In the months since COVID-19 was first discovered, it has had ripple effects with devastating impacts on global economies and supply chains. The crisis, characterized by border closures and lockdowns, has already become an economic and labor market shock, impacting not only supply but also demand. Projections for Africa’s 2020 growth have fallen from 3.9% before the crisis to 0.4% or lower. Several businesses are facing serious challenges, with the real threat of significant declines in revenue, insolvencies, and job losses — particularly for small and medium enterprises, or SMEs.
The International Institute of Rural Reconstruction, or IIRR, has been working with over 10,000 agri-based SMEs, mostly in rural Africa and Asia. Established over 60 years ago, the institute helps women entrepreneurs increase their business competitiveness through capacity-building training in entrepreneurial skills and business management, among other things. So we asked them, “What does this ‘coronavirus monster’ really mean for your businesses?”
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The feedback was devastating. Most of the women were extremely stressed; they cited low sales, reduced or closed markets, limited mobility, no income alternatives, and no safety nets.
The COVID-19 crisis is predicted to have far-reaching consequences that will be felt for years to come. The trajectory of rural development has thus changed, and so must we. We must think differently and be ready to do “business unusual” to help rural entrepreneurs cope with economic stresses amid the pandemic.
In Rwanda, cash has been discouraged to reduce the spread of the coronavirus. However, in sub-Saharan Africa, 66% of the population is “unbanked.” Where does that leave the rural woman?
The solution lies in embracing the future. Gender-inclusive digital services provide an opportunity to support rural-based supply chains and overall food security systems. Therefore, reviving safety nets and using ICTs for boosting business growth will be pivotal for rural, women-led companies to recover from the impacts of COVID-19.
The following strategies can be employed:
1. Strengthening the capacity of governments and the private sector can revive safety nets and women-friendly supply chains for rural, women-led SMEs to boost business growth. This invariably requires that these rural women entrepreneurs become part of the digital economy. Safety nets include insurance products, pension schemes, leasing arrangements, agricultural finance, low-value equity investments, government-to-person e-payment options, and conditional digital cash transfers.
2. Embracing digital financial inclusion can reduce mobility constraints caused by the pandemic. With unpredictable lockdowns and restrictions on movement and person-to-person interaction, digital financial services will enable rural women’s ability to engage in financial transactions without having to travel outside of their communities, businesses, or homes. With the increased ownership of cellphones — even in rural areas — there is more opportunity for mobile transactions.
3. This is the opportune time to increase rural women’s participation in the digital economy, including digital marketing and digital trade. Of course, this means that the necessary enablers must first be addressed, starting with increasing digital identification for rural SMEs to allow innovative ways of securing collateral and credit histories — for example, through the use of data from utilities, trade creditors, and purchases of inputs.
4. With the social distancing phenomena, the era of gathering rural people in groups for capacity building will end. Development organizations should adapt to ICT-based capacity building. This includes providing digital, virtual, and mobile-based business training, coaching, and mentoring related to economic recovery, digital marketing and communication channels, and overall digital financial literacy. Even meetings of village savings clubs, which have traditionally taken place in person, will have to evolve and embrace digitization. In IIRR’s project evaluations supporting the digitization of savings and credit groups, this has resulted in an increased savings culture and decreased loan defaults due to real-time monitoring of individual savings and credit.
Since 2016, IIRR — with UN Women in Uganda and fintechs — has piloted the digitization of village savings and credit associations to enable women entrepreneurs to have digital transaction histories to improve credit access. This initiative has enabled mobile-to-wallet and wallet-to-bank transactions, thus minimizing the use of cash. Now, the need to expand such programs is more critical than ever to enable rural SMEs to survive the COVID-19 crisis.
With the unpredictability of the business environment, we need to support rural businesses to improve ICT-based business continuity preparedness planning. This should start with regulators, financial institutions, and telecommunication companies putting in place an enabling infrastructure and dropping the red tape around innovators to allow for a proactive regulatory framework for digital financial services to thrive in the rural areas that are most underserved.
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