Liquidity woes hound MSMEs amid pandemic

PHILIPPINE STAR/MICHAEL VARCAS

ABOUT 40% of surveyed Philippine businesses have up to five months of liquidity left due to the impact of lockdown restrictions, a study conducted by the Management Association of the Philippines (MAP) and the University of Asia and the Pacific (UA&P) showed.

UA&P School of Economics Vice Dean Peter Lee U in an online event held by MAP on Monday presented the COVID-19 (coronavirus disease 2019) Outbreak and Impact on Business Establishments study, which collected online survey responses from 33 representatives across various sectors and conducted online interviews with representatives from 10 firms.

The study in September and October covered the food manufacturing, accommodation and food services, construction, wholesale and retail trade, and transport sectors, of which more than 60% were micro-, small-, and medium-sized enterprises (MSMEs).

Among the respondents, 40.7% said they had up to five months of financial liquidity left to continue operations. Broken down, 21.9% said they had less than three months of liquidity, while 18.8% said they had three to five months left.

In contrast, 31.3% said they had a year or more financial liquidity left.

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Asked to select three business areas that were affected the most by the pandemic, respondents identified the financial, transport and production areas as top concerns.

The financial area figured most often among companies’ top three areas, but sales and production were more often cited as the number one concern, Mr. Lee U said.

The survey found that the drop in headcount varied for each sector, with travel and recreation as well as hotel and accommodation sectors seeing the biggest reductions at 67% and 48% respectively.

The construction sector’s average headcount reduction was 47%. Nonfood manufacturing had a 39% drop, while the food counterpart only had a 14% decline.

The hotel, restaurant, and art sectors experienced more than 50% decline in sales, which resulted in salary declines of 31-50% for the majority of the businesses. But the salaries of many fell by more than half.

“The decline in sales here is also an explanation for the reduction in employment and headcount,” Mr. Lee U said.

“As jobs are lost, therefore, for many households, incomes then are also lost. This later on aggravated or was expected to aggravate further the dropping demand and sales. And so it becomes a vicious cycle.”

In construction and food manufacturing, sales dropped by 10-50%. Salaries also slipped by 31-50%.

Firms reported some challenges, including mobility restrictions leading to canceled projects and lower customer orders.

Most companies saw raw materials costs increased by 25-50% due to the added costs of transporting goods during the lockdown, Mr. Lee U said.

The firms said they needed direct financing through loans, tax incentives, subsidies for utilities and added health safety costs, and access to newer financing models like crowdfunding and peer-to-peer lending.

The businesses were also seeking consistent safety rules and government assistance in moving goods. — Jenina P. Ibanez

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