Abstract
The ILO’s SME unit, supported by McKinsey & Company, produced a comprehensive framework of policy options to support small firms in developing countries to confront shocks. The report recognizes that small firms’ survival during times of crisis goes beyond overcoming short-term shock conditions. The disruption that shocks cause to economically viable small businesses is often devastating, creating significant inefficiencies and social costs. At the same time, the consequences extend far beyond the threats on firms, employment, and decent living conditions. They also erode future growth potential, as well as social and economic stability. Recent crises have exposed the fragility of even solid, viable, and strong firms in front of shocks and the precarious balance between surviving crises and recovering from their devastating effects. This wide-ranging report addresses head-on some of the key challenges that shocks pose to small firms in developing countries and outlines a range of policy options that can help support small firms during such conditions. It also presents concrete and numerous examples of measures which are derived from previous shocks and from the COVID-19 shock. While there is no one-size-fits all solution, and governments would need to define the measures that best suit their realities, the proposed framework can serve as a starting point for governments to create and have available and ready to deploy coherent and clear support strategies. The strategic role of governments in coordinating support is considered within an integrated approach of broader ecosystems, to both complement resources and tailor and deploy measures that are the right fit to small firm specificities.