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JCEFTS
14,1 An analysis of Covid-19
implications for SMEs in Pakistan
Rehan Aftab
Department of Management Sciences, SZABIST, Islamabad, Pakistan
74
Muhammad Naveed
Received 30 August 2020 Faculty of Management Sciences, SZABIST, Islamabad, Pakistan, and
Revised 26 December 2020
Accepted 9 January 2021 Sajjad Hanif
National University of Computer and Emerging Sciences, Islamabad, Pakistan

Abstract
Purpose – The purpose of this paper is to ascertain the impact of coronavirus (Covid-19) on small and
medium enterprises in Pakistan, which are vulnerable to crisis situations. This study also aims to provide
policy recommendations to the stakeholders by reviewing the situation of small and medium scale enterprises
(SMEs) after the Covid-19 sudden surge.
Design/methodology/approach – The descriptive study is based on quantitative data technique and
primary data collection is undertaken. The survey instrument is adapted from the US Bureau of Labor
Statistics public documents. Collected responses from SME owners are descriptively analyzed using
appropriate graphs.
Findings – The analysis infers that SMEs in Pakistan have encountered unfavorable implications of Covid-
19 in the form of shortage of goods, blockage in transportation, decrease in demand of products and services,
decline in profits and sales, limited operations, lockdown and employee’s layoff.
Research limitations/implications – The limited sample and precise use of instruments are few
limitations along with valuable implications of this research. The analysis of Covid-19 impact on SMEs is an
ongoing phenomenon and aids in proactive planning for the second wave of this outbreak. Financing
schemes, youth entrepreneurship loans, retention of skilled staff and proactive planning for adverse future are
few recommended measures for revival of the SMEs sector.
Originality/value – The use of a unique sample and quality data set collected using the Bureau of Labor
Statistics instrument adds value to the findings of the study and their consistency. The existing body of
knowledge in the context of the SMEs sector of Pakistan is strengthened with an analysis of crisis
implications for this sector, which remained unaddressed in the past.
Keywords SMEs, Covid-19, Government of Pakistan, SMEDA
Paper type Research paper

Introduction
History is full of events, which shattered the normal operations of the businesses through
disruption in the global, regional and national economies. The very first impact of
uncertainties in any form is on economic conditions (Peng et al., 2020). Natural disasters are
one form of disruption in the external environment leading to recessionary trends in
economic indicators (Auzzir et al., 2018). Pandemics are another wave of uncertainty leading
Journal of Chinese Economic and
Foreign Trade Studies
Vol. 14 No. 1, 2021
pp. 74-88 The authors thank to anonymous referees for their valuable comments and editor of this issue who
© Emerald Publishing Limited remained cooperative right from the beginning of writeup. The authors also thank to colleagues for
1754-4408
DOI 10.1108/JCEFTS-08-2020-0054 their fair contribution in promoting this published idea and discussion.
to failures of economies and businesses. An earthquake-like disaster in many countries Covid-19
harms the national economy, businesses and other national events (Oliva and Lazzeretti, implications
2018; Aftab and Naveed, 2020). While epidemics such as Severe Acute Respiratory
Syndrome (SARS), Cholera and pandemics such as Influenza and Coronavirus (Covid-19)
for SMEs
have also severe implications for economies and associated businesses especially small and
medium scale enterprises (SMEs) (Hai et al., 2004; Saunders-Hastings and Krewski, 2016;
Shafi et al., 2020).
Lockdown has led to failures and closures of small and medium scale businesses in the 75
least developed world. Pakistan is a developing country with a sudden surge of Covid-19 in
its urbane areas where thousands of SMEs are operating. The immediate lockdown led to a
severe impact on the businesses in the urban areas. Recently, the spread of Covid-19 has
marked its unfavorable implications on the global economies, large scale corporations and
SMEs. It has not only harmed the lives of the people but also endangered their economic
activities (World Bank, 2020).
The harmful consequences of Covid-19 for SMEs in Pakistan make it a significant area
for research purposes. The implications of the pandemic outbreak must be identified in the
country to promulgate policies according to the need of time. In line with this principle
argument and the severe impact of Covid-19 on SMEs in Pakistan as per the reports of
the World Bank (2020) and other economic watchdogs, it becomes important to identify the
harmful consequences for subsequent development of policies and revival strategies. This
paper aims to identify the implications of Covid-19 on the SMEs sector of Pakistan through
exploratory and descriptive analysis. It also aims to recommend policies for better
management of the downfall in the economy with revival strategies for the victimized SMEs
in the country.
Operations of organizations depend upon the outside environment due to their need for
resources such as labor, raw material and capital for operations. In the resource dependence
theory, Pfeffer and Salancik (2003) suggest that configuration of the environment has a
powerful influence on organizational structure and its strategy, this theory also suggests the
ways through which it can offset some of the harmful influences (Cuervo-Cazurra et al.,
2019). Suppose an organization’s critical resource is related to the supply chain which is
affected in this recent pandemic, so the organization must have incurred huge losses due to
non-operationalization. Resource dependence theory is a baseline to the SME sector and its
challenges in the external environment like a pandemic. So, its perspective is analyzed in
this paper.
The pandemic is ongoing and the least research is being done so far, therefore, the
contributions of this paper are significant and original in nature. The significant
contribution of this paper is the identification of Covid-19 impact on SMEs in Pakistan
through a review of the existing body of knowledge, reports and other documents of the key
government authorities. The other contribution is the descriptive analysis of responses,
which are taken from owners of the SMEs in Pakistan who suffered the recent brunt. A
questionnaire devised by the US Bureau of Labor Statistics is adapted and used for carrying
out a survey for subsequent descriptive analysis. The last contribution is the fair
recommendations for authorities and owners of SMEs to tackle the harmful implications of
Covid-19 and revive their economic activities.
This work has strong practical and academic implications. It enriches the literature
pertaining to the impact of uncertainties such as epidemics and pandemics on the SMEs
sector. The researchers can attempt to explain the descriptive characteristics of implications
analyzed in this paper to extend the SMEs literature. The recommendations of this work are
noteworthy for state authorities to assist the process of SMEs revival in the country for the
JCEFTS betterment of the entire economy. SMEs’ betterment is an ingredient of economic growth so
14,1 recommendations can help the strategy formulation process of state authorities and SMEs
owners.

