<p>As part of Accion Global Advisory Solutions, Shweta Pereira is the Senior Director of Customer Strategy. Shweta oversees Accion’s advisory projects in Asia and supports the advisory team’s efforts to reach new financial institutions in the region. As part of this role, she supports the design of Accion partners’ digital strategies, the development of customer-centric digital financial products and services, and data analysis. She holds an MBA from the Indian Institute of Management in Ahmedabad, India.</p>


Senior Director, Customer Strategy

Shweta Pereira

Microentrepreneurs in Myanmar adapt their businesses to cope with the challenges of COVID-19

Article

Daw Amar Myint owns a small restaurant serving up traditional Myanmar cuisine in the Mingaladon Township of Yangon. When the pandemic hit, she was forced to close her doors. Without customers coming in, she couldn't provide for her family, including her son, who lost his job because of the pandemic. Before the pandemic hit, Daw Amar's restaurant was always busiest at lunchtime, so she decided to keep her kitchen open and start delivering lunch boxes to her customers who couldn't come eat at the restaurant in person. She turned to social media to market her new delivery service and began selling on Facebook. As her online sales picked up, her income has rebounded — she was even able to give a job to her son. She’s now receiving monthly pre-orders, allowing her to estimate her future income and minimize waste when she orders ingredients.
<h2>Providing small businesses with financial support during the pandemic</h2>
Microentrepreneurs like Daw Amar can build stronger businesses, better manage their expenses, and earn reliable incomes to care for their families when they can access financial services like group and individual loans. Accion portfolio company <a href="https://www.dawn.com.mm/" target="_blank" rel="noopener noreferrer">DAWN Microfinance</a> provides these services for low-income microbusinesses in Myanmar, and now they are helping these businesses make it through the pandemic and its economic effects. The dramatic spread of COVID-19 has disrupted lives, livelihoods, communities, and businesses in Myanmar. In response, DAWN quickly mobilized a COVID-19 response team to limit the disruption to clients’ businesses and to adapt their own business.

Micro and small business owners already face many struggles in Myanmar — <a href="https://www.worldbank.org/en/country/myanmar/publication/poverty-report-myanmar-living-conditions-survey-2017" target="_blank" rel="noopener noreferrer">where 1 in 4 people live in poverty</a>, and most people still don't have the financial services they need to manage their daily lives and grow their businesses. These entrepreneurs are experiencing additional challenges during the pandemic, like shortages of imported raw materials, declines in sales and revenue, forced closures of brick and mortar businesses, and the inability to cover day-to-day expenses. DAWN has implemented several changes to help their clients, including:
<ol>
 	<li><strong>Providing alternative repayment options:</strong> DAWN is encouraging clients to transfer repayments digitally through collaborations with banks and mobile money agents. For clients who aren’t comfortable making digital repayments through these third parties, especially group lending clients who normally make cash payments at collection points, staff are continuing field visits while following social distancing measures. Clients also have the option to visit DAWN’s branch locations where staff is practicing social distancing. DAWN is also reimbursing the transport cost to their customers who choose to visit in-person.</li>
 	<li><strong>Offering new products to help clients adapt:</strong> DAWN created a new “Emergency Top-Up Loan” product to support clients’ businesses that have been impacted negatively by coronavirus. This loan is being disbursed in parallel with the client’s existing loan.</li>
 	<li><strong>Rescheduling repayments and providing prepaid loans:</strong> DAWN is proactively contacting customers to reassess their repayment capacity and determine rescheduling options. In some cases, customers can request a prepaid loan and deduct a certain amount from it to offset the remaining balance of their existing loan.</li>
 	<li><strong>Setting up help desks in response to COVID-19:</strong> DAWN’s customer service representatives at their head office and branches are available to help clients in any way that they can.</li>
</ol>
<h2>Meeting customers’ evolving needs</h2>
DAWN’s new efforts allow them to help the people and businesses that are struggling most right now, and to support entrepreneurs that have found new opportunities to grow their businesses and serve their communities despite the circumstances. U Kaung Htike Kyaw, a DAWN customer located in Yangon, runs a small business that produces personal care products, including a wide range of soaps and hand sanitizers. When the pandemic arrived, he expanded his offerings and began producing different types and sizes of hand sanitizers to fill a need in the market. He was able to expand his market even further by selling his products online. By adjusting his business operations to suit his customers’ new and evolving needs, he’s keeping his business running and continuing to earn an income.

