Covid-19 has ravaged small businesses in Asia Pacific – will they recover?

The report shows the full extent of the pandemic’s impact on SMBs and delves into SMB owners’ perceptions.

61% of small-medium businesses (SMB) in Asia Pacific have reported a fall in sales due to the Covid-19 pandemic. However, nearly half of SMB owners in the region remain optimistic about their future outlook.

This is according to a new State of Small Business Report by Facebook, the OECD and the World Bank, which surveyed nearly 30,000 businesses across 50 countries.

The report shows the full extent of the pandemic’s impact on SMBs, and delves into SMB owners’ perceptions and the areas they feel they need the most support.

How many businesses closed during lockdown?

  • 18% of East Asia and Pacific SMBs had to close between January and May 2020, compared to the global average of 26%. In South Asia, the impact hit harder, with 46% of SMBs closing.
  • Countries like Taiwan only saw 4% of SMBs close, as compared to 31% in Singapore. This variation reflects differences in the lockdown measures deployed across the region, which were in turn affected by the infection rates and local government measures.
  • These closure rates also varied between industries. Globally, the hardest-hit were tourism agencies (54% closed) hospitality and event services (47%), education and child care services (45%), performing arts and entertainment (36%), and hotels, cafes and restaurants (32%).
  • Closures also disproportionatel­­y affected SMB led or owned by women. In East Asia and the Pacific region, 22% of female-led SMBs had to close, compared to 16% of male-led businesses. Most of these SMBs operate in acutely affected industries such as personal grooming.

What’s the impact on sales and revenue?

  • There has been a considerable drop in demand for goods and services offered by SMBs, with 61% of small businesses in East Asia and Pacific reporting a fall in sales, in line with the global average of 62%.
  • In countries with limited lockdowns, like Taiwan, 28% of SMBs reported a drop in sales of over 50%. Even with less stringent lockdown measures, shoppers stayed home.

Are SMB businesses receiving financial support?

  • In East Asia and the Asia-Pacific, 29% of businesses were receiving state financial support.
  • Globally, around 60% of support was in the form of government grants (49%) or government loans (10%).
  • Where support is available, SMBs often cited a lack of information as the biggest challenge in accessing financial aid.

How has the pandemic affected domestic and family responsibilities?

  • There are increased demands on SMB business owners to balance domestic responsibilities as a result of containment measures. This is particularly hard on female business owners, with 23% saying they spend more than six hours on domestic responsibilities, compared to 11% of male business owners.
  • In countries where business leaders spent more time on domestic responsibilities, more business leaders also reported that these responsibilities were having an impact on their work.

What are SMB owners’ future expectations?

  • Of the 26% of SMBs that have closed globally, nearly three quarters (74%) reported that they expect to reopen. 47% cited the lifting of Covid-19 containment measures as the most important factor in any decision to reopen.
  • In terms of specific challenges, the three most commonly foreseen challenges among regional business owners for the upcoming months include a lack of demand (45%), cash flow constraints (40%) and repaying outstanding loans (21%).
  • Despite the mixed forecast, the level of optimism in the region remains high, with nearly half of all regional SMBs reporting that they feel optimistic about the future. However, levels of ‘optimism’ vary widely across the region, with business owners in Indonesia (67%) and the Philippines (64%) feeling optimistic, compared to countries like Japan (14%) and South Korea (32%).

What are the needs and policy recommendations required by SMB owners?

  • SMBs still require further support in the short term. Business owner said that more salary subsidies (40%), tax deferrals (30%), and access to loans and credit guarantees (29%) were key measures needed to ensure recovery.
  • Other measures also included rental or loan repayment deferrals, and utility subsidies.

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