October 21, 2021
Introduction
SMEs are the backbone of economies around the world, yet relatively few engage in international trade, and even fewer invest abroad. Moreover, the COVID-19 crisis has plunged the global economy into a deep recession. MSMEs have been amongst the hardest hit.
In this session, policymakers, business sector representatives, researchers, etc. shed light on patterns and development impact of internationalisation of SMEs at the micro and macro levels. The Panellists highlighted important issues like Financial Inclusion, challenges with digitalisation and the role of migrant and diaspora investors and identified the policy challenges for internationalisation of SMEs in home and host countries.
Session Highlight
The opening remarks set the background of the session by highlighting the fact that COVID-19 has disproportionately hit MSMEs especially in developing countries. It was discussed that following Accounting Financial Standards is important, for which a Training Manual for Accounting for MSMEs has been developed by UNCTAD to provide hands-on assistance. One of the Panellists discussed that the major challenges faced by MSMEs is the lack of budgeting exercises, unaccounted sales, erratic payments and delay in tax filing, etc. It was highlighted that about 85 percent of MSMEs have unaccounted sales. 5 to 7 percent of the population do not have any gainful employment and 15 percent are not in a position to practice sustainable development. The most discussed issue was that in order to strengthen reporting and compliance, digitalisation in MSMEs would be effective and would not come at a great cost. Digitalisation would help to manage financial compliance, sales cash flow, payment and transaction receipts, etc. It was discussed that in order to increase digitalisation, the cost of formalisation should be lessened by simplifying the process, which would lead to lower financial and tax burden.
It was also discussed that around two-third of the MSMEs around the globe were severely affected by the pandemic and therefore require tax waivers and financial programs. Panellists noted that resilient companies have stable sales and small firms are more likely to be less resilient. In order to increase resilience, MSMEs could practise efficient inventory management, diversify suppliers, keep financial records, etc. It was cited that 50 percent of the businesses with bank accounts were not strongly affected by the pandemic compared to only 27 percent of those without bank accounts. Also, in 70 percent of the countries, access to affordable financing is a major barrier due to risk in cross-border investment in MSMEs. Therefore, strong cash flow management and keeping a complete track record, reduces likelihood of being affected during a crisis.
Panellists highlighted that with inclusion there is a need for a complete integration too. Three major problems in the way of integration are Financial Exclusion, Informality & Poverty and Inequality. It was highlighted by the Panellists that in order to strengthen economic integration the following should be worked upon:
- Value chain development, Business to Business encounters and networking,
- Digitalisation, Introduction of national wallet,
- Education and Guidance, education of Financial Management and Accounting Systems, and
- Financial Inclusion and Formalisation, simplified procedures and permits.
Therefore, it was highlighted by almost all the Panellists that Financial Inclusion for SMEs is the key driver for economic contribution and employment. For such an inclusion, SME Banks and Venture Capital funds can be helpful. Some of the complementary activities in order to strengthen MSMEs are Capacity Building, Entrepreneurship Cultural Promotion, e-Commerce Development and Government Fee Reimbursement. Development of a manual to be prepared by the government lending a basic understanding of accounting to MSMEs.
Opening
- Richard Bolwijn, Director, Investment Research, UNCTAD
On the panel were:
- Barbara Ramos, Chief of Research and Strategies for Exports, UN International Trade Centre (ITC)
- Vinod Kumar, Member of the Board, World Union of SMEs, Honorary President, India SME Forum
- Lesley Stainbank, Professor Emeritus, University of KwaZulu-Natal, Research Supervisor, Durban University of Technology
- Engineer Saleh Ibrahim Alrasheed, Governor, General Authority for Small and Medium Enterprises
- Paul Steiner, President, National Commission of Micro and Small Enterprises, El Salvador.
Moderator
- Vania Borgerth, Chair, 32nd Session of ISAR, Head, Brazilian Network for Integrated Reporting