[caption id="attachment_22008" align="aligncenter" width="800"]<img class="wp-image-22008" src="https://content.accion.org/wp-content/uploads/2020/08/Kaung-Htike-Kyaw_1-Swenyein-Swenyein-1.jpg" alt="" width="800" height="450" /> <em>U Kaung Htike Kyaw expanded his personal care business’s line of hand sanitizers during the pandemic.</em>[/caption]

We’ve seen how <a href="https://www.accion.org/the-future-of-finance-in-myanmar-is-digital" target="_blank" rel="noopener noreferrer">digital financial tools can open up opportunities for people in Myanmar</a>. Most adults in Myanmar have a cell phone and the vast majority of those phones are smartphones, giving a significant portion of the population access to the internet. The opportunity of digitization has never been more critical for entrepreneurs than it is now. Beyond creating new ways to access financial services, digitization allows small business owners like U Kaung to continue selling online so they can withstand this downturn. By finding ways to continue serving customers during the pandemic, DAWN is giving entrepreneurs the support they need to adapt to challenging times and build new capabilities that will help them continue to thrive in the future.

Digital tools open opportunities for struggling business owners

Aurea Dutta

Lessons learned from India’s corner shop owners who’ve adapted their businesses to meet customer needs during lockdown

When the spread of COVID-19 escalated to frightening levels, India joined many other countries in taking drastic action to slow its transmission. On March 24th, the Indian government ordered a nationwide lockdown for 21 days, limiting movement of India’s vast population. The original lockdown order required all people to stay at home and shops and services to close, except for those designated as ‘essential services,’ educational institutions, areas of worship, and public and private transportation. The government has subsequently extended the lockdown twice while relaxing some restrictions in areas that have not been hot spots for the virus.
<h2>Impact of lockdown on MSMEs in India</h2>
More than 110 million people are employed by India’s <a href="https://msme.gov.in/sites/default/files/Annualrprt.pdf" target="_blank" rel="noopener noreferrer">63 million micro, small and medium enterprises</a> (MSMEs). Many of these businesses were caught off guard by the lockdown. According to a McKinsey report, up to <a href="https://www.mckinsey.com/featured-insights/india/getting-ahead-of-coronavirus-saving-lives-and-livelihoods-in-india" target="_blank" rel="noopener noreferrer">25 percent of MSMEs in India may default on debt</a> under the emerging scenario of an extended lockdown — but each sector will face different challenges. Businesses in the consumer and retail sector are expected to see a 20-25 percent drop in output this quarter compared to the first quarter of 2020. This expected drop is due to disruption in raw material supplies from China and other impacted countries, production shutdown, cashflow constraints, and reduced economic activity due to shop closures. In the manufacturing sector — which includes electronics, textiles, pharmaceuticals, and automobiles — output is expected to drop by up to 50 percent. This drop is largely driven by a high dependence on China for raw materials, halting of production, and lower demand, especially in the auto industry. Across every sector, these business disruptions leave millions of people at risk of losing their livelihoods if MSMEs can’t adapt and build resilience fast.
<h2>Nimble kirana shops show resilience during this crisis</h2>
For many small businesses, the future is <a href="https://timesofindia.indiatimes.com/business/india-business/industry-asks-govt-to-fine-tune-reboot-rules/articleshow/75462140.cms" target="_blank" rel="noopener noreferrer">unclear</a>. However, per a recent <a href="https://www.mckinsey.com/industries/retail/our-insights/survey-food-retail-in-india-during-the-covid-19-pandemic" target="_blank" rel="noopener noreferrer">McKinsey report</a> on Indian food retail, one sector is actually growing. Corner stores, or kirana shops, which sell groceries have grown by as large distributors are unable to deliver to supermarkets due to lack of inventory, reduced transportation capabilities and manpower, and the failure of e-commerce platforms to meet the growing demand for grocery deliveries. Kirana stores, which are typically staffed by just three or four people, have proven themselves nimble enough to seize this opportunity and fill their community’s grocery needs. The stores are likely to continue this growth once lockdowns have lifted, as <a href="https://www.mckinsey.com/industries/retail/our-insights/survey-food-retail-in-india-during-the-covid-19-pandemic" target="_blank" rel="noopener noreferrer">29 percent of shoppers</a> intend to continue frequenting their neighborhood corner store even after the pandemic subsides.

