The impact of COVID-19 on businesses in Mongolia has been severe depending on size, sector, and other characteristics, but smaller businesses were hit harder than larger ones. Micro, small, and medium-sized enterprises (MSMEs) are one of the most dynamic sectors in Mongolia. This sector comprises 77% of total registered business entities; 72% of the total workforce; 17.8% of Gross Domestic Product; and 2.3% of total exports. Women make up a large share of MSME entrepreneurs in Mongolia.  How these businesses were affected by COVID-19? What are the options for their recovery? 

Veronica Mendizabal Joffre, Social Development Specialist of Asian Development Bank, Bolormaa Luvsandorj Managing Partner of Bodhi Financial Advisory Services LLC explore these questions in their report analyzing the findings from a rapid assessment of impacts of COVID-19 on Mongolian MSMEs and informal businesses conducted by the Asian Development in April-May of 2020. A total of 1,003 respondents participated in the survey, of which 59.5% were women entrepreneurs. The report proposes options to make ongoing and future economic recovery measures inclusive and responsive to the needs of this key economic segment.

What are the main findings of the assessment?

The impact of COVID-19 on businesses in Mongolia has been severe depending on size and sector, but smaller businesses were hit harder than larger ones. Falling demand, working capital shortages, cash flow disruptions, and limited access to finance were key challenges. The impact on women entrepreneurs has been more severe with a high share of female MSME entrepreneurs indicating declines in revenue, supply chain issues such as shortage of raw materials, reduced demand for products and services and more challenges in paying employees, possibly reflecting the higher share of female entrepreneurs / female workers in the manufacturing sector. To cope, businesses reacted by reducing costs, laying off workers, and among micro and informal businesses, also by reducing household expenditure. A key finding was that few MSMEs and informal businesses were exploring opportunities to adapt.

What are the proposed options for recovery?

The overarching recommendation is that economic recovery will require a dedicated focus on the recovery of smaller businesses in the formal and informal sectors, as well as promoting their resilience in the medium term. Other key areas of action to ensure that SMEs and formal and informal micro-businesses can overcome this difficult time include:  (1) Maintaining options to preserve liquidity through a continuation of the employee salary subsidy for micro and small entities that retain or create new jobs, until the pandemic is controlled; (2) using a mix of mechanisms to enable access to finance such as supporting affordable and inclusive access to finance for micro and informal businesses and options for wholesale funding to increase access for micro and informal businesses and to support for specific financial needs of women-led MSMEs; 3) enabling small businesses to expand to a digital environment, this includes promoting business development services, such as digital business-to-business marketplaces that link larger companies to MSME suppliers, (4) promoting youth innovation and the development of entrepreneurial skills; and (5) engaging and maintaining fluid communication with the private sector during the recovery phase.

To find out more: https://www.adb.org/sites/default/files/publication/662086/adb-brief-160-msmes-mongolia-covid-19-impacts.pdf