The COVID-19 crisis has already had a major impact on economic activity around the globe and is still unfolding. Unlike the 2007-9 financial crisis, which originated in excessive bank lending, countries are dealing with a global health pandemic that has caused a crisis in the economy and may spread to banks and the financial markets. According to the OECD’s latest estimations, many economies will fall into recession. There is even discussion of a global economic depression.
SMEs are particularly vulnerable to the COVID-19 crisis, which has severely disrupted businesses across the EBRD region. While the OECD SME – Policy Responses paper acknowledges that limited empirical evidence is available so far on how the situation affects SMEs across OECD countries, evidence is emerging from national surveys, which suggest major disruptions in the most affected countries and mounting concerns in others. Consultations by the EBRD’s SME F&D’s network and the EBRD-supported Investment Councils and chambers of commerce across the region suggest that SMEs face enormous challenges in many CoOs.
In the EBRD region, SMEs account for the vast majority of companies, value added and employment and are highly represented in the sectors that are most affected by the crisis, such as tourism, transportation, retail and agriculture. Many SMEs do not have access to specialist professional (legal and financial) advisors to support either their efforts at operational and/or financial restructuring or to help analyse their contractual position as a result of the crisis. Due to the crisis, businesses will find themselves in financial distress, lacking liquidity and in operational stagnation.
Therefore, as stated in the EBRD COVID-19 Solidarity Package: Full Mobilisation Paper, “SMEs are likely to feel the brunt of an economic downturn and will be a focus of EBRD intervention.” The initial panic caused by COVID-19 has started to wane and businesses are now focusing on the reality of needing to change their business strategy in a time of crisis.
Against this background, the EBRD plans to initiate a new technical assistance project to provide SMEs in the countries within EBRD Region (the “CoOs”) with necessary and practical guidance on identifying the best course of action in circumstances of financial distress and business uncertainty, thereby building business resilience and ensuring continuity (the “Project”). This guidance will be tailored to businesses, particularly micro and small enterprises.
Initial research conducted by the SME F&D network and the Investment Councils has highlighted the following key topics for MSMEs in the EBRD region to be explored during the Project (the “Key Topics”):
1. access to finance: loan restructuring, payment deferrals, government subsidies, new credit;
2. financial management: cash flow management, reduction of expenses, inventory management, re-evaluating revenue streams;
3. insolvency and use of personal assets;
4. business strategy to understand crisis adaptability, customer loyalty, new customers and new products;
5. operational management: resource planning, supply chains, marketing;
6. digitalisation: e-commerce, e-signature, cyber crime;
7. HR: remote working, hiring and firing, leadership in crisis, communication, health & safety;
8. contractual disputes and enforcement: preventive measures, credit mediation, payment disputes with suppliers and customers, or landlords;
9. insurance; and
10. sector-specific training, particularly for businesses in the tourism and agriculture sectors.
The Project is intended to take a staged approach, including the following stages:
- Phase 1 – Emergency response and generic guidelines for SMEs, including
a) emergency response legal and business advice on selected topics; and
b) producing generic high-level guideline documentation (e.g. checklist-type of guidance document) for crisis and post-crisis management of SMEs
• Phase 2 – Localisation of generic guidelines produced during Phase 1 and topic briefings for each participating CoO and region;
• Phase 3 – Regional roll out of guidelines and briefings.
The Project will provide EBRD SME clients, as well as a wider SME network in CoOs, with the necessary legal and business advice to identify the best course of action in view of limited liquidity and financial distress and the changing business environment. This advice will be tailored to businesses, particularly micro and small enterprises.
Practical guidance on measures that can be applied quickly and efficiently to help SMEs adapt their businesses is a priority, with advice on how to transfer their businesses to online platforms needed in particular (e.g. managing a team remotely; developing online selling skills; digitisation etc.). Sector-specific training should also be a priority, particularly for businesses in the tourism and agriculture sectors.
Information gathered during the Project will help to identify certain areas where further assistance, including legal reforms, may be needed to support the SME sector. This will be useful for the EBRD’s policy dialogue with relevant country authorities.
The Project is led by the Legal Transition Team (“LTT”) in close coordination and co-management with team members from:
(i) SME F&D, which provides direct finance and advice to thousands of SMEs every year and delivers hundreds of training sessions to local consultants and the staff of SMEs; and
(ii) GPA, which oversees and manages the EBRD-supported Investment Councils and/or chamber of commerce networks. The Investment Councils act as platforms for high-level policy dialogue between the private sector and the authorities and are currently operational in 11 CoOs.
Any competitive selections for business opportunities relating to this project will be published on the EBRD's website: Consultancy Procurement Opportunities.
EBRD project enquiries not related to procurement:
Tel: +44 20 7338 7168
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Independent Project Accountability Mechanism (IPAM)
If efforts to address environmental, social or public disclosure concerns with the Client or the Bank are unsuccessful (e.g. through the Client’s Project-level grievance mechanism or through direct engagement with Bank management), individuals and organisations may seek to address their concerns through the EBRD’s Independent Project Accountability Mechanism (IPAM).
IPAM independently reviews Project issues that are believed to have caused (or to be likely to cause) harm. The purpose of the Mechanism is: to support dialogue between Project stakeholders to resolve environmental, social and public disclosure issues; to determine whether the Bank has complied with its Environmental and Social Policy or Project-specific provisions of its Access to Information Policy; and where applicable, to address any existing non-compliance with these policies, while preventing future non-compliance by the Bank.
Please visit the Independent Project Accountability Mechanism webpage to find out more about IPAM and its mandate; how to submit a Request for review; or contact IPAM via email firstname.lastname@example.org to get guidance and more information on IPAM and how to submit a request.