Policy Responses to the COVID-19 Crisis in Asia and the Pacific

Abstract

The COVID-19 pandemic served as a major and unexpected stress test for all countries' economic systems, including their micro, small, and medium-sized enterprises (MSMEs) and their banking and finance sectors. In addition to the immediate impact of the economic strains posed by the pandemic-related lockdowns and other measures enacted to address the public health crisis, we see COVID-19 as a potential watershed moment for an array of business endeavours, including the financing of MSMEs. While it is quite likely that some degree of ‘snapping back’ will occur, once the pandemic abates, there is a degree to which things will ‘snap forward’. We lay the foundation for the post-crisis policy agenda in MSME finance for Asia and the Pacific. The paper is broadly divided into two main parts. In the first part, we summarize the economic impact of COVID-19 on MSMEs in the region, particularly concerning outcomes such as productivity, profits, and employment among MSMEs. In the second part, we explore the policy responses to this impact within the scope of MSME finance. We conclude the paper with several key takeaways for policymakers that then sets the stage for our analysis of how COVID-19 will change MSME finance in Asia and the Pacific in the years ahead.