Survey Report: Impact of COVID-19 on SMEs · 2020. 4. 3. · chain. Only 8% report no disruptionin...

Survey Report:Impact of COVID-19 on SMEs

Policy & Planning DivisionSmall and Medium Enterprises Development Authority (SMEDA)

April 2020

Contents

April 2020 Small and Medium Enterprises Development Authority (SMEDA) 2

1. Key Findings ……………………………………………………..………….. 3

2. Overview………………………………………………………. ….............4

3. Geographical Distribution …………………………...........……….. 5

4. Classification of Respondents by Sector/ Business ..……… 6

5. Status of Enterprise by Ownership Structure ……………….. 7

6. Classification of Enterprises by Size …………………...………… 8

7. SMEs’ Market ………………………….……....…………………………..9

8. Operations Affected ………………………………...…………….…...10

9. National Level Operations and Export Affected

(by Employment Size)………………………………....……………….11

10. Supply Chain Disruption ………………………....……………………12

11. Supply Chain Disruption (by Employment Size) …………….13

12. Daily Wagers Employed ……………………………………………….14

13. Employees Laid off by Enterprises and their Plan to Rehire them …………………………………………………….15

14. Rehiring Plan (by Employment Size) ……………………………16

15. Future Expectations of Enterprises and their Ability to Sustain a Lock Down ……………………………………17

16. Enterprises that have Halted their Operations …………..18

17. Issues Reported by Enterprises due toCoronavirus Outbreak and Lock Down ………….……………19

18. Facilitation Required by Enterprises in Lock Down ……..20

19. Government Support Required by Enterprises …………..21

20. Key Interventions Identified by Respondents(Government Assistance) …………………………………………..23

Key Findings (Impact of COVID-19 on SMEs)

Enterprises have experienced a reduction in Operations

Report up to 100% lossin export orders

Enterprises report disruption in supply chain

Enterprises have laidoff employees

Enterprises plan to rehire laid off employees in one month

Enterprises report facing financial issues

Total Respondents = 920

Estimated Workforce Employed = 19,641

Estimated Daily Wagers = 8,950

Estimated Annual Sales Turnover = PKR 29 Billion

95% 23% 92% 48%

26%

89%

“Impact of Covid-19 on SMEs”; an online survey by SMEDA, was

launched on April 3, 2020 until April 14, 2020. Nine hundred &

twenty (920) businesses participated in the survey. Results

highlight the issues being faced by SMEs during lockdown and its

impact on employment and production. SMEs have identified

areas for public sector support to sustain their businesses and

mitigate the impact of COVID-19. These include SME-specific

support measures including financial packages, tax relief,

guarantees and grants, relaxation in payments of utility bills,

support in paying salaries and easing conditions for loan

repayments.

Overview

April 2020Small and Medium Enterprises Development Authority (SMEDA)

4

Pakistan is facing the brunt of Coronavirus outbreak as the

country is in a partial lock down. This has had a negative impact

on businesses. Initial estimates show that the economy will

witness sluggish growth in services, manufacturing and

agriculture sectors, increase in unemployment, decrease in

government revenue, decline in exports and disruption in supply

chains. Lockdown across the country is expected to make the

situation dire for the estimated 5.2 million enterprises in the

country. SMEs may experience supply chain distortions due to

irregular supply of raw materials and intermediate goods,

revenue loss and shortage of liquidity to continue business

operations.

1. Abbottabad

2. Bahawalpur

3. Bajaur

4. Batkhela

5. Battagram

6. Bhakkar

District

7. Bucheki

8. Buner

9. Chakwal

10. Charsadda

11. Chitral

12. Dadu

13. Daska

14. Dera Ismail

Khan

15. Faisalabad

16. Ferozewala

17. Gujranwala

18. Gujrat

19. Hangu

20. Haripur

21. Hasan Abdal

22. Hub

23. Hyderabad

24. Islamabad

25. Jamshoro

26. Jehangira

27. Kailash District

Chitral

28. Karachi

29. Kasur

30. Khairpur

31. Khanewal

32. Khyber District

33. Kohat

34. Lahore

35. Lakki Marwat

District

36. Layyah

37. Lodhran

38. Lower Dir

39. Mailsi

40. Makin, South

Waziristan.

