the COVID-19 pandemic and continue to face challenges.

In May 2020, The Center for Financial Inclusion (CFI), as part of the partnership with Mastercard’s Center for Inclusive Growth, launched a six-wave, longitudinal survey examining the impact of COVID-19 on MSMEs in four countries: Colombia, India, Indonesia, and Nigeria. The survey leveraged CFI’s framework on the financial health of MSMEs, allowing a holistic look at the financial health and resilience of MSMEs throughout the COVID-19 crisis.

While it is difficult to compare data from surveyed countries due to the varying impact of the pandemic in each country, the resulting government response, and differences among the samples in each country, the aim of this brief is to present emerging trends from the data available thus far to understand how MSMEs are faring in light of the COVID-19 pandemic.