PPD pivotal for building MSME COVID-19 resilience

Collaboration between public and private sector financial stakeholders will play a pivotal role in ensuring the survival of small businesses amid the current global economic downturn, emphasized participants during AFI’s first-ever Public-Private Dialogue (PPD) webinar on 23 April.

More than 150 AFI members took part in a meeting on “Mitigating the Impact of COVID-19: Implications and Response Measures for MSMEs”. It provided a platform for discussion on global and national perspectives with the aim of finding solutions that build the resilience of micro, small and medium size enterprises (MSMEs) by addressing the short- and medium-term impacts of COVID-19.

“We need to promote innovation, technology, expand cashless payments systems and supporting technologies that will allow virtual transactions, and collaborate in the midst of this pandemic,” said Bank of Ghana’s Ismail Adam.

Adam outlined some of Ghana’s many responses to the economic shockwaves being triggered by COVID-19. Among them were efforts to boost bank liquidity in order to support critical sectors such as micro, small and medium enterprises (MSMEs), which he described as the “most hard hit” industry.

“This is the time we need to support our MSMEs” he said, adding that national efforts to enhance liquidity will help “financial service providers grant credit to MSMEs and restructure existing facilities”.

In line with unprecedented global action to encourage social distancing, Adam explained that the central bank had ramped up its promotion of digital financial services (DFS). This included lowering Know Your Customer (KYC) requirements, cancelling fees on small mobile money transactions as well as raising the limits on daily transactions, mobile wallet sizes and monthly aggregate transactions.

Across the network, AFI members have introduced a range of immediate and often short-term fiscal and monetary policies designed to help cushion MSMEs, which are frequently described as the backbone of economies. An extensive rundown of AFI member responses can be found in the AFI COVID-19 Policy Response Dashboard.

Central Bank of Jordan’s Waleed Samarah highlighted some of the measures being implemented within his jurisdiction, including loan repayments deferrals, refinancing programs and the strengthening of financial consumer protection, before reiterating the importance of digital innovations in the current climate.

“If we don’t have the infrastructure or flexibility in regulatory frameworks, then we will not be able to use DFS,” he said while also underscoring that regulators must invest in educating consumers on the use and benefits of new technologies and tools.

Homing in on MSMEs, Samarah said that “the [COVID-19] crisis affects their whole value chain,” before adding that “both the private and public sector should work together – and not separately – to plan and have a dialogue, like what we have today.”

Bangko Sentral ng Pilipinas’(BSP) Ellen Joyce reiterated the need for greater long-term and collaborating planning, particularly in support of digital products and services that could be tailored to the needs of informal sector workers.

Joyce drew attention to recent measures being adopted in the Philippines, including payment deferrals, wage subsidies and policy rate reductions, but noted how these developments had also given rise to fresh challenges.

“The challenges [for BSP] will lie in the implementation of wage subsidies and soft loan programs because MSMEs need support as soon as possible. But without adequate social protection distribution and business support infrastructure, implementation could drag,” said Joyce, who is also co-chair of AFI’s SME Finance Working Group.

In support of more investment targeted at helping consumers conduct transactions, Thunes’ Gabor Hava said that banks and regulators must focus on advancing interoperability.

“The trend that we see – and actively support – points towards the direction that the interoperability of payments needs to be increased, and that domestic and international connections and transfers have to be related and as good as banking experiences”.

He added that government and private sector players were already working together to create digital solutions, modernize “outdated” systems and promote electronic KYC.

Also advocating closer ties was Ant Financial’s Regina Feng, who emphasized the need to leverage technology to reduce COVID-19’s adverse impacts, promote economic recovery and embrace collaboration with various partners. She explained that, in China, this has resulted in greater collaboration among digital platforms, technology companies, financial institutions and local government entities.

“This is an opportunity to push forward the acceleration of digitalization and policy support that is not easy to get during normal times. We have seen some industries collapse, but we also some new industries emerge, so we should be prepared,” Feng said.

During the question and answer session, National Bank of Rwanda (BNR) Deputy Governor Dr Monique Nsanzabaganwa noted that enhanced collaboration could yield a rise in tailored digital products and services that better meet the specific needs of informal sector workers.

“We have seen a lot of e-commerce platforms coming up, but I get the impression that they tend to help those who are already connected, like in the cities,” she said. “How are we making it our call to reach out to the producers in the informal sector, in rural areas and how can we facilitate them to come onto these platforms? We need collaboration and investment, starting from encouraging owning a digital gadget, such as a phone or computer.”

Meanwhile, MasterCard’s Christopher Harrall underscored his company’s commitment to assisting small businesses, particularly those owned by women.

“One thing the crisis has made unfortunately and painfully evident, it’s what you do outside of the crisis that’s important, and that’s why that the commitment among all of us to enable financial inclusion is so significant,” he said, adding that there was an urgency to the timing of these policies.

“Let’s not let the perfect be the enemy of the good, because we do need to move quickly to satisfy some of the short-term demands but we also need to cognisant of how we come out as a more resilient and capable ecosystem going forward,” he said.

He added that the financial services corporation was able to partner with governments to provide aggregate data on sectoral spending, tourism and retail that could assist with the development of products and services.

GSMA’s Killian Clifford highlighted the importance of mobile money, providing estimates that up to 50 percent of transactions were peer-to-peer.

“Most MSMEs do have access to a mobile phone, so mobile and mobile money is very important when considering targeted interventions for this group,” he said.

Through partnerships, Visa‘s Amina Tirana said that many more would be able to weather the current COVID-19 storm.

“What we have seen is that, for small businesses, the most important thing right now is how do you survive? And our experiences with businesses around the world is that those who have access to networks and resources and are able to pivot through knowledge, stand a much better chance of surviving and recovery,” she said.

Tirana also emphasized the importance of gender and gender-sensitive MSME policies, saying that more than a third of MSMEs in emerging markets are women-owned. She noted that crises tend to exacerbate prevailing disparities women face in access to loans, savings and digital technology.

“It’s important that we focus on women and consider both the pre-existing and long-term. There is enormous political will right now in all sectors, so use this as a leapfrog moment,” she said.

BNR’s Dr. Nsanzabaganwa added that women who work in informal sectors are most at risk of being left behind, which is why we need gender-sensitive and targeted interventions in formulating policies to address the COVID-19 pandemic.

“Now, more than ever, there is a need to collaborate and invest in women,” she emphasized.

Shining a spotlight of the pervasiveness of the ongoing pandemic was AFI Deputy Executive Director Norbert Mumba, who said that “more than 90 percent of AFI member countries have been affected by the coronavirus with a total number of reported cases counting to over 275,000”, up by 55 percent from roughly a week ago.

AFI’s PPD Platform gives policymakers, regulators, the private sector, development partners and other key players the opportunity to engage in frank and focused conversations, share technical expertise on key financial inclusion issues, develop more informed policy, and encourage innovation and investment.