41. Mansehra

42. Mardan

43. Mirpurkhas

44. Mohmand

Agency

45. Multan

46. Muzaffargarh

47. Noushehro

Feroze District

48. Nawabshah

49. Nowshera

50. Pashat Salarzai

Bajour

51. Peshawar

52. Phalia, Mandi

Bahauddin

53. Quetta

54. Rahim Yar

Khan

55. Rawalpindi

56. Sadiqabad

57. Sahiwal

58. Sanghar

59. Sargodha

60. Sheikhupura

61. Shikarpur

62. Sialkot

63. Sui, District

Dera Bugti

64. Sukkur

65. Swabi District

66. Swat

67. Toba Tek Singh

Geographical Distribution


Total 920 respondents from all over Pakistan

• 68% of the respondents were engaged in Services activities followed bymanufacturing (16%), Marble, Mining & Quarrying (6%) and Agriculture(5%).

• A deeper analysis shows that 17% of the respondents are associated withthe education sector, (5%) with Hotels & Restaurants, (4%) Wholesale &Retail, (4%) Textile, (4%) Agriculture and Livestock, (3%) ICT & Commerce,(2%) Travel and Tourism, (1%) Food Processing, (2%) Jewelry andEngineering (2%).

Classification of Respondents by Sector/ Business


0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

Agriculture (incl. Dairy Livestock)Automotive

EducationEngineering

Food ProcessingLeather & Footwear

HandicraftsHealthcare

Hotels & RestaurantsICT & Ecommerce

JewelleryManufacturing

Mining & MarbleOther

PharmaceuticalProfessional Services/ Consulting

Retail and WholesaleServices

TextileTravel and Tourism

4%4%

17%2%

1%1%

2%2%

5%3%

2%10%

7%13%

2%2%

4%14%

4%2%

% of Respondents (Enterprises)

Buisness SectorOther

5%Agriculture

5%

Manufacturing16%

Marble, Mining & Quarrying

6%

Services68%

Sectors

In terms of ownership structure of respondents;

• 42% of enterprises self identified as soleproprietorships;

• 20% Private Limited Company

• 19 % Partnership

• 13% Single Member Company• 3% Public Limited Company

Status of Enterprise by Ownership Structure


Partnership21%

Private Limited19%

Public Limited3%

Single Member Company

12%

Sole Proprietorship

41%

Other4%

Status of Enterprise by Ownership Structure

Annual Sales Turnover of respondents indicates that majority(81.1%) of the respondents were from small sized businesses withup to 30 million annual sales turnover. 32.8% of respondentsindicated to have less than PKR 1 million annual sales turnover.

33.9% of enterprises have 1 to 5 employees. Cumulatively,84.4% of enterprises have up to 30 employees. 12.8% ofenterprises have 30 to 150 employees and 2.9% have morethan 150 employees.

Classification of Enterprises (Annual Sales Turnover and Employment Size)


Up to 1 million

1+ million to 2 million







Above 300 million

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%

32.8%13.8%

13.0%10.1%

11.4%6.0%

5.3%3.5%4.0%

Annu

al S

ales

Trun

over

(PKR

)

Percentage of Enterprises

Percentage of Enterprises (by Annual Sales Turnover PKR)

0.0% 10.0% 20.0% 30.0% 40.0%

1 to 5

6 to 10

11 to 20

21 to 30

31 to 50

51 to 100

101 to 150

151 and Above

33.9%

19.0%

22.0%

9.5%

5.8%

5.0%

2.0%

2.9%

Percentage of Enterprises

Num

ber o

f Em

ploy

ees

Percentage of Enterprises (by Employment Size)

• 34.6% of enterprises report their entire market (up to 100%) to be locali.e within city. Only 6.5% of respondent’s sell their product / servicenationally while 4.35% of enterprises report that they export up to 100%of their product/service.

