Covid-19 economic impact : Women-led SMEs more likely to borrow informally than from banks

Women-owned small and medium-sized enterprises (SMEs) in Sri Lanka were least likely to have taken a loan from a financial institution and are far more likely to have borrowed from family and friends to meet financial obligations during Covid-19, according to a new report.


The report, titled “Gendered Impacts of Covid-19 on Small and Medium-Sized Enterprises”, was compiled by Women in Work, a partnership between IFC and the Australian Government.

Presenting a snapshot of the impacts of the pandemic, the report is based on surveys of SME clients of four financial institutions and from the distribution network of one fast-moving consumer goods company. It shows almost three quarters of SMEs surveyed experienced decreased sales. Nearly two-thirds of the SMEs saw their sales drop by more than 25% on their pre-Covid monthly average.

“Overall, our research shows little difference between the impacts on businesses – whether they were owned by men, women, or jointly owned,” said IFC Country Manager for Sri Lanka and the Maldives Amena Arif. “But it was clear that women were less likely to access loans from formal banks to support their businesses and more likely to take a more traditional route, borrowing from family and friends. They were also much less likely to use digital business channels. This highlights potential areas for future work with financial institutions to tailor their support to meet the unique needs of female and male business owners.”

In response, the IFC-DFAT report offers recommendations, including increased access to working capital solutions and other loans for women-owned SMEs (WSMEs), better access to business-related training, and greater support to help small businesses shift to digital business channels.

“We hope the report’s recommendations will be a useful input into creating a more resilient Sri Lankan economy in which women-owned businesses make a greater contribution,” said Australian High Commissioner to Sri Lanka David Holly.

Beyond its focus on women, the report showed that eight out of 10 SMEs in Sri Lanka experienced difficulties meeting operating expenses and had some shortfall in debt repayment or ability to meet financial obligations due to Covid-19. Moreover, over three quarters of SMEs reported difficulties accessing their usual financial services. Companies in the manufacturing and construction sectors are the hardest hit, followed by the services sector. However, despite the challenges, almost three-quarters of the SMEs surveyed predicted they would continue to operate indefinitely.

The findings are based on a survey completed by 413 SMEs from across the country between 22 June and 22 July 2020. Around one million SMEs – 25% of which are women-owned – account for about 45% of total employment in Sri Lanka.

IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets and works in more than 100 countries.