Impact of epidemics and pandemics on global economies and small and

medium scale enterprises
76 Before the sudden surge of coronavirus by the end of 2019, there were many other epidemics
and pandemics in the past few decades. All these have badly influenced the economic
conditions and operations of business organizations (Hai et al., 2004; Saunders-Hastings and
Krewski, 2016; Shafi et al., 2020). SARS outbreak in 2002 negatively influenced the economic
growth, financial markets and small and medium scale organizations of the victim countries
(Chen et al., 2007). SARS emerged as a global health emergency from the Asian region, and
hence was having a worse impact on the Asian economies at the start of its infectious wave.
Tan and Enderwick (2006) in their analysis of SARS economic impacts, concluded that it
severely harmed the small and medium scale organizations, especially in the Asian
countries. Afterward, its uplift in 2004 created operational problems in the form of closures,
declining sales and supply chain distortions for small and medium scale organizations in
other parts of the world. Chen et al. (2007) empirically analyzed the impact of SARS on the
stock market performance in Taiwan after its sudden outbreak. They found a negative
impact of SARS on stock market performance as the index declined during the period of
SARS (2002–2004). Like, SARS, Avian Influenza also had bad implications for the economic
conditions, financial markets and business organizations (Watkins et al., 2007).
Watkins et al. (2007) analyzed the preparedness of Australian small and medium scale
business organizations in response to influenza. The survey method was adopted to
analyze the impact of influenza on SMEs in Australia as it is the major sector using
workforce in the country. The study concluded that the businesses were not prepared to
tackle the challenges posed by influenza and have to lay off employees with its outbreak
with worsening business conditions. Basuno et al. (2010), studied the impact of influenza
on small and medium scale enterprises of 33 Indonesian provinces. The effects of this
outbreak were harmful leading to the closure of businesses. Layoffs, disruption in the
supply chain and decline in profitability were other problems for the businesses in
Indonesia during this period. The reviewed literature from different economies suggests
that SMEs are vulnerable to epidemics and pandemics. Any uncertainty with adverse
effects on the national economy distracts the progress of SMEs’ business operations. The
literature clearly endorses that uncertain situations bring troubles for small and medium
enterprises in the form of disruption in supply chains and a decrease in the demand for
their products and services.