SMEs’ Market (Within City, National Level or Export)


0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

0% Up to 20% Up to 40% Up to 60% Up to 80% Up to 100%

% o

f Ent

erpr

ises

% of Products Sold (Within City, Nationally, Exported)

Where do Enterprises Sell their Products

Within City Nationally Export

95% of enterprises admit to have experienced a reductionin production / work activity / contracts due toCoronavirus outbreak. Only 5% respondents state that theyhave not experienced any reduction in their work activity.

51.6% of enterprises report that COVID-19 outbreak hasaffected up to 100% of their operations; whereas 22.6%have reported up to 100% loss in export orders.

Operations Affected due to COVID-19 and Lock Down


5% have not experienced

any Reduction in Work

95% have Reported Reduction in Work

Reduction in Production/ Work Activity/ Contracts due to Coronavirus outbreak

0.0%

20.0%

40.0%

60.0%

Up to

10%

Up to

20%

Up to

40%

Up to

60%

Up to

80%

Up to

100%% o

f Ent

erpr

ises

% of Work Activity Afftected

Orders/Work Activity of SMEs Affected (%, National and Exports)

Orders/Work Activity of SMEs Affected (%, Natioanal)

Orders/Work Activity of SMEs Affected (%, Exports)

Enterprises with greater than 30 employees report a higher level of disruption in exports.

National Level Operations and Export Affected (by Employment Size) %


0%

20%

40%

60%

1 to 5 6 to 10 11 to 20 21 to 30 31 to 50 51 to100

101 to150

151 andAbove

% o

f Ent

erpr

ises

Number of Employees

National Level Work Activity Affected (by Employment Size) %

0% Work Affected Up to 10% Work Affected Up to 20% Work Affected

Up to 40% Work Affected Up to 60% Work Affected Up to 80% Work Affected

Up to 100% Work Affected

0.00%

20.00%

40.00%

60.00%

80.00%

1 to 5 6 to 10 11 to 20 21 to 30 31 to 50 51 to100

101 to150

151 andAbove

% o

f Ent

erpr

ises

Number of Employees

Export Affected (by Employment Size) %

0% Work Affected Up to 10% Work Affected Up to 20% Work Affected

Up to 40% Work Affected Up to 60% Work Affected Up to 80% Work Affected

Up to 100% Work Affected

As the size of the enterprise increases,disruption in operations at the nationaldecreases.

92% of the enterprises reported a disruption in supplychain. Only 8% report no disruption in supply chain.

Majority of enterprises have experienced a disruption in supply chain.On a scale of 1 to 10 (with 10 being the highest level of disruption),15.6% report a disruption level of 8, 13.2% of SMEs have reported adisruption level of 9, while 46.4% have reported maximum disruptionlevel (10). Only 2.4% of SMEs state that supply chain disruption is at itslowest level.

Supply Chain Disruption


8% have reported no disruption

92% have reported

disruption

Disruption in Supply Chain due to Coronavirus Outbreak

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

Disruptio

n Leve

l 1

Disruptio

n Leve

l 2

Disruptio

n Leve

l 3

Disruptio

n Leve

l 4

Disruptio

n Leve

l 5

Disruptio

n Leve

l 6

Disruptio

n Leve

l 7

Disruptio

n Leve

l 8

Disruptio

n Leve

l 9

Disruptio

n Leve

l 10

% o

f Ent

erpr

ises

Supply Chain Disruption (with 10 being the highest level of disruption)

• Around 48% of enterprises with up to 30 employees have reported the highest level of disruption (level 10) in their supply chain

• The survey indicates that as the size of enterprise increases, the level of supply chain disruption decreases

Supply Chain Disruption (by Employment Size)


0%10%20%30%40%50%60%

1 to 5 6 to 10 11 to 20 21 to 30 31 to 50 51 to 100 101 to 150 151 andAbove

% o

f Ent

erpr

ises

Number of Employees

% of Enterprises (by Supply Chain Disruption and Employment Size

Disruption Level 1 Disruption Level 2 Disruption Level 3 Disruption Level 4 Disruption Level 5Disruption Level 6 Disruption Level 7 Disruption Level 8 Disruption Level 9 Disruption Level 10

37% of respondent businesses do not employ daily wagers. 43% ofbusinesses employ 1 to 10 daily wagers. As per survey results, 1%employ 101 to 150 and 2% employ above 150 daily wagers.

