Small Businesses: Small Engines That Could Save the Global Economy | Business and economic news

Whether it’s your local grocery store or a startup with a small amount of capital and big dreams, almost anywhere you look, small businesses typically form the backbone of a country’s economy. Together, they employ the majority of the world’s workforce and tend to generate a substantial share of economic output.

But the size of small businesses and their relatively small political influence compared to, say, large airlines or banks, mean they are also more vulnerable to economic downturns than their better-funded peers.

During the 2020 coronavirus pandemic, thousands of small and medium-sized enterprises (SMEs) – generally defined as businesses with up to 500 employees – experienced the most difficult year imaginable.

But as our series of stories from the past few weeks have shown, small businesses from Minneapolis to Mumbai and beyond have used their courage and ingenuity to survive – and in some cases thrive – during the COVID era. -19. For this, these entrepreneurs deserve respect, admiration and probably also a day off.

Yet small businesses need more than praise. They need access to credit, technical advice and protection programs to cope with tough times, supply chain failures and the myriad of other challenges they face.

Tarek Chehab, founder of Lebanese design company Styro 3D, is very proud of a nine-meter clenched fist he raised in the city’s central Martyrs Square in support of the October 2019 protests. [File: Al Jazeera]

But they don’t always understand. In fact, the International Monetary Fund estimates that the failure rate of SMEs could increase by nearly nine percentage points without government support, according to a working paper released in September based on data from 17 countries.

That may not seem like much until you consider the fact that globally, SMEs make up about 90% of all businesses, according to the World Bank.

They also account for around 70% of global employment and 50% of global GDP, according to the International Labor Organization. This means that an increase in small business failure rates of this magnitude would be overwhelming for millions of people.

Shop closing

It is surprisingly difficult to assess the number of SMEs that have closed their doors. Many homeowners apparently turn off their lights and lock themselves behind them without claiming bankruptcy protection.

Data from the online review site Yelp Inc suggests that more than 80,000 small businesses in the United States closed permanently between March 1 and July 25, according to Bloomberg News.

Manohar Wagle, 62, owner of Wagle Sports store in Mumbai, India [File: Tish Sanghera/Al Jazeera]

And most American small businesses fear the successes will continue. More than 62% of small business owners believe the worst of the COVID-19 pandemic is ahead of us, according to a fourth quarter 2020 survey by the US Chamber of Commerce and insurer MetLife.

Developing countries will feel the effects of the pandemic on small businesses even more acutely, as they are an even larger component of these economies compared to those of developed countries, which is why helping small businesses is a good idea. means for decision-makers to globally support employment and therefore their economies in the broad sense.

Need more help

Many governments and central banks have indeed poured billions of dollars to help people who have lost their jobs and aid companies – big and small – that have been forced to scale back operations to control the spread of the coronavirus.

But even though further help is likely, some politicians are already sounding the alarm about the potentially negative long-term effects of such huge government borrowing.

But it doesn’t have to be that way. The IMF’s September working paper suggests that public intervention, narrowly targeted at eligible SMEs, could cost “modest” 0.54% of a country’s gross domestic product (GDP).

Stories of resilience

But even without outside help, the small businesses Al Jazeera has profiled in recent weeks have survived the COVID onslaught. So what traits do these stoic entrepreneurs share?

One is resilience, something you need in lots of buckets if you are a small business owner. Iran, which had suffered years of US sanctions even before the pandemic.

Ehsan, who makes clothing and accessories in a workshop outside Tehran, says he had become hardened in the fight.

“We’ve worked in the worst of markets and I’ve seen all the ups and downs in the 21 years I’ve been working, so we keep going and we’re not afraid,” he told Al Jazeera.

Pratik Master and his wife, Bee, kept their grocery store in the central English town of Wigston open by stocking it with what their community needed during the pandemic. [Couresty: Pratik Master]

Agility and the willingness to take big risks seem to be the other common threads in their stories. A large multinational may not be able to overhaul an entire business model overnight, but with great courage a small entity can be successful.