Impact of Covid-19 on global small and medium scale enterprises

Covid-19 is an active crisis for businesses around the globe. It has hampered the economic
growth of the entire world with quick and extended outreach. According to the report of
World Bank (2020), the sudden emergence of Covid-19 has brought a recessionary trend in
the global economy with no single nation sustaining against its bad impacts. In total, 5.2%
shrinkage in 2020 is reported by the World Bank. It also indicates the small and medium
enterprises as victims of this outbreak and it has severe implications for businesses for a
long-term period. These facts clearly indicate the impact of Covid-19 on small and medium
enterprises. The relevant evidence of this impact is substantiated below.
The recent Covid-19 pandemic also has an impact on the SMEs sector of affected regions.
Lu et al. (2020) studied the impact of Covid-19 on more than 4,800 SMEs in China. They
found that small and medium enterprises are in worsen position after the pandemic Covid-19
outbreak. Businesses are facing challenges in the form of shortage supply, the decline in implications
demand and reduction in the labor force. Another study analyzed more than 5,800 business
linked with the network, the study also found that the outbreak of the Covid-19 has badly
for SMEs
harmed the businesses of the sole owners and few partners. The closure of businesses with a
shortage of resources is a significant outcome of the pandemic outbreak (Bartik et al., 2020).
Seetharaman’s (2020) analysis of business organizations also shows the negative
consequences of Covid-19 on the business environment. The forceful and mandatory 77
closures of businesses and restrictions on the level of operations have harmful effects on
small and medium enterprises. In a similar context of the Covid-19 impact on SMEs, Fairlie
(2020) concluded that in the first month of restrictions, many small businesses were closed
and with the extended restrictions for the second month, many other businesses were closed.
All these happenings created troubles for not only male business owners but also for women
owners of small businesses.

Impact of Covid-19 on small and medium scale enterprises in Pakistan

Covid-19 impact on the SMEs in Pakistan is noteworthy as 90% of the total businesses in
Pakistan constitute SMEs. Also, the contribution of national GDP by SMEs is 40%
(SMEDA, 2020). So, the ongoing pandemic hurts the national economy with a direct impact
on the small and medium enterprises in the country. Covid-19 has adversely influenced the
economy of Pakistan, ADB (2020) has reported a negative growth of 0.4% in Pakistan due to
this outbreak. According to the UNDP (2020) report and response plan, which has short term
plans for facing the challenge of the ongoing pandemic with the government intervention in
the form of financial support for SMEs, Covid-19 has badly struck the SMEs sector of
Pakistan. The businesses have lost their employees and customers due to lockdown in the
country. Many solely owned businesses have met closure due to this outbreak. Women-led
businesses proved more vulnerable to this shock as per the report of UNDP (2020).
Sustainable development policy institute (SDPI) issued its findings on the impact of
Covid-19 on the SMEs sector in Pakistan. Their work clearly states that around 50% out of
the 3.8 million SMEs will face a decline in sales and profits. SDPI further projected that
around 0.95 million of the SMEs are not capable enough to even survive a lockdown of
1 month. Also, around 2 to 3 million SMEs after lockdown will definitely require financial
assistance to revive their businesses. The ongoing situation will not only impact the
financial viability but also it will disrupt the supply chain of the SMEs sector (Javed and
Ayaz, 2020).
Shafi et al. (2020) analyzed the situation of micro, small and medium scale enterprises
(MSMEs) in Pakistan after a surge of Covid-19, they found that enterprises in Pakistan faced
severe problems in terms of decrease in demand for products and services, shortage of
supplies, disruption in supply chain and reduction in profits and sales. The study also
concluded that 83% of the businesses were vulnerable and not prepared enough to tackle
this shock. Moreover, the majority of the businesses cannot survive with an extended period
of lockdown in the country.
SMEDA is a recognized institute in Pakistan governing the matters of small and medium
enterprises. Recently it has conducted a survey of 920 businesses, which proves businesses
as vulnerable entities to the outbreak of Covid-19 (Naqvi, 2020). The survey reports that
95% of SME operations have been reduced after the outbreak. In total, 92% of the SMEs
faced deficiencies in the supplies due to failures of the supply chain. Moreover, there are
23% of SMEs, which have reported a complete loss due to the cancellation of 100% of export
orders. Around 46% of the businesses have reduced their workforce in few months after the
JCEFTS lockdown situation. Finally, 89% of businesses are in a financial crunch after the spread of
14,1 Covid-19 (Naqvi, 2020) Figure 1.
Sareen (2020) analyzed and reported the fierce implications of Covid-19 for small and
medium enterprises in Pakistan as a result of a breakdown in the national economy. The
decline in the growth of the national economy and shortfall of revenues collectively lead to
unfavorable business operations for the SMEs. Unemployment raises due to the closure of
78 business sites after Covid-19. The failures of businesses gave rise to the concerns of the
government as the unemployment rate tremendously increased after the outbreak. The State
Bank of Pakistan upon the direction of the government launched a financing scheme for
small and medium enterprises for payment of salaries and wages at concessionary rates.
This step was taken to support businesses during the period of crisis and to reduce the level
of unemployment (State Bank of Pakistan, 2020).