Enterprises with up to PKR 2 million annual sales turnover employ less number of daily wagers. However, comparatively larger sized enterprises with PKR 150 million to above PKR 300 million annual sales turnover employ larger number of daily wagers

Daily Wagers Employed


None

1 to 5

6 to 10

11 to 20

21 to 30

31 to 50

51 to 100

101 to 150

151 and Above

0% 5% 10% 15% 20% 25% 30% 35% 40%

37%

33%

10%

8%

4%

2%

2%

1%

2%

Num

ber o

f Em

ploy

ees o

n Da

ily

Wag

es


Employees Working on Daily Wages

None1 to 5

6 to 1011 to 20

21 to 3031 to 50

51 to 100101 to 150

151 and Above

0%5%

10%15%20%25%30%35%40%

Up to 1

1+ to 2

2+ to 5

5+ to 10

10+ to

30

30+ to

50

50+ to

150

150+ t

o 300

Above 30

0

Num

ber o

f Dai

ly W

ager

s

% o

f Ent

erpr

ises

Annual Sales Turnover (PKR Million)

Daily Wagers (by Enterprise Size)

None 1 to 5 6 to 10 11 to 20 21 to 30 31 to 50 51 to 100 101 to 150 151 and Above

48% of enterprises have laid off some of their employees due to lockdown while 52% report that they have not laid off any of theiremployees.

26% of enterprises that have laid off employees, plan to rehire them inone month, 18% plan to hire them back in 2 months, while 15% plan torehire in 3 months; once lockdown is lifted. 25% of enterprises plan torehire (or take other measures) as soon as the situation improves.

Employees Laid off by Enterprises and their Re-hiring Plan


52% say they have not laid

off employees

48% say they have laid off employees

% of Enterprises who have laid off employees

1 month26%

2 months18%

3 months16%

4-6 months9%

6-12 months6%

End of Lock Down/Other

25%

Enterprises Plan to Rehire Employees that have been Laid off (Number Of Months)

• If the rehiring plan of enterprises isanalyzed, it illustrates that most of theenterprises whether they are small ormedium sized, plan to rehireemployees in one month

• A similar percentage (around 25%)plan to rehire as soon as the situationimproves or when the lock down islifted• A higher percentage of comparatively

larger enterprises (with 101 to 150and above employees) plan to rehireemployees in 6 to 12 months as theirbusinesses may take more time toreturn to normal.

Rehiring Plan (by Employment Size)


1 month

2 months3 months

4-6 months6-12 months

When…

0%

5%

10%

15%

20%

25%

30%

35%

1 to 5 6 to 10 11 to20

21 to30

31 to50

51 to100

101 to150

151and

Above

Rehiring Plan (by Employment Size)

1 month 2 months3 months 4-6 months6-12 months When Situation Improves/ Other

In wake of the Coronavirus pandemic, majority ofenterprises (60%) expect to continue with their present lineof business over the next 1 year, while 18% say they woulddownsize their business. 6% report that they may closedown their business, while 7% would diversify into anotherline of business.

33% of enterprises report that they will be able to sustaintheir business for a period of 2 weeks of lock down, while26% can sustain themselves for a months duration.

Future Expectations of Enterprises and their Ability to Sustain during Lock Down


Close down business

6%

Continue with present business

60%

Diversify into another line of business

7%

Downsize business

18%

Expand business6%

Other3%

Expectations concerning business over the next 1 year

0%5%

10%15%20%25%30%35%

2 weeks 1 month 2 months 3 months ormore

% o

f Res

pons

es

Lock Down Duration

Enterprises Ability to Sustain a Lock Down

Respondents have reported that 73% of them have completelystopped operating during the lock down, while 27% have haltedoperations partially.

80% of enterprises that have up to 30 employees have halted theiroperations completely as compared to enterprises with greaternumber of employees, which shows the vulnerability of smallenterprises during lock down. The survey indicates that as the size ofan enterprise increases, its ability to operate during lock downincreases.

