OECD recently released a paper providing an analysis of the diverse range of SME and entrepreneurship policy measures implemented during the course of a year since the start of the COVID-19 crisis.
The paper documents how SMEs were at the center of the disruptions at the start of the pandemic and that one year later they stand in an even more precarious position, in particular young firms and start-ups, the self-employed, as well as women-led or minority-owned businesses. Governments acted swiftly to put in place ambitious support for SMEs and entrepreneurs, but one year into the pandemic, they are facing a complex dilemma that emergency liquidity support remains essential but at the same time it is not sustainable over the longer term and may have potential negative effects that need to be addressed to support the recovery.
This paper formulates 15 lessons learned to help governments address three challenges: First, to continue support measures to avoid a liquidity crisis among SMEs while minimizing the negative side effects; Second, to ensure that the gradual phase out of this emergency support does not create an SME solvency crisis; And third, to introduce effective policies that foster SME recovery.
- Ensure rapid delivery of SME and entrepreneurship policy support by simplifying access to support and ensuring effective digital delivery systems, while safeguarding accountability and effectiveness;
- Ensure to the extent possible that policy support focuses on viable existing companies and start-ups;
- Reboot start-up policies to enhance the potential of innovative new ventures for recovery;
- Ensure that support measures are inclusive and reach vulnerable segments of the SME population, including women and minority entrepreneurs;
- Rethink policy approaches with regard to self-employed entrepreneurs;
- Avoid SME over-indebtedness and an SME solvency crisis by exploring equity, quasi-equity and other non-debt support;
- Prepare responsible exit strategies for emergency liquidity support measures;
- Allow processes of creative destruction to take their course, while supporting second chance entrepreneurship and safeguarding a just transition;
- Ensure that recovery programs to “build back better” reflect the circumstances and perspectives of SMEs and entrepreneurs and are well-suited to support their recovery;
- Include a strong focus on the digitalization of SMEs and new firms as a cornerstone of recovery;
- Take actions to improve the resilience of SMEs, start-ups and scale-ups;
- Strengthen the forward-looking capacity, resilience and responsiveness of SME and entrepreneurship policy frameworks;
- Ensure effective and inclusive multi-level governance mechanisms;
- Ensure that SMEs and entrepreneurs, and the organizations that represent them, are consulted and included in government decision-making processes regarding policy responses to the pandemic and in the development of recovery plans;
- Consider the unique challenges and opportunities the SME and entrepreneurship policy responses to COVID-19 pose for policy monitoring and evaluation.
Read the full version of this OECD Policy Responses to Coronavirus (COVID-19) online here>
Download this paper here>