Small & Medium Enterprises Most Affected By COVID-19, 60 Percent Unemployed

May 17, 2020 | Investopaper

A study has shown that 60 percent of the people involved in small and medium enterprises in Nepal have lost their jobs due to the two-month-long strike to prevent the spread of COVID-19. The report also states that the income of such enterprises has decreased by almost 95 percent.

The Institute for Integrated Development Studies (IIDS) conducted a survey of 700 entrepreneurs in 23 districts, 400 representatives of high-risk communities, government officials and elected representatives. The study concludes that small and medium enterprises in both the formal and informal sectors have been most affected by COVID-19. These enterprises are quicker to be affected as they have less cash than assets.

“As the lockdown continues, such ventures can only last for about two months,” the report said. Most of the entrepreneurs in the survey have sought cash grants from the government as relief. “There are also demands for interest subsidies, concessional loans, and rent breaks,” the report stated.

According to the study, seasonal and informal sector workers, who make up 60 percent of Nepal’s total labor force, have been forced to lose their jobs. Temporary workers, internal migrants and daily wage workers are most at risk in terms of income. The study found that low-income women were particularly at risk.  Likewise, women’s participation in the labor market has decreased due to the loss of employment of women working in the hospitality sector, wholesale and retail.

28 percent men and 41 percent women have lost their jobs, the report said. Lodges, hotels, arts, recreation and transportation are the areas most affected by the epidemic.

The study report estimates that the number of tourists visiting Nepal will decrease by 60 percent in 2020 due to COVID-19, which will lose the opportunity to earn US $400 million in foreign exchange. The remittance inflows are expected decline by 15 to 20 percent this year. Due to the negative impact on trade, tourism and remittances, the economic growth estimate of Nepal before the Covid-19 epidemic is estimated to be below 2.5 percent.

The study report has been prepared in consultation with 700 entrepreneurs, 400 people, more than 30 private sector organizations and government officials. The distribution chain has been disrupted due to Kovid-19. The study also found that the existence of small and informal enterprises was being challenged and that many people were at risk of falling back below the poverty line when they lost their jobs and incomes.

The study has stated that the decline in trade, tourism and remittance inflows would add challenges to achieving the sustainable development goals if Nepal’s revenue base and foreign grants shrink. It estimates that there is a lack of investment needed to achieve the sustainable development goals and that there will be more competition for concessional loans.


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