Methodology
This section provides an empirical analysis of the real consequences of Covid-19 on SMEs in
Pakistan. To empirically analyze the impact of Covid-19 on SMEs, a descriptive study based on a
quantitative approach with primary data collection is carried out in this paper. The pandemic is
ongoing uncertainty and the limitation of data only prompts to undertake exploratory or
descriptive studies. In the descriptive study, the characteristics of the ongoing situation in the
SME sector are statistically analyzed. The consequences of Covid-19 on SMEs are few outcome
variables, which are analyzed using descriptive statistics in this paper.
The instrument used for data collection is an adapted questionnaire from public documents of
the US Bureau of Labor Statistics. There are few basic reasons for using this questionnaire in the
setting of Pakistan. First, the Covid-19 pandemic has an almost similar nature impact on SMEs
globally as per the initial reports and findings (Bartik et al., 2020). Although, there is more
intensity of its impact in developing countries with limited resilience and resources (Burhan et al.,
2020). So, with the same set of problems for SMEs in ongoing pandemic same queries can be
addressed from different contextual settings. Second, Shafi et al. (2020) analyzed the impact of
Covid-19 on micro-level businesses in Pakistan with the same set of questions as devised in the
instrument of the US Bureau of Labor Statistics. Ratnasingam et al. (2020) also used the same set
of questions in a survey of Malaysian SMEs in the South Asian region and concluded significant
results of its application in the South Asian context, in which Pakistan is also located. Finally, the
standard of the adapted questionnaire is recognized as the repeated surveys of labor statistics in
different regions that have the same outcomes. The adaptation of the questionnaire is because of

