In Nepal, SMEs contribute about 22% to the country’s GDP, creating over 1.7 million job opportunities.
The Global Impact
The outbreak of COVID-19 has created an economic and labor crisis with far-reaching effects on micro, small and medium enterprises (MSMEs) around the world. Effects range from working capital constraints to undermining the growth of businesses and employment generation. The International Trade Centre (ITC) COVID-19 Business Impact Survey conducted in 132 countries gathered from 21 April till 2 June 2020 showed that two-thirds of MSMEs were strongly affected and one-fifth of MSMEs risk shutting down permanently within 3 months. 64% of women led firms reported being strongly affected as compared to 52% for men-led firms. The risk of shutting down permanently within 3 months is 26% for youth-led firms compared to 18% for non-youth-led businesses. [i] Similarly, in a survey conducted by the United Nations Industrial Development Organization (UNIDO) in 34 countries with major representation of MSMEs, 49% of surveyed women entrepreneurs reported temporary suspension of activity due to COVID-19 compared to 51% of youth entrepreneurs and 35% for male entrepreneurs over 35 years of age. While the nature of the challenges was similar for all businesses, women led businesses showed lower resilience.
Country Context
In Nepal, SMEs contribute about 22% to the country’s GDP, creating over 1.7 million job opportunities. [ii] However, SMEs in Nepal predominantly fall in the informal sector, mainly by the virtue of being unregistered.[iii] Women play a significant role in SMEs in Nepal and are involved in different capacities across the sector. However, of the 111,442 estimated operational SMEs, only 12.8% women entrepreneurs fully or partially own these SMEs. [iv] Furthermore, 84.6% of the country’s total working population is employed in the informal sector, with women’s share in the informal economy (90.5%) is more than men’s (81.1%).[v]
The effect of the COVID-19 pandemic can be seen across sectors, with ranging severity. The sectors most affected include food and accommodation services, hospitality, wholesale, and retail – where a greater proportion of workers are female. This exposes women to income losses as well as layoffs. Furthermore, minimal social protection aggravates the existing gender inequalities. For decades, work opportunities for women have been limited, which has been furthered by the onset of the pandemic. Most women remain in unpaid work or in work that is underpaid and undervalued (For example, support staff, cleaners and sanitation workers, and nurses). Additionally, women are also burdened with a surreal amount of domestic work. With the pandemic, as jobs became scarce, given the gender dynamics, women were the ones who had to give up their paid jobs or were laid off, for unpaid care work at home. Results of the survey conducted by ILO found that 37% of the surveyed businesses had laid off a proportion of their female staff, whereas 58% of these businesses laid off 50% to 100% women employees. Likewise, 37% of businesses imposed a pay cut on their female employees, out of which 58% had inflicted a 50% deduction in salary. 5% of businesses had even inflicted a full 100% pay cut on their female employees.
For women entrepreneurs and SMEs, the pandemic has led to the closure of businesses and into financial distress and insecurity, leaving many without a regular income or effective social security safety nets.
They were forced back into unpaid domestic work, without any certainty of resuming operations of their enterprises. Furthermore, women were exposed to a staggering gender-based information gap. Studies revealed that only 44.6% of the total population had the Nepali language as their mother tongue while around 22% of the people did not speak Nepali either as a first or second language[vi], out of which the majority are women. However, the information disseminated by government agencies is mostly in Nepali. Information was also disseminated through mobile phones, radio, and the internet, with an already existing gender gap in terms of cell phone ownership and access to the internet. This resulted in women being disadvantaged in both the information and technology front.
Opportunities and moving forward
However, as it is often said that crisis drives innovation, some women in Nepal unleashed their inner entrepreneurial skills, turning the crisis into an opportunity. When exposed to issues with procurement and sale of milk, small-scale women farmers started making dairy products such as cheese, cottage cheese (paneer) and other items. Similarly, some women entrepreneurs also used surplus vegetables to make pickles, jams and juices to avoid wastage. Women engaged themselves in using kitchen waste to make compost and old containers as pots.
Moving forward, the disproportionate impacts on the marginalized groups like women should be sincerely considered. There was a significant lack of gender lens during Covid-19, particularly in Covid-19 handling and management. In order to encourage inclusion and mitigate the gender inequalities, women should be considered and included in decision making across levels. Economic stimulus packages that have a preference for women should be introduced. Furthermore, for women who have lost their jobs due to the pandemic, the government should introduce skill enhancement trainings for women, which are aligned with new opportunities post Covid-19.
[i] International Trade Center, “COVID-19: The Great Lockdown and its impact on small businesses”, 2020
[ii] Nepal Rastra Bank, 2020
[iii] CBS, 2018
[iv] https://sakchyam.com.np/wp-content/uploads/2017/02/WomenSMEBankingDiagnostic.pdf
[v] CBS 2018
[vi] CBS, 2011
Tanushree Agrawal is a BBA Graduate from Christ University, with a major in Finance. Her areas of interest are Mergers and Acquisitions, private equity, impact investing, and economic policy. She was previously associated with BankerBay, an investment banking firm in India, working with the M&A team. She is a former fellow at beed management.