COVID-19: Small Businesses Manage, Improve & Adopt to New Normal


In our 7th podcast, we had a conversation with Agri-business, Agri-lending and MSMEs expert – Ms. Subrina Shrestha. Subrina works as a MSME and agri-lending consultant at Business and Finance Consulting, a Swiss based organization trying to connect commercial banks to MSMEs. Prior to this, she worked on various projects across the globe that provided MSMEs easy access to finance . Tune in to the podcast here or read the highlights of the conversation where she points out the challenges that agri-sector and MSMEs are and will be facing during and post the crisis.

 Impact of COVID on MSMEs and agri-businesses
Subrina tells us this crisis was unpredictable and unprepared so whatever forecasts had been made in the past are gone to the wind. There’s always a light at the end of the tunnel but this time, it’s not visible yet for MSMEs. So, the best strategy for now is to ride out the storm and be creative with your business. Find ways to cut expenses or  generate more revenue.
She  gave  an overview of some mistakes (or actions in general) that founders are making in terms of running their businesses. And how this has affected them even more during the crisis. Here’s few of them:

1. Under reported revenues
Most of the time, businesses  report less profits  than what was actually earned. Sure they got away without paying higher taxes before but now they’ll be facing difficulties in justifying and getting loans. Their past financial documents show less profits and right now it’s almost nil so there’s no strong evidence  to show the bank that they can pay back the loan.

2. Personal loans over business loans
According to the data by Nepal Rastra Bank, only 17% of businesses have actually taken a business loan while the rest of them  run on personal loans. This means that the provision of refinancing loans announced by the government to the MSMEs will only be availed by those businesses that had taken business loans. The announcement must have seemed like a big deal on the surface but if we check the specifics, the majority of the businesses have little or no benefit at all.

3. Lack of financial discipline
Subrina has noticed that many business owners do not have practical financial management knowledge and run their finance based on their whims. They fail to account for a lot of things that later hurt their financial statements. For example, some do not account the expense of their office space because it’s its own property or their own labor which comes under opportunity cost.  These minor details need to be taken into consideration by MSMEs and agri-business owners.

A recent development from the government’s side that has been gaining momentum because of its improved provisions is the Fiscal budget 2020/21. As someone who knows the agri-sector and MSMEs on a deeper level, here’s what Subrina’s thoughts are on the fiscal budget. 

Efficacy of Fiscal budget 2020/21 on MSMEs and Agri-businesses
The provisions are  made in good intention but the problem is with  implementation, if it happens at all that is. She has taken this stance based on previous year’s agricultural budget which apparently had the same provisions but  was barely implemented. Likewise,  the people, mostly at the grassroots level,  weren’t even aware of the provisions and weren’t able to reap its benefits. Apart from this,  the provision of tax exemption isn’t even applicable to startups and small businesses because they haven’t been able to make profits  especially during the lockdown. So it seems that the budget is more favored towards already established businesses rather than on MSMEs and startups.

A take on human resources and government incentives to retain them
Subrina gives us an example of Serbia where MSMEs are a significant chunk that contribute to the country’s economy. She highlights that the Serbian  government has implemented specific plans in order to support these MSMEs including  state guarantee schemes, liquidity and capital loan, and deferred payroll taxes. The government has also incentivized companies to pay their employees and to keep supporting the economy. This is coming in line with a recent study that concluded that the cost of laying off employees during a crisis is much bigger than the cost of giving incentives to companies to retain their employees. She suggests that the Nepali government do the same to save the economy.

Interested to dig deeper into the mind of an MSME pundit? Check out the full podcast here.

Article by Yangzum Lama.