How the COVID-19 pandemic will affect female entrepreneurs from different informal sectors

This is a blog post written by Nawreen Sobhan and Dr Abeer Hassan from University of the West of Scotland.

Starting a business can offer a lifeline for people living below the poverty line as they try to recover financially and mentally. However, the Covid-19 crisis is going to have a devastating impact on economies. The outbreak has brought countries’ economies to a halt and driven many victims to shut their business and seek loans to survive. If starting a business in the informal sector [1] was difficult before the coronavirus crisis, it will be far more difficult after the crisis. This is because many employees will be made redundant (if they are not already redundant) and some people (especially women) will look to start a new business to be able to survive. Many of them will look for an informal sector to trade their products/services. As the Covid -19 is pandemic affects all countries, developing countries have a particular vulnerability because so many people work in the informal sector.

The impact of covid-19 on outreach informal sectors’ entrepreneurs

Over the past decade or so, there has been a growing recognition of the role of entrepreneurs[2] in the informal sector. There are common factors, around the world, which contributed to the increased level of informality. The increased rate of unemployment, the declining role of the government in initiating new jobs. In addition, the lack of trust in official agencies and long legal procedures to facilitate the establishment of formal enterprises are known to be reasons that increase informal sectors in developing economies.

It is very difficult to collect proper statistics in developing countries from any informal sectors, as people do not necessarily consider what they are doing as “business”. Moreover, national statistical agencies are tending to register enterprises as a whole rather than individual entrepreneurs. Although most of the world governments are offering to help/support small businesses during this pandemic, the very interesting and important question is “how are governments going to get hold of informal sector data to provide support to the right people?"
Main challenges during Covid-19 pandemic for female entrepreneurs in informal sector

Once the World Health Organization (WHO) announced the coronavirus pandemic, governments were forced to implement quarantines and stay-at-home orders which have negative consequences for all businesses, including small businesses and those who are working in the formal sectors. For example, female entrepreneurs making handicraft items will not be able to sell their products as people are tending to buy only essential items in the pandemic period. Another factor also is the shortage or the delay of getting the raw material from suppliers which might increase the costs of some goods.

Due to the Covid 19, many private sector companies made their employees redundant. As a result, after losing their job, many of the people, especially females, will transfer to the informal sector for their survival. Generally, people are using common online platforms such as Facebook, Twitter, e-bay, Amazon for selling or buying general items including furniture, car, household. However, during the pandemic the role of business in online platforms has been changed dramatically as people start to advertise essentials only. This includes, selling fresh fruits and vegetables, home baking delivery, home schooling, etc,., 
Online business platforms will play a very crucial role in the near future due to the current pandemic. As it requires no formal regulation, anyone can reach potential customers by working virtually from anywhere to support their family financially.  

This pandemic situation might be the era that will force businesses to look for alternate solutions. If you’re convinced that online business is the way to go, this is the time to take this sector seriously, to make sure that the appropriate structures are put in place for its recognition and full integration into the wider economy.

[1] Unregistered and small-scale private enterprises engaged in non-agricultural activities with at least some of the goods or services produced for sale or barter (based on 15th ICLS)
[2] An entrepreneur is an individual (or team) who creates a new business venture within a place that offers a new product(s) or service(s) and adds value to markets within the community.
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