Inside Politics

How pandemic impacted micro firms, households

Thursday, July 8th, 2021 00:00 |
A medic attends to a Covid-19 patient at the Jaramogi Oginga Odinga Hospital in Kisumu. Photo/PD/File

Only 27 per cent of micro, small entreprises (MSEs), which closed during lockdown in 2020, had reopened by March this year as families whose businesses failed went without meals for several days, a new CBK survey shows.

By March 2021, about 20 per cent of businesses had closed, of which 11 per cent closed during the 2020 lockdown period, while 9 per cent closed between November 2020 and March 2021, citing reduced sales and lack of operating capital.

The percentage of MSE households who missed meals quadrupled during Covid-19, and remains substantially higher than pre-Covid levels,” the Finaccess MSE Covid-19 tracker survey shows.

The survey undertaken by the Kenya National Bureau of Statistics, Central Bank of Kenya and FSD Kenya shows that 20 per cent of businesses that were active in the pre-covid period had closed by March this year.

“The firms interviewed cited the need for additional capital to reopen, which averages Sh18,000,” it says.

Eleven per cent of these business had closed by November 2020 mainly due to reduced demand and government containment measures while nine per cent of them closed between November 2020 and March 2021, having survived the lockdown period.

About three quarters of the MSEs said they did not receive any government support despite the announcement that it would cushion small businesses. 

An estimated 40 per cent of businesses cited increased cost of supplies as their biggest challenge while 63 per cent of businesses that closed by November hoped to reopen, according to the survey released last week. 

Business owners

The main source of support for business owners during the 2020 lockdown was their social networks (friends and family), followed by savings and credit cooperatives (Saccos), a key source of finance for MSEs. 

About 65 per cent said cash assistance would have enabled them to weather the lockdown, with government cited as the key source.

The MSE sector accounts for 24 per cent of gross domestic product (GDP), over 90 per cent of private sector enterprises and 93 per cent of total labour force in the economy. 

Development of this sector is therefore central to realiwation of national development goals anchored in the Kenya Vision 2030 and the Big Four agenda, according the Finaccess MSE Covid-19 tracker survey.

It also indicates there was marked increase in digital transactions, with 58 per cent of businesses that accepted mobile money payments prior to Covid-19, reporting a sharp increase in digital usage during lockdown.

 However, this declined to 26 per cent by March 2021, partly reflecting reversal in mobile money waivers.

Youth-owned businesses relied more on digital platforms to reach their customers. 

A third of businesses increased their use of SMS/Phonecalls during lockdown to reach customers; but very few businesses started using new digital channels (social media, etc.)

All in all, the survey says, the Covid-19 pandemic has had far reaching impacts on micro firms.

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