The COVID-19 pandemic has had an unprecedented impact on trade, investment, growth, and employment, all critical contributors to the achievement of the Sustainable Development Goals (SDGs). While economies around the world are reeling from the pandemic’s impact, some segments are disproportionately affected. This is particularly the case for women-owned micro, small and medium enterprises (MSMEs).

According to the IFC, the finance gap for formal MSMEs in developing countries is valued at $5.2 trillion. Additionally, there is an estimated $2.9 trillion potential demand for credit from the informal sector, which is not adequately served today. There are close to 162 million MSMEs in emerging markets, of which 141 million are micro-enterprises and 21 million are SMEs.

Women-owned enterprises comprise 23 percent of MSMEs and account for 32 percent of the MSME finance gap. The total MSME finance gap for women is estimated at $1.7 trillion. Despite the fact that women owned MSMEs have a smaller average size than male owned enterprises, women-owned enterprises account for an outsized share of the finance gap.

In the ASEAN region, MSMEs account for about 89-99 percent of all businesses, 52-97 percent of employment, and contribute between 23-58 percent of GDP. Despite their economic and development importance, MSMEs face many roadblocks to sustainability. One of the main problems they face, especially for women-owned or led MSMEs, is access to finance.

COVID-19: Exacerbating existing problems

Due to the impact of COVID-19, the challenges faced by women MSMEs have been compounded by the following:

• Owing to the high level of informality, women-owned MSMEs are likely to have limited or no access to public and private financial services and credit;
• Low levels of collateral and asset ownership, compounded by reduced risk thresholds by financial institutions who have tightened lending procedures;
• There are significant social, cultural, and procedural barriers that women-owned MSMEs face when it comes to business registration, leading to high levels of informality and reduced ability to gain emergency government support in times of economic crisis;
• Internet/digital literacy is low in rural areas restricting women-owned MSMEs’ to conduct business online. Added to this is the fact that electricity connection can be unreliable in rural areas. This makes e-commerce challenging;
• A lower level of market linkages/networks, including for capacity building;
• Women-owned MSMEs do not tend to have a large amount of cash holding. This is likely to adversely impact these enterprises in times of economic downturn.

A survey of 30,000 businesses across 50 countries by Facebook, the Organisation for Economic Cooperation and Development (OECD) and the World Bank shows that 18 percent of SMEs in the Asia Pacific region had to close their operations between January and May 2020. Businesses from the South Asian region experienced a larger hit by the pandemic with 46 percent of SMEs closing.

Additionally, WEConnect International conducted a survey on the Impact of COVID-19 in Asia. The survey found that the pandemic had a negative impact for 80 percent of women-owned enterprises causing issues such as losing customers, inability to move inventory and not being able to shift to digital platforms. The survey also reported that 91 percent of the women-owned enterprises saw a 31 to 50 percent decrease in sales and/or revenue. Moreover, the pandemic introduced new financial challenges with 52 percent of SMEs noting that they cannot pay employees, while 35 percent need capital and don’t know where to go.

Aside from these challenges, many are adapting to “optimize or refocus their business” operations. Of those surveyed, 38 percent have moved to digital business models, while 35 percent are developing new business lines which respond to local needs. Women-owned enterprises have stated that they need support in the following areas:

• 61 percent in increased access to finance
• 60 percent in increased business opportunities
• 53 percent in increased networking opportunities
• 39 percent in business training
• 39 percent in increased mentorship
• 37 percent in increased access to investment

The Women Enterprise Recovery Fund

Transformation towards digital economies is accelerating at the global, regional and country level. To ensure inclusive digital economies, key sectors needs to be targeted where women constitute the majority of the workforce in terms of self-employment and job employment.

The Women Enterprise Recovery Fund is a project funded by the Dutch Entrepreneurial Development Bank (FMO), the Government of Canada, and Visa Inc and it is implemented by the United Nations Economic Commission for Asia and the Pacific (ESCAP) Catalyzing Women’s Entrepreneurship programme in partnership with the United Nations Capital Development Fund (UNCDF) under its ‘no-one left behind in the digital era’ strategy. The Innovation Fund is hosted by the UNCDF ASEAN programme, supported by the Australian Government.

This fund will partner with private sector innovators to design and launch digital solutions such as supply chain financing, AgriTech, alternative lending, among other solutions which support women enterprises which have been economically impacted by COVID-19. The fund is designed to develop, test and/or scale-up solutions, such as those listed above, to allow women entrepreneurs to recover from the business impacts of COVID-19. Successful fund applicants will receive up to US$ 50,000 in co-funding, technical assistance, mentorship and connection with investors.

About UNCDF

The UN Capital Development Fund makes public and private finance work for the poor in the world’s 46 least developed countries (LDCs).

UNCDF offers “last mile” finance models that unlock public and private resources, especially at the domestic level, to reduce poverty and support local economic development.

UNCDF’s financing models work through three channels: (1) inclusive digital economies, which connects individuals, households, and small businesses with financial eco-systems that catalyze participation in the local economy, and provide tools to climb out of poverty and manage financial lives; (2) local development finance, which capacitates localities through fiscal decentralization, innovative municipal finance, and structured project finance to drive local economic expansion and sustainable development; and (3) investment finance, which provides catalytic financial structuring, de-risking, and capital deployment to drive SDG impact and domestic resource mobilization.

Updated January 2021