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Dr. Barbara Kotschwar

February 2021

Dr. Barbara Kotschwar is Executive Director of the Visa Economic Empowerment Institute, a professor at Georgetown University and former specialist at the World Bank.

 

1 - 2 Minutes

Small business in the digital age: recommendations for recovery and resilience

A year after COVID-19 transformed the way we all live and work, it’s more important than ever to create more inclusive, equitable economic opportunities for everyone, everywhere.

Last year we created the Visa Economic Empowerment Institute – a network to exchange ideas on payments and public policy. The institute provides a platform to solve problems, share data and increase economic empowerment, trade and global connectivity. Working closely with policymakers, we’re committed to convene and collaborate on policies to rebuild and grow the global economy.

A new research paper was published this month, looking at how small businesses are faring in the increasingly digital world and what policymakers can do to support them. Small Business in the Digital Age: Recommendations for Recovery & Resilience is available in full here with a short summary and key findings detailed below.

Summary

Greater digitisation of commerce has brought enormous benefits to businesses and consumers. This first paper examines the results of a survey of small businesses in five developing countries: Brazil, Colombia, Malaysia, Philippines and South Africa.

The research finds that the firms which embraced digital commerce and cross-border capabilities before and during the pandemic have weathered the crisis better than others. Responses also indicate that more small businesses want improved internet connectivity, assistance with digital commerce and help with cybersecurity – more than they want direct financial support from governments. These findings help inform several recommendations to policymakers on measures they can take – and some they should avoid – to help small businesses recover and thrive.

Key findings

  1. One third of the surveyed firms in all five countries managed to weather the crisis or even thrived, while one-half saw steep declines in business activity and revenue.
  2. COVID-19 harmed the smallest firms more acutely. Over 60 percent of micro, small and medium enterprises (MSMEs) – and especially micro enterprises – were hurt in the crisis, with growth flatlining or turning negative.
  3. Firms are digitising intensely. A significant percentage in every size category say they have abandoned cash. MSMEs heavily adopted mobile payments, QR code capabilities, established digital payment services, and some newer payments services from fintechs during the pandemic. MSMEs also expanded their use of social networks and marketplaces across size categories and business sectors.
  4. Digitising helps resilience. Firms in every size category that accept remote orders as their primary sales method, use marketplaces, and export goods and services were able to mitigate the impact of the crisis. In other words, digitisation and export market diversification cushioned firms against the crisis.
  5. MSMEs are prioritising digital capabilities for 2021. When asked what they need most over the next three to six months, overwhelming majorities of MSMEs say they need customers to return, followed by the need to digitise their sales channels, acquire better internet connectivity and improve their digital payments capabilities. Fewer firms prioritised the need for more loans or grants. Basically, they want to be able to do business, more than receive further direct financial assistance.
  6. For 2021, firms in every size category say they will prioritise expanding their digital marketing, growing their online sales and amplifying their use of digital payments. Fewer firms are ready to close physical offices, though over one-third of firms are considering more teleworking.

Click here to read the Small Business in the Digital Age: Recommendations for Recovery & Resilience report in full.

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