Financial issues 89%

Laid off 46%

Loss of export orders 23%

Disrutpion in supply chain 92%

Reducon in operaons 95%

Figure 1.
0% 20% 40% 60% 80% 100%
SMEs problems after
Covid-19 outbreak
Source: SMEDA analysis
the changes in the language of items to make it easier for the sample of Pakistan with different Covid-19
native languages. The item in adapted instrument related to the insurance premium is omitted as implications
SMEs in Pakistan lack in this facility provided to their employees. The detailed instrument is
available on the official website of US labor statistics.
for SMEs
The entire population of this research constitutes of SMEs sector in Pakistan. There are
about 3.8 Million SMEs operational in Pakistan (Javed and Ayaz, 2020). The entire sector
includes services, manufacturing, food buying/selling and startups as SMEs (Burhan et al.,
2020). The complete sector got the brunt of the pandemic outbreak. From the stated 79
population, the final sample of around 1,500 SMEs owners in big cities of Pakistan, which
were badly harmed by Covid-19 was targeted using non-random sampling. The confidence
interval of 95% by allowing the margin of error up to 2% or 3% lead to the figure of almost
1,500 respondents from the entire population of SMEs in Pakistan. Also, such a sample size
for the population in millions is endorsed by the work of Sekaran and Bougie (2016). The
purposive sampling technique is used to identify the set of targeted businesses from the
entire population as per the understanding of the subject matter and situation of SMEs in
big cities of Pakistan after the sudden outbreak. Purposive sampling enables the selection of
the most relevant audience to the issue as per the understanding and judgment of the
researcher’s subject knowledge. The big cities where SMEs operates are selected as targeted
sample due to intense impact of Covid-19. Islamabad, Rawalpindi, Karachi, Faisalabad,
Hyderabad, Multan and Gujranwala are badly struck cities as per the government official
statistics (Covid-19, 2020). The rural regions are completely neglected from the sample size
due to the three major reasons. First, it is the sampling technique that allows the selection of
the most suitable audience from the entire population to serve the purpose of research and in
this study, the purposive sampling has led to the selection of suitable target sample in
urbane regions where intense cases of Covid-19 were reported and the lockdown was
imposed. Second, the businesses in rural areas of Pakistan were not forced to strict measures
of guarding against Covid-19 and there were least reported cases from rural areas in
Pakistan so businesses in rural areas are not regarded as a potential audience for a sample.
Only major cities according to national statistics of Pakistan are counted for the final sample
with the purposive technique. Finally, the time, resource and accessibility constraints are the
limitations of this study while collecting data. So, this study is delimited to the major cities
affected by a coronavirus and easily accessible SMEs operating in these cities. SMEDA
(2020) has an overall statistics of SME count, there is data constraint for city-wise
operational SMEs count. The chosen SMEs are from different sectors as described by
SMEDA, so all sectors have sample representation in the final survey. Covid-19 has equally
harmed different businesses in the chosen cities and similar restrictions were imposed by
the government as policy measures so the results of a few selected SMEs in the same
vicinity can be generalized due to the similar contextual setting of the entire population. The
questionnaires were sent to owners of SMEs in these cities for data collection.
The completed questionnaires were returned back by 1,207 participants, achieving a
response rate of 80.4%. The other statistics related to the questionnaire are presented in
Table 1.

Findings, analysis and discussion

The descriptive analysis using the collected data from 1,207 respondents is carried out with
a graphical representation of the response percentages to any particular factor. The detail of
responses to individual items of the instrument with relevant response percentages is given
below in Table 2. After this representation, a detailed graphical analysis is presented with
suitable graphs.
JCEFTS The first analysis is pertinent to the experiences of SMEs after the outbreak of Covid-19.
14,1 Graph 2 presented below shows the percentage of individuals who have responded in favor
of any of the listed impacts on their business due to Covid-19 Figure 2.
Graph 2 clearly shows that 96% of the businesses have experienced lockdown enforced
by the government of Pakistan after the declaration of Covid-19 as a pandemic. The second
most rated experience of the businesses is a decrease in the demand for products and
80 services. The demand for the products and services declined for 74% of the total SMEs
targeted in the sample. During the lockdown, people were enforced to stay in their homes,
thus leading to a reduction in demand for products and services offered in the marketplaces
beyond their necessities.

Cities Floated questionnaire (SMEs) Response % (SMEs)

Islamabad 251 81
Rawalpindi 257 82
Karachi 328 78
Faisalabad 192 83
Table 1. Hyderabad 143 86
Responses Multan 172 76
distribution Gujranwala 157 79

Survey items (sample size 1207) Responses (%) Responses

Shortage of supplies or inputs 72 869

Decrease in demand for products or services 74 893
Increase in demand for products or services 13 157
Difficulty in moving or shipping goods 68 821
Government-mandated closure of this business location 96 1159
Hired additional employees 0
Increased employees’ hours of work 0
Reduced employees or their hours of work 71 857
Told employees not to work, with or without pay (for example, laid off) 82 990
Increased salaries and wages 0
Reduced salaries and wages 54 652
Fully or Partially paid employees asked not to work 9 109
Not paid employees asked not to work 91 1098
Allowed telework opportunities 23 278
Does not allowed telework opportunities 77 929
Increased paid sick leave 67 809
Decreased paid sick leave 7 84
None 26 314
Received loan or grant to pay employees 42 507
Never received loan or grant to pay employees 58 700
Increase in sales turnover 3 36
Decrease in sales turnover 88 1062
Neither increase nor decrease 9 109
Table 2. Increase in profits 7 84
Items wise responses Decrease in profits 83 1002
details Neither increase nor decrease 10 121
The 13% of respondents who have opted increase in the demand for the products and Covid-19
services might be the owners of products having inelastic demand like necessities (milk). implications
Due to disruption in transportation and intercity lockdowns, 72% of respondents faced
disruption in supplies. Similarly, due to disruption in supply chains, 68% of businesses
for SMEs
faced problems in the movement of their goods during the lockdown phase after the Covid-
19 outbreak. The next pie chart as Figure 3 relates to the analysis of changes in employment
practices.
It indicates that 82% of the businesses sent their employees on leave with or without 81
payment. Even though employees are asked not to work, still they are not laid off from the
businesses. About 71% of the businesses either laid off their employees or reduced their
working hours. Finally, 54% of the businesses reduced the salaries and wages of their staff
after the outbreak of Covid-19 having a significant impact on operations of the businesses.
Among the employees of businesses, who were asked not to work, 91% were not paid
during the forced leaves whereas only 9% of the businesses paid their employees, who were
asked not to work. The demonstration of this distinction is presented below in Figure 4.