Enterprise Operations Halted


Completely73%

Partially27%

Enterprises that have halted their Operations (Completely or Partially)

0.0%

50.0%

100.0%

1 to 5 6 to 10 11 to

20

21 to

30

31 to

50

51 to

100

101 to

150

151

and

Above

Pe

rce

nta

ge o

f E

nte

rpri

ses

Enterprise Size – Number of Employees

Enterprise Operations Halted Completely or Partially (by Size of Enterprise, %)

Completely Partially

Enterprises have reported multipleissues during Coronavirus outbreakand lock down;• 89% of enterprises, report Financial issues

• 60% report issues in Selling theirproduct/service.

• 43% report Supply Chain Disruption,followed by Marketing (39%),Transportation (38%), Labour (37%),inventory issues (17%), Importing (14%),Exporting (11%) issues

Issues Reported by Enterprises due toCoronavirus Outbreak and Lock Down


0% 20% 40% 60% 80% 100%

FinancialLabour

MarketingSelling

ExportingImporting

Supply Chain DisruptionInventory Issues

WarehousingTransportation

Electricity ShortageGas Shortage

Water Shortage

89%37%

39%60%

11%14%

43%17%

7%38%

5%2.3%1.6%

Percentage of Respondents (Enterprises)

Issues Reported by Enterprises

• While highlighting multiple areas of facilitation required, 82% of enterprises indicate that the theGovernment introduce a special package for small and medium enterprises. 33% demand areduction in duration of lock down, while 31%% would want the Government to allow allbusinesses to operate during lockdown.

• 24% share that the Government introduce awareness programs for businesses in wake ofCoronavirus pandemic

Facilitation Required by Enterprises during Lock Down


0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Reduce duration of lock down

Allow all businesses to operate during lock down

Introduce a special package for SMEs

Introduce awareness programs for businesses

Other

33%

31%

82%

24%

6.90%


What can the government do to facilitate businesses?

Government Support Required by SMEs


0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

FinancingBusinesses

Taxation/Customs &

Tariff

Wage support Rental Costand Utility Bills

Support

Others ExportFacilitation

InfrastructureSupport

Regulations/simplificationof Procedures

63.92%

10.46% 8.81% 7.17% 5.29% 1.65% 1.53% 1.18%

Government Support Required by Businesses

Thematic Areas

%Re

spon

dent

s

To cope with the current challenges, 68.92% of enterprises demand financial schemes including loans on low interest rates,grants and relaxation of loan payments, followed by taxation / customs & tariff (10.46%). Around, 16.52% enterprisesrequire support to meet operational expenses including; wage/ salaries support (8.81%) and rental cost & utility support(7.71%). Furthermore, export oriented units call for government support for export facilitation (1.65%). 1.53% ofenterprises want infrastructure support and 1.18% require amendments in regulations/ simplification of procedures.

Key Interventions Identified by Respondents(Government Assistance)


Financing SMEs• Special Grants and interest free loans may be provided to SMEs.

• Financial assistance for small scale automotive industries may be provided. Grants & interest free loans maybe introduced.

• SME facilitation helpdesks may be established at Banks for guidance regarding documentation and otherprocedures critical in obtaining loans.

• Financial Schemes may be announced for services sector including IT Businesses, Business Consultation,Wholesale & Retail, logistics etc.

• Special financial schemes and grants may be provided to Women Entrepreneurs (WEs).

• Relaxation in interest payments for running finance for 1-2 months may be provided.

• Government may provide interest free loans for school administrators so that they can manage their systemduring and after lock down.

• Businesses that are debtors/ declared defaulters or are affected by any other bank issues may be facilitatedand granted an opportunity to avail further loan facility. In other words, their CIBs should be cleared forfurther loan availability.

Financing SMEs• Relaxation in mark-up may be provided by deferring it for 6 months without any additional charges.

• Financial assistance may be provided to online businesses.• Programs may be introduced for new startups.

• The government should give loans to retail stores so that they can continue their business otherwise they will have to layoff employees and cut down business.

• Soft loans may be provided to freight forwarders/ Logistics Sector in order to enhance investment in IT, warehousing & Transportation etc.

• Special Financial package (free of interest) may be announced for transport sector (goods transport) to upgrade their existing fleet (obsolete vehicles) according to the international standards.

