Update 10: SEDPI Rapid community assessment on the impact of COVID-19 to nanoenterprises
Two months after the government started easing lockdowns in most parts of the country, 36% of nanoenterprises reported to have bounced back to pre-pandemic level. In May, only 18% expected to bounce back within one month which may be a good sign of recovery if the spread of the virus is contained.
Nanoenterprise (NE) is a SEDPI-coined term that refers to unregistered livelihoods of self-employed individuals. They typically operate informal businesses alone or with the help of unpaid family members targeting their own immediate local communities.
Status of nanoenterprises
Those that bounced back report that they are already able to earn about the same income; and experience normal demand to their products and services. For the month of June, there were twice as many nanoenterprises reporting slowdown in sales compared to those that reported strong demand.
Access to supply on inputs needed to operate their livelihoods remain stable.
Financing options
Nanoenterprises typically access loans from informal sources which make them vulnerable to predatory financing practices. Most of them borrow money from cooperatives, rural banks, microfinance NGOs and pawnshops.
On average, nanoenterprises borrow a small sum of money ranging from PhP3,000 to PhP10,000 to finance their livelihoods such as sari-sari stores, carinderia, farmers, fisherfolks, dressmaking and vending. Microfinance institutions offer collateral-free loans to them payable in three to six months with interest rates ranging from 2% to 5% per month.
With microenterprises cautious on demand, they prefer not to access loans. Only two of three of those who finished their loans opted to renew their for another cycle. This is also a sign that nanoenterprise have the ability to weigh risks and returns.
For the month of June, when normal loan collections resumed, one in three nanoenterprises was able to repay in accordance with amortizations based on the Bayanihan Act’s loan deferment schedule. A majority are requesting for up to two months additional grace period to allow them more time to adjust and cope with the new normal.
Essential financial service to low income group
There are approximately 8 million low income households that access microfinance services in the Philippines. MFIs are frontliners in the delivery of financial services to low income groups who find it difficult to open deposit accounts and access loans from commercial banks.
SEDPI estimates that a PhP40B economic assistance to nanoenterprises channeled through MFIs will address their financing needs to jumpstart their livelihoods. This is based on 8 milion estimated number of microenterprises and PhP5,000 economic assistance package.
The proposed Philippine economic stimulus package contains a total of PhP245 billion budget to assist micro, small and medium enterprises. Only a small fraction of this is expected to reach nanoenterprises.
Prioritizing nanoenterprises
The negative impact of COVID-19 to nanoenterprises is undeniable. The research shows that nanoenterprises are showing positive signs of bouncing back faster.
Preferential option to those at the bottom of the pyramid should be extended first since these groups can bounce back quickly; only need a small amount of stimulus; will reduce need for cash dole outs; and will reach millions of Filipino low income households.
Note:
The research is part of a series of rapid community assessments that determines the economic impact of COVID-19 to microenterprises and the informal sector. SEDPI, a microfinance institution (MFI), conducted the survey from June 23-30 with 5,791 respondents located in Agusan del Sur and Surigao del Sur.
It is not a representative sample of the entire Philippines. It is highly localized but should be a good case study that reflects the situation in the countryside. SEDPI believes that the nationwide experience may not be far from our research results.
Previous updates:
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• June 12 (Update 9): Microenterprises show signs of bouncing back as lockdown eases
• May 28 (Update 8): 8 out of 10 microenterprises open for business one month after GCQ
• May 22 (Update 7): Demand for microenterprise products remain weak amid COVID pandemic
• May 15 (Update 6): Demand slumps on microenterprise products 2 weeks after GCQ
May 8 (Update 5): Only 5% of microenterprises back to “normal” in first week of GCQ
• April 30 (Update 4): Two in three microenterprises hopeful to bounce back two months after lockdow – UPDATE 4
• April 24 (Update 3): Community assessment and recommendations for support to microenterprises and the informal sector during and after COVID-19 – UPDATE 3
• April 14 (Update 2): Community assessment and recommendations for support to microenterprises and the informal sector during and after COVID-19 – UPDATE 2
• April 6 (Update 1): Community assessment and recommendations for support to microenterprises and the informal sector during and after COVID-19 – UPDATE 1
• March 30: Immediate impact of COVID-19 lockdown to microenterprises