Government-mandated closure of this

96%
business locaon

Difficulty in moving or shipping goods 68%

Increase in demand for products or services 13%

Decrease in demand for products or

74%
services
Figure 2.
Shortage of supplies or inputs 72% SMEs experiences
analysis
10% 20% 30% 40% 50% 60% 70% 80% 90%100%

54%
71%

82%

Hired addional employees

Increased employees’ hours of work
Reduced employees or their hours of work
Told employees not to work, with or without pay (for example, laid off or furloughed)
Figure 3.
Analysis of changes
Increased salaries and wages
in employment
Reduced salaries and wages practices
JCEFTS After the analysis of the payment status of employees asked not to work, the next is the
14,1 analysis of businesses, which have allowed telework opportunities. Figure 5 presents the
percentages as a bar chart for businesses, which have either allowed telework opportunities
or have not allowed telework opportunities.
Among all samples, 77% of the SMEs have not allowed telework opportunities, this is
mainly because of the lack of resources and nature of business. Many SMEs cannot work
82 using telework opportunities, so this option was not used. Only 23% of the SMEs allowed
telework opportunities to their workers. Following this analysis, there is an analysis of the
sick leave policy of the SMEs during the Covid-19 period. Figure 6 presents the analysis of
the sick leave policy implemented by SMEs during the Covid-19 period.
As it is a medical emergency, so 67% of the SMEs enhanced the sick leaves for their
employees after the pandemic outbreak. In total, 7% of the business decreased the duration
of sick leaves, this might be due to the more need for workers during this period to operate
the specific types of businesses such as medical stores and necessity items shops. In total,
26% of the business never revised sick leave policy. Figure 7 appearing below shows the
percentage of businesses, which have availed of loans from the government to support their
salary payments with the other bar representing the percentage of businesses, which have
not availed loans from the government to support their salary payments.
The bar chart shows that 58% of businesses have not availed of a loan from the
government to pay their employees during this period. While 42% of the businesses have
availed loans or received grants to pay salaries to their employees during the period of low
economic activities. The final part of the analysis constitutes the analysis pertaining to

9%

Figure 4. 91%
Payment or not
payment to people Fully or Parally paid employees asked not to work
asked not to work
Not paid employees asked not to work

90%
80% 77%

70%
60%
50%
40%
30% 23%
Figure 5. 20%
Telework
10%
opportunities
analysis 0%
Allowed telework opportunies Doesn't allowed telework opportunies
 80% Covid-19
67%
70% implications
60% for SMEs
50%

40%
26%
30%
83
20%

10% 7% Figure 6.
Sick leave policy
0% analysis
Increased paid sick leave Decreased paid sick leave None

Never received loan or grant to pay

58%
employees

Received loan or grant to pay

42%
employees
Figure 7.
Grant and loan
availability analysis
0% 10% 20% 30% 40% 50% 60% 70%

