Evidence around the world reveals that the COVID-19 pandemic has forced many micro, small, and medium enterprises (MSMEs) to innovate and adopt digital solutions. In response to travel bans, school closures and work from home arrangements, many have turned to digital technologies to maintain a semblance of normalcy.
In the Philippines, an October 2020 report by the World Bank and National Economic and Development Authority stated that the rapid adoption of digital technologies can help the country overcome the impact of the COVID-19 pandemic, recover from the crisis and achieve its vision of becoming a middle-class society free of poverty. While the push towards digitalization in the country has begun even before the pandemic, it is now becoming a necessity for organizations to survive and, in the long-term, thrive.
In a global research team that I am currently part of, we are studying how MSMEs in China, Malaysia, the Philippines and Thailand are adjusting amid the COVID-19 pandemic. As we go through the initial stages of the interviews in the Philippine team, one of the emerging themes we observed is on how the pandemic has sped up the digitalization of MSMEs.
Esme Palaganas, founder of fashion business Basic Movement, began focusing on her company’s e-commerce platform since the Philippine government imposed a lockdown in March 2020. Previously, fashion businesses like hers relied on social media platforms such as Instagram to sell their clothing lines. From there, the owner or her employees usually perform the manual legwork, including the consolidation of orders and processing of payments and deliveries, to name a few. However, many businesses like Esme’s had to streamline all these processes through an e-commerce platform when the pandemic struck.
Prior forms of digitalization have also helped certain MSMEs become more resilient amid the pandemic. Reden Rojas of The Murang Gulay Shop, for example, had already been active on Facebook even before the pandemic, having over 20,000 followers. When the crisis struck, the business experienced a surge in online orders and inquiries. The same case can be said for Pacita “Chit” Juan, founder of ECHOstore, a retail store carrying green fair trade products created by marginalized communities. Prior to the pandemic, the company had already established its footing in the digital space through its online store and distribution across several e-commerce platforms. These prior initiatives to digitize proved to be a strategic advantage for these businesses when the pandemic struck.
While there is no doubt that the adoption of digital technologies is amplified during the pandemic, the challenge is that digitalization has been difficult to introduce to MSMEs ever since. MSMEs, for instance, are used to selling anywhere and anytime. Before the pandemic, there was no immediate need to establish a digital presence because ‘physical selling’ was the norm. However, with the physical distancing and safety protocols imposed during the pandemic, MSMEs were forced to adopt digital solutions quickly to survive.
Clearly, the rapid digitalization of MSMEs during the pandemic is but one of the ‘lowest hanging fruits’ to cushion the pandemic’s continuing impacts. Other immediate benefits of digitalization include (1) managing transactions from a distance, thereby taking part in proper social distancing (2) delivering goods efficiently, thereby ensuring an orderly transport of goods (3) facilitating the use of financial technologies, to enable cashless and convenient transactions and (4) engaging new and existing customers through social media, thereby increasing the potential market of MSMEs.
Despite the potential benefits, however, digitalization has given rise to several challenges, including: (1) cybersecurity and data privacy concerns (2) exposure to digital fraud (3) online misinformation (4) lack of capacity to develop market power and platform dominance and (5) digital divide and infrastructure-related issues.
Supporting the digitalization of MSMEs during the pandemic is, therefore, a big challenge that requires proper intervention from policymakers and other stakeholders. Back then, digitalization was just an option for Philippine MSMEs. Today, it has become part of the ‘new normal.’ As the pandemic continues, government and other concerned stakeholders might want to expand and intensify their interventions to digitalize MSMEs not just during the pandemic but even beyond.
* * *
Ian Benedict Mia is a research and technical assistant in the Center for Business Research and Development (CBRD) of De La Salle University. He is currently a member of a DLSU team taking part on a global research project titled “Entrepreneurial Resilience and Recovery During and After COVID-19 Crisis: Firm- and Community-Level Responses in China, Malaysia, Philippines, and Thailand”, which is supported by the UK Research and Innovation (UKRI). You may contact him at ianbrmia@gmail.com.
The views expressed above are the author’s and do not necessarily reflect the official position of DLSU, its faculty, and its administrators.