435957143-The Impact of COVID.edited

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Nov 24, 2024

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1 The Impact of COVID-19 on Small and Medium-Sized Enterprises (SMEs): Evidence from Surveys in Kuwait Author Affiliation Course Instructor Date

2 The Impact of COVID-19 on Small and Medium-Sized Enterprises (SMEs): Evidence from Surveys in Kuwait The Covid-19 crisis has adversely affected many businesses worldwide by forcing them to curtail their operations. Since the virus is spread through droplets, governments were forced to instill measures to minimize close contact between persons, such as traveling advisory and constrained capacity of social places. For instance, various governments imposed curfew hours and the lockdown of risky spots. These measures were meant to reduce the spread of Covid-19. These policies prohibited the public from meeting in eateries, cafes, and business centers. In this light, many commercial outlets, such as coffee shops, bars, resorts, and travel agencies, closed their doors. Along with the previous suspension of air travel to and from various countries, the travel and tourism industry had already plunged. These preventive restrictions doomed many interrelated businesses. The economic impact of the pandemic has been a key research topic for many scholars worldwide. Following the prolonged curfew hours and lockdowns, small and medium enterprises (SMEs) began to feel the fiscal crunch caused by the covid-19 pandemic. A 2020 survey by Bensirri Public Relations revealed that since Kuwait imposed lockdowns to minimize the spread of the virus, 45% of businesses in the country reported that they have deferred or shut down their activities, while another 26% are about to collapse after experiencing a more than 80% decline in revenues. The study, Kuwait Business Impact Survey (KBIS), examined 498 Kuwaiti enterprises that were gainful in 2019 to support the debate on the effects of Covid-19 with facts and data ( Bensirri Public Relations, 2020). The pandemic has affected businesses across all industries as many people have lost jobs and, thus, losing their purchasing powers. 36% of retail, 39% of construction, and 46% of professional services have halted their businesses after a continuous

3 revenue drop ( Bensirri Public Relations, 2020). This survey was conducted in April 2020, meaning the situation must have worsened since the pandemic exceeded expectations. The effect of Covid-19 on SMEs can be described best by business owners. Dai et al (2021) interviewed various Chinese entrepreneurs asking about operational status, main challenges, business outlook, and their feelings regarding covid-19. According to the survey, in February 2020, despite the approval to reopen businesses, with stringent measures, only 20% of SMEs resumed operation (Dai et al., 2021). The pandemic cast a weighty toll on small enterprises, with many facing difficulties lasting beyond three months with their present cash flow. The closed SMEs were uncertain about their reopening and risked running out of cash before reopening. The main challenges facing SMEs during this period included distractions in logistics, constraints on labor mobility, and decreased market order (Dai et al., 2021). Many businesses closed completely as they could not sustain production or even find market for their products. The main issues faced by SMEs during the pandemic include financial, interruption of supply chain, decline in demand, reduced sales (Shafi et al., 2020). The primary reason for the plight of SMEs is lack of preparedness to handle such calamities. A majority of these troubled businesses could not survive if lockdowns prolonged for more than 2 months as Shafi et al. (2020) noted. These challenges have disrupted the economic status of many countries. Covid-19 has ravaged nearly all sectors. Iraq International Organization for Migration (IOM) assessed businesses across “agriculture, automotive, carpentry, chemical, construction, education, food production, general trade, hospitality, manufacturing, medical services, general services, materials (metal and plastic), technology, and textiles ” industries to determine their experience with the pandemic. All SMEs in these sectors reported a decrease in production and sales, while others were at the risk of closing permanently. The decline in business has adversely

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4 affected the financial market. A study by Brown et al. (2020) established that the number of new equity transactions has decreased remarkably since the onset of covid-19, with seed finance been the most affected entrepreneurial finance, meaning that recent startups have challenges obtaining finance. Thus, SMEs are bound to fail in the Covid-19 era as they struggle with declined revenues and lack of financial resources. On the contrary, some businesses have flourished during the covid-19 pandemic. Entertainment is among the industries that recorded increased revenues and profits. A business owner in Kuwait city explained that "the sales increased significantly because the type of business that I am working on depends on the gathering of family and people in one place. During the partial lockdown, the demand has slightly decreased, but during the total lockdown, there were no orders at a, because products could not be delivered to the customer. One of the important reasons for increased sales and the project's success during the period of Coronavirus is that people do not have the usual means of entertainment or places of entertainment such as cinemas, malls, restaurants, and external gatherings. Additionally, people had an abundance of free time to kill, so they need methods of entertainment while at home, and the type of product that I offer has provided them with that ” (Saleh, 2020 p.13). However, these businesses faced significant challenges, including meeting customer demand, particularly delivery time due to lockdowns. Operations were subsequently halted during total lockdowns. Businesses across the world were forced to implement significant changes to survive the pandemic. According to Al-Fadly (2020), hotels researched how to manage their businesses without directly contacting customers. For instance, they utilized social media to entertain guests and maintain existing customers by providing regular updates through a portal (Al-Fadly, 2020). Besides, many managers, supervisors, and team leaders began working from home. In this light,

