COVID-19 threatens the developing world's small businesses. This is how to save them

When Caroline Moses started her small corner shop outside Nairobi a year ago, her bubbling enthusiasm compensated for her lack of experience.

The 23-year-old entrepreneur came fresh from the Smart Duka program, a partnership between TechnoServe and the Citi Foundation, where she had learned to keep business records, manage her stock, and treat her customers in such a way that they’d keep coming back.

Her enthusiasm and basic learnings got her far. Her "duka" (Swahili for “corner shop”) was starting to grow as a business, and she was excited to see her sales reach an average of $60 per day.

Then came the COVID-19 crisis and with it sales at her shop fell by 50%. She was far from the only "duka" owner to suffer.

Small businesses like Caroline’s are vital sources of goods and services in developing countries like Kenya. In Nairobi, for example, 80% of basic consumer goods are sold through dukas.

Some of the COVID-induced blows that Caroline has suffered have included losses from customers returning to their villages either for safety or because they had lost their jobs in the city.

In addition, curfews have made it difficult for suppliers to keep the shop stocked too, whilst reduced hours and investments in new safety procedures have cut into her sales.

The importance of protecting small businesses during the pandemic

Small businesses like Caroline’s keep local economies afloat. They are even more important in vulnerable communities and neighborhoods, because they provide essential goods in areas that large retailers aren't able to serve.

As the COVID-19 pandemic places new strain on global food security, the ability of these retailers to serve their communities is being tested: in Kenya, Nigeria, and South Africa, over half of poll respondents reported that some or many basic food items have become difficult to find.

Small businesses are also important drivers of livelihoods: in sub-Saharan Africa and South Asia, 90% of employment is in firms with fewer than 50 employees, as is 75% of employment in Latin America and the Caribbean.

Small retail outlets are also an especially important source of employment and income for women and young people.

Protecting these jobs is more important now that economic opportunities have become even more scarce. In urban areas of Peru, for example, the country’s lockdown has left more than half of the poorest households without any income.

The paradox is that despite all these reasons why they are crucial, small businesses are fighting for their own survival. How can we help them?

When we talked to entrepreneurs in Latin America, Africa, and India, they shared the challenges that are causing them financial and emotional stress. Often, curfews, travel restrictions, and other obstacles are keeping them from reaching their customers.

Economic difficulties have reduced the spending power of their customers. Employees are struggling to reach their place of work, and maintaining adequate stock has become a challenge.

Here are five conclusions we drew about lines of action that can be taken:

1. Shift the focus from goals to business survival

As a development organisation, we typically focus our work with small businesses on helping them grow; but under these circumstances, that’s not realistic. The focus of both the entrepreneurs and those of us who support them must shift from goals to business survival.

With a survival mindset, we developed a set of strategies that entrepreneurs can use to help their businesses get through the crisis:

● Resilient financial management, such as identifying the financial outlook for different scenarios and finding ways to cut costs without jeopardizing future growth;

● Adopting new revenue opportunities, such as shifting products and service offerings to more essential items, or offering safer and easier ways for customers to access products, such as delivery;

● Accessing and making good use of any government aid and flexible borrowing terms.

2. Create a space for expressing emotions

Emotional health is an important part of the response, as well; entrepreneurs feeling overwhelmed by stress will have a difficult time making key decisions.

For that reason, we’ve found it helpful to provide a space where entrepreneurs can simply share their experiences and feel supported. When we talk to entrepreneurs who have passed through previous crises, we often hear that the most important thing that our programs contributed wasn’t a particular tool or piece of advice, but rather the reassurance that they weren’t alone.

3. Help deliver remote learning tools

Safety considerations limit the ability of our staff to visit shop owners or gather entrepreneurs together for workshops. This has caused us to accelerate our adoption of remote-learning strategies.

TechnoServe recently published research on effective remote support, and our experience responding to this crisis underscores several points:

● It’s best to use communications tools that entrepreneurs can easily access and already use; depending on the setting, this could be Skype, Zoom, Google hangouts, WhatsApp, text messages, phone calls, and even radio;

● In a digital setting, it’s especially important to make content short, digestible, and engaging;

● It’s critical to continue finding ways to use effective behaviour change communication techniques remotely, such as having entrepreneurs practise the new techniques they are taught.

4. Draw on digital as a networking tool

We’ve also identified that it’s important to continue building communities between entrepreneurs, even if it has to be done remotely. WhatsApp groups, Facebook groups, and other online platforms allow entrepreneurs to brainstorm solutions to shared challenges and provide one another with emotional support.

That’s exactly what happened with Caroline and her counterparts. “My trainer has connected the shop owners in my region with different suppliers and manufacturers, making it easier for us to get the products we weren't getting from our usual suppliers," she said.

Through TechnoServe, we have created a WhatsApp group where our trainer is sharing training materials. "We are reminding ourselves of precautionary and health-related measures to undertake to avoid contracting or spreading the virus when we serve and interact with customers and suppliers," she continued.

5. Act now

The impact of a timely response should not be underestimated. The COVID-19 pandemic is a challenge unprecedented in scale and scope, and this is a uniquely difficult moment for Caroline and millions of other entrepreneurs around the world.

But judging from previous disruptions, the right kind of support at the right time can be a decisive factor in whether or not a business survives.

During the political upheaval that crippled Nicaragua’s economy during 2018 and 2019, for example, while approximately one third of small businesses went out of business nationally, nearly 90% of the businesses we worked with survived the crisis. Entrepreneurs estimated that their revenue would have fallen an additional 26% without the new techniques they used.

By providing timely and appropriate support, sharing what works, and cooperating and learning from one another, those of us around the world can help these vital businesses survive the crisis and support their communities.