Public and private sector stakeholders must work together to develop practical solutions that foster sustainable recovery for micro, small and medium-sized enterprises (MSMEs) during the coronavirus crisis, speakers said at a virtual webinar on 20 October.

Despite being the backbone of many economies, MSMEs – particularly those led by women and youth – have been adversely affected by COVID-19’s negative impact on global supply chains. While short-term measures, such as interest-free loans or deferred payments, have provided critical support to small businesses, AFI Deputy Executive Director Norbert Mumba reminded participants that digital transformation was key to surviving this and future crises.

“Digitalization increases MSME productivity, reduces costs and helps avoid a complete economic halt,” AFI’s Mumba said, explaining that the use of contactless payments had helped keep many small businesses afloat during the pandemic. Embracing digital innovations, he added, would appeal to the youth – another vulnerable group – and help foster income-generating activities to improve resilience in the face of financial shocks.

Other essential interventions, he emphasized, must also be supported by robust, coordinated and gender-sensitive strategies involving monetary and financial sector policies as well as the participation of private banks. Going forward, equally important would be ensuring financial stability through sound exit strategies from some existing emergency measures.

“COVID-19 reminds us that measures should be a ‘living policies’ at both the micro and macro levels with consistent and complementary goals, backed by solid monitoring, so that they can be maintained, adjusted, or phased out as appropriate,” Mumba said.

With a second national financial inclusion framework already in place, Bank of Tanzania’s Revelian Felix, credit guarantee scheme manager, said that the central bank was in a better position to tackle the ongoing crisis, especially given its emphasis on bolstering digital services. Any new policies, he noted, must also facilitate recovery both at the demand and supply side by enabling access to markets, capital and literacy.

He also underscored the importance of targeting vulnerable subgroups within MSMEs, noting that “if we channel funds through women and youth, we can make sure that the COVID-19 impact is reduced or minimised to help those groups stand on their own”. But in order ensure that policies met the needs of specific groups, he called on governments to push for greater data collection.

Also sharing his expertise was Gcina Patrick, principal development officer at Central Bank of Eswatini, who noted that public-private partnerships could bolster government resources by providing funds for initiatives, particularly those that support women and youth-led businesses.

Collaboration was also top of the agenda for Caren Robb, Vice President and Chief Operating Officer at FINCA Impact Finance, who told participants that “we only solve this by working together”.

“It’s the combination of different people working together that is going to get to that end customer that we want and need to support,” she said, adding that early investment in digital channels had facilitated flexible business practices by allowing call centre personnel to work remotely.

Vodacom Group Managing Executive for Public Policy Judith Obholzer also noted how the ongoing pandemic had vastly accelerated the use of digital technology, adding that it could be used as a springboard to develop universally available digital solutions.

She added that while MSMEs have wide ranging needs, most importantly, they need to be able to sustain themselves with products such as insurance and credit.

“MSMEs are critical to Africa’s economic life and if we equip the men and women driving it, we will together build a more resilience and prosperous way,” Obholzer said.

AFI recently announced that it was partnering with Vodacom Group, Africa’s leading technology communications company, under the global network’s public-private dialogue platform to advance financial inclusion in Africa through systematic knowledge sharing with financial policymakers and regulators.

Greater focus on digital solutions, said Nathalie Gabala, Mastercard Foundation’s Regional Head of Western, Central and Northern Africa, also supports MSMEs by boosting access to markets beyond national borders.

Regulators, she added, must put more emphasis on supporting youth and women enterprises worst affected by the pandemic and ensure liquidity for microfinance institutions given that they work directly with customers.

Nearly 50 participants from 25 countries attended the technical webinar on facilitating MSME sustainability and viability in Africa during COVID-19, organized by AFI’s SME Finance Working Group (SMEFWG). Roughly half of AFI’s membership comes from Africa, making it the largest region represented in the network.

This was the second event supported by the Mastercard Foundation under AFI’s COVID-19 Policy Response for Africa Region, following a webinar on agent banking on 5 August. Earlier this year, Mastercard Foundation and AFI agreed to partner on a two-year project that focuses specifically on MSMEs and digital finance in response to the devastating impacts of the global pandemic in Africa.