From our conversations with local kirana shops, we observed how some of these businesses have adapted their business to better serve their customers by:
<ul>
 	<li>Physically picking up stock from distributors to ensure that they don’t run out of merchandise to sell</li>
 	<li>Offering home deliveries by hiring vehicles with permits to deliver to large housing societies, partnering with existing home delivery services like the popular food delivery aggregator Swiggy, or renting carts to transport food</li>
 	<li>Aggregating informally with other merchants to distribute more efficiently, e.g., vegetable vendors who pool their inventory and sell together with a shared truck</li>
 	<li>Signing up on web <a href="https://economictimes.indiatimes.com/small-biz/startups/features/how-m-paani-is-helping-kirana-stores-in-india-thrive-during-the-covid-19-lockdown/articleshow/75092609.cms?from=mdr" target="_blank" rel="noopener noreferrer">platforms</a> to create a digital storefront and increase their reach for shoppers in the neighborhood</li>
 	<li>Processing orders placed over the phone or on WhatsApp</li>
 	<li>Accepting digital payments</li>
</ul>
Chakrapani is a client of Accion’s partner <a href="https://www.accion.org/instead-sending-people-bank-sub-k-brings-banking-people" target="_blank" rel="noopener noreferrer">BASIX Sub-K iTransactions</a>. He and his wife quickly adapted their small business to today’s circumstances. The couple owns a kirana store in Hyderabad, which caters to the daily needs of the neighborhood residents, mostly migrant workers and students. As the store provides essential goods, it has been allowed to stay open.

The footfall in Chakrapani’s store has nearly doubled since the lockdown began. The demand for a variety of items has increased as consumers stock up for several days at a time, given the uncertainty of the lockdown. The next closest market is around two kilometers from the neighborhood, so the whole locality now depends on his store for most of their daily needs.

To cater to the growing demand for his products, Chakrapani started accepting payments through his previously unused mobile wallet account. While he’s still not comfortable navigating the app, his son — who is home as his school is now closed — is teaching him to use this tool. In addition, Chakrapani is offering home deliveries, stocking up on a variety of in-demand items, and increasing his distributor network. Chakrapani expects to retain some of these new customers once the lockdown is lifted.

Although kirana stores have been able to continue operating and are hyperlocal in their reach, there are still several lessons we can learn from the nimble kirana that we can apply to other sectors:
<ul>
 	<li><strong>Look for new opportunities:</strong> Due to the pandemic, there is a surge in demand for pandemic-related items such as personal protective equipment (PPE), medicine, and cleaning supplies. MSMEs with manufacturing capacity can look to <a href="https://www.unido.org/stories/indias-manufacturing-reels-impact-covid-19" target="_blank" rel="noopener noreferrer">manufacture these items in part or full</a>.</li>
 	<li><strong>Expand supply chains:</strong> MSMEs dependent on single large suppliers should look to diversify their suppliers and identify alternative sources to prevent running out of stock.</li>
 	<li><strong>Leverage temporary workforces:</strong> Businesses can access additional labor from those who have lost their jobs or those who are looking for additional work during the lockdown.</li>
 	<li><strong>Assess realistic consumer demand:</strong> MSMEs should evaluate how demand has changed during the COVID-19 crisis to determine required supply. This could even be an opportunity to reach new customer segments as people’s needs and preferences may have changed.</li>
 	<li><strong>Leverage digital platforms:</strong> MSMEs can use platforms like WhatsApp, Facebook, or Instagram to find new suppliers, market, and sell their goods.</li>
</ul>
When the lockdown is finally lifted, MSMEs that adapted their business models will be able to recover faster from the impact of the pandemic and prepare for future shocks.
<h2>How can financial service providers help MSMEs adapt their business and build resilience?</h2>
Financial service providers (FSPs) play an essential role in the financial lives of the businesses they serve. Due to their close relationships with MSMEs, they are well-positioned to help their small business customers adapt to the new reality, implement recommended changes, and restart their businesses — just like Chakrapani has done. Besides offering credit to ease the cash crunch being felt by these businesses, financial institutions can provide digital payments, business education, and mentoring. FSPs can also offer tools to help businesses expand their reach and adopt best practices so they can build financial health and resilience.

Accion works with large and small financial service providers to design products, offer customer engagement and business education resources, and build risk and credit analytical tools that help them support their MSME clients. If your company is experiencing challenges related to the pandemic and needs personalized support from our team of experienced advisors, please <a href="mailto:GLASSupport@accion.org" target="_blank" rel="noopener noreferrer">contact us</a> to determine how we can support your COVID-19 response efforts.

How some small businesses are thriving during the COVID-19 crisis in India

Melissa Baez

Out of 58 million small businesses, only 10 percent are women-owned. How is the financial system failing them?