5 Home-Based Businesses (HBB) had higher survival chances if they implemented technological measures. Saleh (2020) assessed the operations of HBBs in Kuwait city during the covid-19 pandemic. IT and social media have been useful in communicating directly with clients, receiving orders, promoting products, and making payments. A participant in Saleh's study declared that "I use Instagram and WhatsApp for my business. I use Instagram to advertise my products and show pictures of them and WhatsApp to receive orders from customers. Technology is crucial in current times more than ever. Nowadays, using social media is necessary for a business to flourish and succeed. E-mail in our region is rarely used, unlike western countries ” (Saleh, 2020 p.10). In addition, businesses have sought for ways to control their expenditures as they struggle to remain operational amid decreased production and sales. While assessing the impact of the pandemic on SMEs in Armenia, Beglaryan and Shakhmuradyan (2020) identified that compared with large organizations, SMEs have been hit harder by the crisis, forcing them to lay off many of their employees, reduce working hours, and cut pay. By reducing the number of workers, SMEs cut their expenditures and increase chances of surviving the pandemic. Thus, many SMEs failed due to their reduced capacities to innovate new strategies for doing business. The above surveys indicate that covid-19 has affected SMEs in all sectors. Many SMEs could plunge after being bumped by the pandemic, possibly ruining a private sector necessary to change the economic structure of various countries that have been relying on natural resources. For instance, the Kuwait government has been urging citizens to establish private businesses over the last decade to cut its expenditure on salaries of individuals working in state jobs. Much of these efforts to engineer SMEs have been ruined by the covid-19 pandemic. The literature shows that many SMEs have closed operations, and the remaining ones have been recording a

6 decline in revenues. Although the problem is widespread across all industries, hospitality, and tourism industries are the most affected, leading to workforce and salary cuts to recover from decreased revenues and increased operating costs. Surprisingly, some businesses have become more profitable as the demand for their products increases with the pandemic. However, lockdowns and movement control eventually affected all businesses in the country. Accordingly, some businesses adopted technological reforms to survive the pandemic. Along with working from home, social media and IT have been instrumental in doing business during the covid-19 era. Overall, the pandemic has changed the way SMEs do business, forcing many to close and encouraging innovation as a key component of business strategies.

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7 References Al-Fadly, A. (2020). Impact of COVID-19 on SMEs and employment. Entrepreneurship and Sustainability Issues , 8 (2), 629-648. https://doi.org/10.9770/jesi.2020.8.2(38) Beglaryan, M., & Shakhmuradyan, G. (2020). The impact of COVID-19 on small and medium- sized enterprises in Armenia: Evidence from a labor force survey. Small Business International Review , 4 (2), e298. https://doi.org/10.26784/sbir.v4i2.298 Bensirri Public Relations. (2020). Kuwait COVID-19 business impact survey finds 45% of businesses have shut down since February . Prnewswire.com. https://www.prnewswire.com/news-releases/kuwait-covid-19-business-impact-survey- finds-45-of-businesses-have-shut-down-since-february-301060491.html. Brown, R., Rocha, A., & Cowling, M. (2020). Financing entrepreneurship in times of crisis: Exploring the impact of COVID-19 on the market for entrepreneurial finance in the United Kingdom. International Small Business Journal: Researching Entrepreneurship , 38 (5), 380-390. https://doi.org/10.1177/0266242620937464 Dai, R., Feng, H., Hu, J., Jin, Q., Li, H., & Wang, R. et al. (2021). The impact of COVID-19 on small and medium-sized enterprises (SMEs): Evidence from two-wave phone surveys in China. China Economic Review , 67 , 101607. https://doi.org/10.1016/j.chieco.2021.101607

8 International Organization for Migration. (2021). Panel study: Impact of Covid-19 on small- and medium-sized enterprises in Iraq: Main findings [EBook]. Saleh, Y. (2020). ICT, social media and COVID-19: Evidence from informal home-based business community in Kuwait City. Journal of Enterprising Communities: People and Places in the Global Economy , 15 (3), 395-413. https://doi.org/10.1108/jec-07-2020-0131 Shafi, M., Liu, J., & Ren, W. (2020). Impact of COVID-19 pandemic on micro, small, and medium-sized Enterprises operating in Pakistan. Research in Globalization , 2 , 100018. https://doi.org/10.1016/j.resglo.2020.100018

435957143-The Impact of COVID.edited

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