Styro 3D, a design factory Beirut used to make showcases and parts for Styrofoam movie sets including a huge Godzilla and Incredible Hulk.

But after a massive port explosion devastated large parts of the Lebanese capital on August 4 and killed two Styro 3D employees, the company quickly turned to manufacturing wooden frames and doors to rebuild the houses. and businesses damaged by the explosion.

“Don’t ask me where we had the courage to continue,” Styro 3D’s Tarek Chehab told Al Jazeera. COVID-19 and the ongoing currency crisis have added to his pain.

Quick thinking and a radical overhaul also saved Albert Chen and his father, Tim. Hong Kong. Their outdoor furniture business collapsed after the February outbreak. Tim Chen decided he wanted to buy a machine in Taiwan to make surgical masks.

“I remember my first reaction was, ‘Are you crazy? Albert told Al Jazeera.

They formed a new company, called MaskLab, producing a myriad of colorful masks for a fashion-conscious city, which sold out within minutes of launching online in July. They have since opened their fourth store and also sell overseas.

If you operate a neighborhood grocery store, knowing your customers well doesn’t just make you popular. In a crisis, it can save your livelihood.

It was the secret of the survival of two grocers met.

In the small town of Wigston in the UK, Pratik Master used social media to reach its clients. He took requests for products that local supermarkets were lacking in the early days of the outbreak and delivered them to his customers’ homes.

In the capital of Pakistan, Islamabad, Aamer Khattak used a similar strategy to save his 20-year-old business, despite going to the old school, taking orders over the phone and giving credit to those in need.

Elsewhere in Islamabad, other entrepreneurs have adopted mobile phone apps to launch start-up grocery delivery services.

The technology also helped the entrepreneurs we met in India.

Manohar Wagle, fourth generation, 62, 155-year-old Wagle Sports store owner Bombay, was forced to embrace WhatsApp and GooglePay to keep customers fit and sane as they endured one of the world’s toughest coronavirus lockdowns.

Meanwhile at New Delhi, Meghana Narayan and Shauravi Malik have moved their organic baby food manufacturing business entirely online, slashing their network of third-party stores and letting more than half of their staff of 45 leave.

But for Eugenia Santome of BeWe Home, a small company that produces frames, boxes and other decorative items from recycled wood in the Argentine capital, Buenos Aires, eliminating its 20 employees was not an option.

Before the country’s lockdown in March, Santome told his staff to work as if there was no tomorrow.

A few days later, she pooled all the money she had in the family business she had founded and summoned her staff again.

“I said, ‘Take this money. It’s not all your salary, but take that money and pay nothing. Just use it to buy food, ”Santome told Al Jazeera.

BeWe Home was able to get back to work 15 days after the lockdown, as it fell under the aegis of “essential” companies that made wooden pallets. Government help eventually arrived, but until then Santome has used his own credit cards to pay wages and buy raw materials.

So far, everyone in the company has been able to keep their jobs.

In Minneapolis, Peace Coffee, a small roaster, has partnered with Wildflyer Coffee, a nonprofit dedicated to job stability and skills development for homeless youth, to help the two small businesses to survive 2020 [Courtesy: Wildflyer Coffee]

And in Minneapolis, Minnesota in the United States, small business owners resisted not only the pandemic, but the civil unrest that followed the murder of George Floyd, a black man, by a white police officer. The entrepreneurs we spoke to chose to use rebuilding their businesses as an opportunity for social change.

Lee Wallace, owner of Peace Coffee, a roaster dedicated to selling 100% organic and fair trade coffee, realized she had something precious to give to her community: physical space.

After ordering online, she decided she no longer needed her physical cafes, so she loaned two of her spaces to a local food bank that feeds 100 families a week.

Two other former Peace sites will be used by Wildflyer Coffee, a non-profit organization dedicated to job stability and skills development for homeless youth.

“It was always about community, but in an even more direct way,” Wallace told Al Jazeera.

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