changes in the sales turnover and profits of the businesses during the Covid-19 outbreak
period. Figures 8 and 9 show the analysis of sales turnover and profits, respectively.
The bar chart shows that businesses during the past few months of Covid-19 spread
have received severe brunt in terms of their reduction in sales. In total, 88% of business
sales have declined. On the contrary, 3% of business sales have increased, these might be
the SMEs dealing in medical instruments and other necessary items. In total, 9% of
businesses that have maintained their level of sales turnover are not affected by Covid-19.
These might be the businesses of products with inelastic demand like wheat.
Overall, 83% of businesses have faced a decline in profits due to a low level of economic
activity. In total, 7% of businesses’ profits have increased and 10% of businesses have
sustained their profits. SMEs offering medical care facilities and medical items have
retained their profits. Even a few of such firms are able to make more during the Covid-19
spread period.
After descriptive analysis, it is the ranking of issues according to the response
percentages. Business closure during the pandemic is the first ranked issue faced by SMEs
with a response of 96%. The decrease in sales turnover and profits during the pandemic
period are the second and third-ranked issues with responses as 88% and 83%, respectively.
Employees told not to work during this period is the fourth-ranked issue with a response of
82%. The decrease in the demand for products and services is the fifth-ranked issue with a
response percentage of 74%. The shortage of supplies and difficulties in the supply chain
are the sixth and seventh-ranked issues with responses as 72% and 68%, respectively.
The issues analyzed and reported in the findings of the study are significant challenges
for SMEs under the ongoing pandemic situation. A study of European SMEs during the first
JCEFTS phase of a pandemic by Juergensen et al. (2020) reported the same sort of findings as
14,1 European SMEs to seem to have logistics problems, supply disruptions and demand decline.
Pakistan is located in the South Asian region, which includes Southeast Asia, a study of
Malaysian SMEs in the regional context by Ratnasingam et al. (2020) concluded supply
chain problems and financial management due to lack of profits as prominent challenges for
around 748 SMEs operating in Malaysia. Likewise, Robinson and Kengatharan (2020) in
84 their study interviewed the management of 14 SMEs in Sri Lanka and concluded that
material acquisition, demand decline and payroll deficiencies are the major problems faced
by Sri Lankan SMEs. Lu et al. (2020), Bartik et al. (2020); Shafi et al. (2020) have concluded
similar sort of findings in their analysis of Covid-19 impact on small and medium
enterprises. It shows that Covid-19 holds almost the same impact on SMEs across different
regions of the world with the consistency of research findings and other reports. The
reported findings in relation to layoffs are consistent with the few studies, which are
undertaken right after the Covid-19 outbreak. Naqvi (2020) in his findings also reported that
unemployment tends to increase after the Covid-19 outbreak in the SMEs sector. Businesses
have forcefully endorsed the policy of layoffs with adverse conditions for the operations due
to lockdown (Sareen, 2020). SMEDA’s short report to identify the problems of small and
medium enterprises during the Covid-19 period also concludes failures of supply chain and
financial issues as severe problems. The same findings are obtained in this study. Overall,
there is insufficient literature developed this year to analyze the problems of SMEs in
Pakistan or worldwide after the Covid-19 sudden surge. So, the findings reported in this
study are groundbreaking in the context of the SMEs sector of Pakistan. Further research

