‘Lessons from COVID-19 should be replicated to recover from floods’

Islamabad : Dr. Vaqar Ahmed, Joint Executive Director, Sustainable Development Policy Institute, has said that lessons on the recovery of Micro, Small, and Medium Enterprises (MSMEs) from the unprecedented challenge of COVID-19 should be replicated and modified to strengthen response and recovery from large-scale loss incurred during current floods.

Dr. Vaqar was addressing the launch of a study on “Micro, Small and Medium Enterprises amid disaster: lessons from Pakistan’s experience.” The research conducted jointly by SDPI and International Development Research Centre (IDRC) is based on 750 firms across the country with a special focus on women-owned and women-led firms.

Dr. Vaqar said that the study revealed that at the initial stages of the crisis, there was a decrease in import-export, production, and short-term consumption patterns along with a liquidity squeeze and decline in capital and investment, which left MSMEs struggling for survival. He said that tax reforms and subsidies did not have much positive impact and the majority of SMEs could not avail public financial facilities due to lack of awareness, doubts, cumbersome transaction costs, and processes whereas informal borrowings remained highly preferred. He also recommended that transaction costs and time for registration of

SMEs should be streamlined, and government should support the resilience and recovery of SMEs through specific quotas.

Izzah Shahbaz, Principal of Credit, Karandaaz Capitals, said that private financial markets are highly collateralised and the necessary condition of guarantee hinders SMEs from accessing financial assistance. She further said that research conducted by Karandaaz revealed that stringent corporate governance discourages SMEs from entering the formal sector and registration, which also disables them from accessing formal public financing initiatives leaving them vulnerable to external shocks.