Supporting small and medium enterprises through the COVID-19 crisis

The COVID-19 outbreak has hit small and medium enterprises (SMEs) and their workers hard, including in Indonesia. So what do SMEs need and what has worked in previous calamities to help them survive? Here are our top five policy options.

News | 13 April 2020
Around the globe, small-sized and medium-sized enterprises (SMEs) are the main providers of employment. In Indonesia, similarly SMEs are one of the economic pillars of the country.

One of small enterprises in Indonesia
In 2012, SMEs have contributed 57.4 per cent to the Gross National Product (GNP) and also play a great role in tackling unemployment by employing 107.6 million of workers (data from the Ministry of Cooperative and SMEs).

The COVID-19 outbreak has hit SMEs hard. SMEs are affected on both the demand and the supply side. On the supply side, companies experience a reduction in the supply of labour, as workers are unwell or need to look after children or other dependents while schools are closed and movements of people are restricted.

On the demand side, a dramatic and sudden loss of demand and revenue for SMEs severely affects their ability to function, and/or causes severe liquidity shortages. Furthermore, consumers experience loss of income, fear of contagion and heightened uncertainty, which in turn reduces spending and consumption.

SMEs need urgent support to survive COVID-19. What do SMEs need to do to protect their business and their workforce?

  1. Better access to finance and working capital to help with their short-term cash flow through grants, affordable loans or temporary tax exemptions.
  2. Boosting demand for products and services such as support for temporary converting productions to covid-19 necessities..
  3. Protecting employment and social protection like subsidy schemes to help workers keep their jobs or training programmes.
  4. Support reactivating firms after the virus is contained. Business will not go back to normal so firms will need help adopting to new market conditions.
  5. Social dialogue and social cohesion strengthen a country’s resilience when workers and employers face the crisis together.
Preserving business and decent work is possible in the face of this pandemic.