Patankar (2019) shows that small businesses in India were more vulnerable after a disaster than their larger counterparts, as the former lack technical and financial capacity as well as business continuity plans. According to the 2016 United Nations Development Program (UNDP) synthesis report, regardless of the nature of the companies and countries of operation, small businesses usually rely on personal savings and networks to cope with disasters. Especially in developing countries, small businesses have to adopt informal coping strategies due to lack or lack of formal mechanisms.
Fifty-seven percent of entrepreneurs consider their online businesses to be their main occupation. Even though all online businesses were negatively affected, 84% of female online entrepreneurs were hopeful of recovering from the shock within a year. The purpose of this research was to understand how online entrepreneurs respond to shocks such as COVID-19.
The advantages of being small and online, as discussed earlier, are manifold in the context of COVID-19. At the time of the second round of our survey, the government-enforced lockdown had been in place for more than two months. However, businesses were skeptical, given the losses experienced during Pohela Boishakh (Bengali New Year) which was celebrated under social distancing measures (i.e. lockdown) to combat COVID-19.
For our research, we will focus on the resilience of companies, which is defined by their ability to prevent worsening circumstances, such as surviving the circumstances caused by COVID-19, and their perceived ability to recover from a crisis.
Methodology and Sampling
Findings
Are They Still in Business?
The proportion of sellers of fashion accessories is higher among closed businesses compared to open businesses; almost a quarter (24%) of closed businesses were involved in the sale of fashion accessories, compared to only 9% of open businesses (Table A, Appendix). Fifty-one percent of the open firms are in the clothing sector and almost 18% in the food sector – shares that are larger than those of the closed firms (see Table S, Appendix). Closed companies are smaller in terms of number of employees and running costs compared to open companies.
96% had up to five employees and about 60% had no recurring costs (Table B, Appendix).
Intermediate Impact of COVID-19
From our analysis, we see that those selling fashion accessories that are non-essential items are more likely to fail. During the first round of the survey in April, the fear factor hit these companies hard. Therefore, compared to April in June, fewer companies reported the negative effects of COVID-19 (Figure 2).
Twenty-one percent of the companies believe that they are doing better compared to other companies (Figure 3). These companies are mainly in the food and clothing sectors and have seen an increase in customer engagement on their online sites during Eid. In April, during our first round of research, these entrepreneurs were more uncertain about what was going to happen.
At that time, 30% of companies were unsure about overcoming the shock from COVID-19, while only 15% were very confident that they would be able to overcome the shock (Figure 4). Confidence levels for online businesses improved and there was less uncertainty about the effect of COVID-19 on the market. 13 percent of businesses expected it would take more than a year to return to their pre-Covid stage (Figure 5).
Moreover, 62% of entrepreneurs think they can return to the previous business phase within 6 to 12 months (Figure 5). While their confidence grew in this one month and some companies are doing better than others, how have they held up in this situation? During the second round, companies stick to the same coping mechanisms as during the first: cancel orders, give discounts, lay off employees or make no changes at all.
Fewer companies (37%) are canceling orders and more companies (33%) are offering discounts to sell products (Exhibit 6). During the lockdown, many people and businesses have switched from cash on delivery to mobile financial services (MFSs) as it helps maintain social distancing, safety and hygiene. In the time between the two rounds, companies that could afford to do so were temporarily closed.
Intermediate Impacts of COVID-19
Compared to last year's Eid holiday, only 6% of companies earned higher revenue, while 79% earned lower revenue (Figure 8). If the pandemic continues, these online entrepreneurs may not have access to any other source of support. Their survival will require formal assistance from government or non-governmental agencies.
None of the companies receive any form of formal assistance from the government or non-governmental organization. In April, we found that these companies operate informally without official registration, which makes them ineligible for any formal support. While policymakers need to step up and address the financial needs of these small online businesses, businesses also need to step up and formally register.
Despite the lack of support from government and non-governmental agencies, these companies have their own support systems (or network) for non-financial support. Many of our female entrepreneurs are involved in online business forums where they can seek guidance. Forty-six percent of businesses turn to these online entrepreneur groups for help, while 53% turn to family and friends and 44% depend on other entrepreneurs.
I think male entrepreneurs will always have an advantage in recovery loans, advice, etc., because people in Bangladesh feel that women in this business see it as a hobby.” The work-life balance and mental health of these women are closely related to performance and thus the resilience of their companies. Together with the poor state of their financial capabilities and access to financial support, this increases their stress.
Most women now spend a significant amount of time on household chores, and less time running businesses or doing office-related work. Women entrepreneurs spend an average of 4 hours on household tasks, while before the lockdown they spent 2.5 hours (Figure 11). Given the added burden of household chores and caregiving, they also spend less time on business activities.
Resilience
Instead, we investigated their recovery capacity by taking information about how confident they feel about recovering from circumstances caused by COVID-19 and their perception of how quickly they will be able to return to the previous phase of their business. We added work-family balance and owner mental health as an attribute of the resilience of these firms, as these may threaten resilience. Based on the results we have discussed in Section 3, we can draw a conclusion about the resilience of these companies in relation to the above characteristics.
In terms of adaptability, agility and resilience, and the ability to recover, we find that these companies have a certain ability to last longer, prevent their circumstances from worsening by adopting some coping mechanisms, and temporarily close with confidence that they will return within a reasonable time. period. From the point of view of vulnerability, these companies are more at risk, as they do not have access to formal financial support, as they are informal in nature. Women's difficulties in maintaining a work-life balance and their poor mental health during this crisis period may also hamper the resilience of these companies.
Concluding Remarks
From our two rounds of surveying, it is clear that these female entrepreneurs have been flexible and adaptable in the face of COVID-19. However, it is important to note that they do not have access to formal support from external government and non-government sources. Employees are laid off and more will be laid off if the income of these businesses does not increase.
A case study in Japan, Mexico and India on small businesses: impact of disasters and building resilience.
