Small business, big impacts: Pandemics, small & microenterprises, and fair recovery in Pakistan

Small business, big impacts: Pandemics, small & microenterprises, and fair recovery in Pakistan

Partner: Southern Voice (SV) – Global Hub

Timeframe: January 2022 - July 2023

Introduction

The COVID-19 pandemic and the subsequent policy measures had a significant impact on Small and Micro Enterprises (SMEs) in Pakistan. It has not only exacerbated the existing challenges but also created new inequalities for the owners and workers of the SMEs. This study aims to explore the pandemic impact on the SMEs in general and looks at their financial health in particular, e.g. the adverse effects on workers, and the coping strategies of owners and employees. The study further draws the urgent attention of the government to take action and implement measures to ensure the sustainability of SMEs in a post-COVID era in alignment with SDGs 1, 5, 8, and 10.

Methodology

To collect data, we used a mix of qualitative and quantitative research methods, including survey instruments, key informant interviews, and focus group discussions. Structural Equation Modelling (SEM) was utilized to measure the impact of COVID-19 on enterprises and workers. The binary logit estimation technique was employed to measure the impact of the pandemic on small-scale enterprises, while the multinomial technique was used to measure the impact of the pandemic on SME owners.

Findings

The findings suggest that the lockdowns resulted in decreased production activities, affecting both demand and supply, which, in turn, created a notable effect on the financial health of SMEs. It led to significant inequalities between and within these enterprises and the workers, thus highlighting the need for urgent policy action to address these issues.

Research Questions

1. How did the pandemic differentially impact SMEs based on factors such as age, migration status, skill or education level, gender (for workers), and size, sector, and health indicators of the firms (for entrepreneurs)?

For the sake of this study, micro-enterprises are defined as those enterprises that have five or fewer employees, and small businesses are those that have 50 employees or less.

2. What were the specific channels through which the pandemic affected SMEs?

3. How did the adverse impact on these businesses affect the workers employed in these enterprises?

4. How did the adverse impact on these businesses affect their owners and entrepreneurs?

5. What government policies were implemented to mitigate the adverse impact of the pandemic on SME owners and workers?

Focal Person: Dr Fareeha Armughan