There’s a lot of talk about the ‘missing middle’ in India – businesses that are too small to receive loans from commercial financial service providers, and too large for support from many traditional microfinance institutions. But what about the ‘missing’ female small business owners? India’s micro, small &amp; medium enterprises (MSMEs) represent nearly 58 million businesses, create 150 million jobs, and account for 45 percent of industrial output. Of these MSMEs, only around 10 percent are owned by women, yet women entrepreneurs form a vital segment of this sector. In fact, research by <a href="http://www.goldmansachs.com/our-thinking/public-policy/gmi-folder/gmi-report-pdf.pdf" target="_blank" rel="noopener noreferrer">Goldman Sachs</a> has shown that women are more likely to use their earnings and increased bargaining power to buy goods and services – which, in turn, creates a productive cycle that fuels economic growth. If we recognize the implications of this research, why are there still so few women-owned MSMEs in India? What can be done to help unlock the full potential of female entrepreneurship throughout the nation?

As with the rest of the MSME sector, access to finance is the most critical barrier to entry and business growth for women-owned MSMEs. According to an <a href="http://www.ifc.org/wps/wcm/connect/a17915804336f2c29b1dff384c61d9f7/Womenownedbusiness1.pdf?MOD=AJPERES">IFC report</a>, lending to women-owned MSMEs as a separate segment is still unexplored in India due to lack of segmental focus on women.

To better understand how to improve outreach and financial service offerings to women entrepreneurs, Accion recently partnered with the Indian School of Business, Hyderabad to conduct focus group discussions in Chennai, Tamil Nadu with 22 women entrepreneurs who were graduates of the <a href="http://www.goldmansachs.com/citizenship/10000women/">Goldman Sachs <em>10,000 Women</em> initiative</a>. The discussions aimed to understand the experiences of women entrepreneurs in accessing funding for their business and identify any financial barriers faced by women-owned MSMEs. Results of the focus groups will help inform Accion partners’ Swadhaar and RBL’s new business focused on MSMEs to design more appropriate products and channels for this market segment.

So what did we learn?

<strong>Across the board, women entrepreneurs indicated that owning and operating a business gives them confidence, a sense of independence, greater, social recognition and increased financial stability for their families.</strong> Participants were self-motivated and eager to expand their businesses. In terms of business financing, their needs are quite similar to any other MSME: larger loan amounts with lower interest rates and fees, longer loan tenures, hassle-free loan processing, and quick disbursement. Yet the women reported experiencing unique challenges and biases compared to male counterparts when trying to access loans to fund their young businesses:
<ul>
 	<li><strong>Unfavorable perception of control</strong>: financial institutions approached doubted who actually runs the enterprise – the woman or her husband.</li>
 	<li><strong>Negative perception of stability</strong>: financial institutions view single women to be of higher risk as they are expected to move residences once married and there’s a perception that women-owned businesses shut down more easily when faced with challenges.</li>
 	<li><strong>Lack of adequate collateral</strong>: access to collateral is difficult for women entrepreneurs due to legal obstacles such as unfavorable inheritance and property rights. Often property is in the man’s name, or the women have to ask permission from family members to provide property as collateral.</li>
 	<li><strong>Cumbersome and inflexible processes to access the loan: </strong>some institutions require a spouse to become the co-borrower and loan documentation requirements are lengthy with long processing times. Once married, any change to a woman’s name must be reflected in all documentation.</li>
</ul>
About 70 percent of women participating in the focus groups indicated they had approached a bank for funding to start their business but were denied, as banks are reluctant to lend to startups. Consequently, the women entrepreneurs were resourceful in finding alternative ways to get seed financing for their business ideas such as:
<ul>
 	<li><strong>Taking out what’s known as a ‘jewel loan’</strong>: Around 60 percent of the participants had turned to a "jewel loan" facility, whereby jewelry is used as collateral for the loan. Jewel loans are easy to obtain, processed quickly, and require few documents. Women usually own and possess the collateral (gold), and repayment is due only at the end of term, aligning with the cash flow constraints of a start-up business.</li>
 	<li><strong>Borrowing from friends, family, own funds:</strong> when possible, some participants looked to personal savings and informal funding sources, like their spouse, family, and friends.</li>
 	<li><strong>Borrowing from public sector banks</strong>: participants indicated they felt that public sector banks are more customer-friendly, bank staff have a good understanding of the MSME business, and loan application processes are more flexible compared to private sector banks.</li>
</ul>
What can we learn from these initial findings? While it's still early in the research process, there appear to be opportunities for financial service providers to make capital for women-owned MSMEs more accessible by accepting alternative forms of collateral and making loan application processes less cumbersome. A greater focus on staff training on MSME business specificities and sensitization on gender biases may also go a long way in changing negative perceptions of women-owned businesses to ultimately create a more welcoming business environment for female clients. Accion will be looking into these questions and more as we expand the focus groups in other regions throughout India such as Delhi, Mumbai, Pune, Hyderabad, and Bengaluru.

Shweta Pereira

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