Neither increase nor decrease 9%

Decrease in sales turnover 88%

Figure 8. Increase in sales turnover 3%

Sales turnover
analysis
0% 20% 40% 60% 80% 100%

Neither increase nor decrease 10%

Decrease in profits 83%

Increase in profits 7%
Figure 9.
Profits analysis
0% 20% 40% 60% 80% 100%
studies can be undertaken for further factors and elaboration of Covid-19 impact on the Covid-19
SMEs sector. implications
for SMEs
Recommendations/policy suggestions
The analysis of SMEs’ current situation based on the survey prompts for a quick course of
action to revive this sector and the national economy as both are interrelated. World Bank
and International Monetary Fund along with few state agencies of Pakistan have enlisted
few recommendations to support the recovery of the national economy with declining cases
85
of Covid-19. In this paper, there are specific policy recommendations for the state authorities
and SMEs for sustainability, revival and growth of the sector after mitigation of Covid-19
severe impact, which was observed in the starting months.
The supply chain problems, closure of businesses and decline in sales turnover due to
lockdowns can be resolved with the application of smart lockdown policies and the same has been
adopted in many countries of the world. The Government of Pakistan (GOP) should come forward
in this time of need to assist the business operations of SMEs. The financing scheme to aid the
salaries of SME workers for few months is one bold step of the government (State Bank of Pakistan,
2020). The government should also initiate short- and medium-term working capital financing
schemes for SMEs to manage their immediate need for cash and enable liquidity. Export financing
can also better work under current circumstances for SMEs in Pakistan. The government can
specifically provide export financing to SMEs, which are significantly contributing toward the
favorable balance of payment.
As per the reports of IMF (2020), GOP distributed PKR 150bn to low-income people and
GOP has also provided a relief package of PKR 100bn to the SMEs sector. There is another
recommendation extending beyond these vigilant steps in the form of providing micro-
financing to young entrepreneurs. The government should increase the budgetary amount
of the “Kamyab Jawan Program,” which is the flagship scheme of sitting government for
young entrepreneurs. The increase in funds will help young people to initiate more small
and medium enterprises in near future. This will not only help in the revival and growth of
SMEs but also reduce the level of unemployment, which was suddenly uplifted by the
Covid-19 outbreak. The strict terms and conditions of the “Kamyab Jawan Program” should
be relaxed under the current pandemic situation where SMEs are badly influenced. This
measure for SMEs owners and young entrepreneurs will give them more access to credit and
this credit can be used to revive the SMEs sector after severe brunt.
The survey reported in this study concludes that only 42% of the businesses in the SMEs
sector received loans or grant for payment of employees’ salaries and wages. Other
businesses have not received any loans to manage their operations in a hard time. It is
recommended to the owners of SMEs that they should avail financing schemes offered by
the government to assist their operations and retention of employees. Layoffs will lead to the
loss of experienced employees; the financing scheme can help them to retain experienced
staff. GOP’s existing financing scheme for payment of 2 to 3 months payroll and other
expenses should be revisited for leveraging enough liquidity in the SMEs sector for at least
1 year as experts are expecting more phases of Covid-19 outbreaks. Moreover, as the
findings suggest a decline in profits and demand of SMEs, the government should allow
businesses and consumers to interact in the market with Cvoid-19 standard operating
procedures (SOPs) for more hours in a day as the current policy restricts the market hours of
operations with rigid measures.
SMEs owners should comply with the state (SOPs) to carry out their operations with
greater ease as the pandemic is an ongoing phenomenon. Although the government has
authorized SMEs to start their businesses, the SOPs are binding. The failure to comply with
JCEFTS SOPs can lead to severe consequences for SMEs once again. So, the owners should follow
14,1 these procedures while undertaking business operations.
The Covid-19 second wave is expected in near future with almost the same nature of
consequences for the SMEs sector (The Express Tribune, 2020). SMEs should prepare a
proactive plan from the lessons of the first wave to manage their operations in the expected
surge. The survey reported in this study shows 23% of SMEs allowing telework
86 opportunities for workers. All SMEs whose work can be remotely managed should train
their staff for online working practices. At last, the collective effort of both SMEs and GOP
can aid the process of sector revival after the harmful implications of Covid-19.

Conclusions
The emphasis of this work is on the analysis of the impact that Covid-19 has on the SMEs
sector of Pakistan after its outbreak. At first, the documentary evidence and related
literature are collectively explored to identify the consequences, which SMEs have faced due
to the Covid-19 surge. To substantiate the literature and initial reports of economic and
financial bodies such as the central bank and world bank, the survey is conducted using
questionnaires from SMEs in big cities of Pakistan. The findings and relevant analysis show
that Covid-19 has created severe nature of problems for the SMEs sector in Pakistan. Small
and medium enterprises have encountered issues such as shortage of goods, blockage in
transportation, decrease in demand of products and services, the decline in profits and sales,
limited operations, lockdown and employee layoff.
The findings of this work are followed by recommendations as policy measures for
government and management of SMEs. The steps mentioned as recommendations are
practical implications of this work for stakeholders. Financing schemes, youth
entrepreneurship loans, retention of skilled staff, liquidity enhancement with more short-
term loans and proactive planning for adverse future are few recommended measures for
revival of the SMEs sector. With this study, the academicians have more evidence of the
subject and can further extend the work to different sectors of Pakistan. This work enriches
the literature pertinent to pandemic impact on small and medium enterprises and opens
avenues for future research. Having sample and instrument constraints in this paper, the
upcoming studies can undertake a rigorous survey with additional questions for additional
analysis of Covid-19 impact on SMEs. A study separately analyzing the impact of Covid-19
on manufacturing, services and food sector SMEs can add value to the body of literature and
would have practical implications. A broader context of SMEs from diverse regions and
countries should be analyzed for further identification of eminent implications of Covid-19
for the SMEs sector.

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Corresponding author
Rehan Aftab can be contacted at: [email protected]

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