Foundation 787: Micro, small and medium businesses need financial assistance

SARAJEVO, (Patria) - In the period from March 26 to April 5, 2020, Foundation 787 conducted a survey on the impact of the crisis caused by the COVID-19 virus on businesses and entrepreneurs in BiH. A total of 1,364 entrepreneurs participated in the online survey, of which 57.7% were women and 42.3% were men. Of the total number of respondents, 90.1% were from the Federation of BiH, 9.2% from Republika Srpska, and 0.7% from Brčko District.
Also, looking at legal status, 57.7% of sole proprietorship owners, 37.9% of limited liability company owners, and 4.4% of entrepreneurs with unregistered businesses participated in the survey.

The largest number of respondents, 86.2%, are owners of micro businesses, employing up to 10 people, and 11.7% are owners of small businesses employing up to 50 people. Of the total respondents, 78.4% operate exclusively in BiH, and 19.6% operate in both BiH and foreign markets.

To the key question of how the COVID-19 virus outbreak affected the business operations and revenues of the respondents' businesses, as many as 71.5% of those surveyed answered that the crisis had an extremely negative impact on their business and revenues by the time the research was conducted. As many as 68.9% of male respondents and 73.3% of all female respondents shared such an extremely negative response. As somewhat expected, the crisis has so far had the most negative impact on micro businesses. 72.4% of them reported an extremely negative impact of the crisis, and a total of 67.5% of small businesses and 57.1% of medium-sized businesses indicated the same situation. By the end of the first week of April, 72.7% of respondents had already suspended operations, while 16.4% continued to operate by introducing alternative forms of business, such as home delivery of products.

Additionally, by the end of the first week of April, 11% of respondents were forced to temporarily lay off employees, while 51.9% expressed fears that they would have to do so soon. A worrying fact is that 74.3% of business owners fear they will be forced to close their businesses, while this percentage is slightly higher among businesses run by women, at 76.4%. Additionally, 80.8% of sole proprietorship owners and 70.9% of LLC owners believe they will be forced to close their businesses in the near future.

The majority of respondents are actually unsure if they will be able to overcome the crisis on their own, while 35.3% explicitly believe they will have to close their business if they do not receive adequate support. Additionally, 37% of businesses run by women believe they will have to close their business without support.

There are many challenges facing entrepreneurs in BiH in their business operations during COVID-19. The largest percentage, 71.2% of respondents, points to reduced or completely suspended demand for products and/or services due to limited or suspended operations, and 63.1% of respondents state they cannot meet their obligations to the state. Also, over a quarter of businesses have problems with collections and liquidity, while a significant percentage also report a lack of working capital (23.1%). Some surveyed business owners also highlight the problem of maintenance costs for machines that require daily startup while operations are suspended; they point out the inability to import raw materials and supplies needed for work; goods expiring; special challenges are also psychological and concern for the health of employees, etc.

The largest number of respondents, 42.9%, estimate that the economic consequences for their business will last up to a year, and an additional 31.1% believe the consequences will be felt in the next 6 months. Deferring payment of obligations to the state is an option that 62.9% of respondents choose as one way to ensure business continuity in the coming period, while 51% of business owners will try to reduce all costs to continue operating. A significant percentage of respondents, 40.1%, plan to borrow from banks and microcredit institutions as a way to overcome business obstacles caused by the COVID-19 crisis.

Almost all respondents (95.6%) stated that financial support is currently most needed. 56.9% point to the need for tax and contribution relief, 23.5% consider one-time financial support essential, and 13.8% call for a moratorium on loan repayments and all obligations to the state. Regarding one-time financial support, 44.9% of business owners believe that an amount up to EUR 5,000 would objectively be needed to overcome the crisis situation, of which 420 businesses (53.4%) owned by women are in extreme need of these funds. As many as 59.5% of sole proprietorships would be helped by an amount significantly less than EUR 5,000 to avoid ceasing operations.

As priority measures that institutions in BiH should take to contribute to the economic revitalization of businesses, 65% of respondents emphasize the necessity of tax relief, 60.9% state the need to abolish parafiscal charges and utility fees for the next 6 months, 48.4% of business owners demand clear and transparent criteria for selecting beneficiaries who will receive incentives based on BiH's international aid, and 35.1% of respondents believe that paying VAT upon collection would alleviate the difficult times for BiH businesses during the crisis.

Regarding technical and expert support, as many as 97.3% of respondents indicated the need for at least one type of such support. The greatest needs were highlighted for assistance in adapting business models to the current situation (48.9%), financial consulting (42%), and general business planning (20.7%).

Foundation 787 thanks all business owners for their time in completing the questionnaire. Detailed research results have been submitted to all relevant government institutions in BiH, as well as international organizations and other key stakeholders.

Foundation for Socio-Economic Development 787 is a non-profit organization whose work is focused on the economic empowerment of women and youth by promoting entrepreneurship, and supporting their professional growth and development. Foundation 787's activities include education, information, networking, providing business development services, and advocating for a better position of women and youth in BiH society.