• Government may launch a special package for small and medium sized businesses to support investment in home finance.

• Special allowance for small scale private schools which may cover school rent, teachers salaries, utility bills, and other expenditures.



Taxation/ Customs & Tariff• Income tax levied on salaried class may be rationalized.• Exemption of duty on imports of raw material for pharmaceutical and medical industry.• Sales tax and minimum tax rates on turnover may be reduced by 50% for minimum 6

months.• Tax on gross profit may be reduced from 3 % to 1 % as per previous practice.• Manufacturing Industry may be declared as zero rated sector.• Withholding tax may be zero rated.• Around one-year exemption on the imports of raw material and machinery for SMEs

may be provided.• Duties and taxes may be exempted on the shipment arrived / stuck at port during the

period of lockdown.


Key Interventions Indicated by Respondents(Government Assistance)

Taxation/ Customs & Tariff• Sales Tax refunds should be reimbursed immediately in exporters accounts and start it from smallcompanies and small amounts without classification of industries.

• Companies who are Withholding Tax agents should be relaxed for the period of 6 months.

• To protect new startups, a package including tax relief and financial incentives may be announcedfor New Startups in order to facilitate their loan payments and operational expenses.

• Increase import duties on the consumer and capital products that are produced locally.

• Support online businesses by providing tax facilitation (rationalizing provincial sales tax on servicesetc.)

• Tax support may be provided to start new businesses. Civil Aviation Charges on all imports may beZero rated till June, 2020.

• Furthermore, tax imposed on Employees’ salaries may be simplified.



Wage Support to Retain Employees• Support may be provided to businesses to meet their operational expenses such as

salaries, office rents. • Salaries support may be provided to employees for three months• Government may provide special incentives to SMEs in order to retain their employees.• 50 percent of daily wagers (6-12months) salaries may be paid by the Government to

sustain their jobs. Government may notify a 50 percent reduction (6-12 months) of rent for commercial properties



Rental Cost and Utility Bills• Reimbursement of rentals for 3 months • Landlords may be instructed to waive commercial rentals for 6 months.• Government should announce special package for buildings, rent and

utility bills, etc. • Waiver of duties and taxes on utility bills (Electricity & Gas) may be

provided.• Waiver on Port Demurrages and Container rents. Complete waiver of the

port charges along with the container rents being charged by the shipping lines.



Infrastructure Support• Innovative methods may be introduced in Train Businesses • National SME Portal: The portal may be operative 24 hours to receive problems

& suggestions of SMEs. The issues and suggestions may be passed on to concerned provincial departments, organizations, people and federal government for their timely support.• For online classes and education, it is important to ensure 3G and 4G facilities

and to train teachers for online courses



Facilitating Exports• Government may support free trade shows for Handicraft products. • One window support for exports may be introduced • SMEDA may provide facilitation in identification of international sales opportunities

by connecting or finding the buyers globally to address issues related to exports. • Online awareness programs may be introduced for small unit owners to obtain online

order from international buyers in order to enable them to compete with Indian or Bangladesh manufacturers.



Regulations/ simplification of Procedures• During the pandemic period, visits / interference of public office holders, including

FBR, ESSI, EOBI, WWF, TMO may be delimited.• Tax procedures and documentation may be simplified.• Softening FBR laws, equality of laws and protection of agriculture and businessmen, as

they provide jobs for unemployed.

Developing SOPs for Businesses• Allow businesses to operate with precautions and necessary SOPs may be developed

for industry and agriculture sector to prevent future loses due to such pandemics or national disasters.



Small and Medium Enterprises Development AuthorityMinistry of Industries & ProductionGovernment of PakistanHEAD OFFICE4th Floor, Building No. 3, Aiwan-e-Iqbal Complex Egerton Road, LahoreTel: 111-111-456URL: www.smeda.org

Turn Potential into Profit!

Authors: Nadia J. SethMaryam Anas GanaieFarhan Zafar

Support: Mohammad RazaMohammad Ashraf Shakoori

Survey Report:Impact of COVID-19 on SMEs

Survey Report: Impact of COVID-19 on SMEs · 2020. 4. 3. · chain. Only 8% report no disruptionin...

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