Impact of COVID-19 on Small and Medium-sized Enterprises (SMEs) in Iraq

In order to shed light on the impact of COVID-19 on Small and Medium Enterprises (SMEs), which were affected by closures and reduced working hours, IOM conducted a survey with 456 enterprises active in different sectors in urban areas of Iraq in April 2020. The inquiry focused on governorates with the highest rates of displacement, returns, and ex-combatants as identified by IOM. In order to measure the effects of COVID-19 on SMEs, the research uses a stratified sampling strategy applied to a database of urban employers in the areas where IOM’s Enterprise Development Fund (EDF) has been implemented.

The analysis found a significant impact on economic outcomes at the firm level. Effects on sales and production among firms have been the most pointed, with temporary reductions in paid employment also reflected. These have been especially noticeable within the construction and manufacturing industry, followed by the food and agriculture industry. For more details, see the IOM produced factsheets, dashboard and report.

Factsheets
All Sectors
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Construction and Manufacturing
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Food and Agriculture
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Services
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Wholesale and Retail
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Dashboard
Panel Study I:
IMPACT OF COVID-19 ON SMALL- AND
MEDIUM-SIZED ENTERPRISES IN IRAQ

Measures taken to curb the spread of COVID-19 have led to reduced operating hours or the closure of many of Iraq’s small- and medium-sized enterprises (SMEs). Although restrictions, including curfews, school closures, and restrictions on travel into and within the country, eased after the first few months of the COVID-19 response, the economic impact of the pandemic is expected to be severe. To measure the losses and investigate how SMEs are coping with movement restrictions, the International Organization for Migration (IOM) in Iraq, the Food and Agriculture Organization (FAO), and the International Trade Center (ITC) launched a panel study following 893 enterprises, focusing on 15 governorates and 16 sectors. Findings show that COVID-19 has negatively affected production on average by 67 per cent, employment by 27 per cent, and monthly revenues by 63 per cent February and June. More than half of the businesses had difficulties accessing their most important inputs and four out of five SME owners faced lower domestic consumer sales. Almost three out of five SMEs interviewed reported that they were at risk of permanently shutting down. The most common approach was to reduce the number of employees, a strategy adopted by 34 per cent of the SMEs. A potential result of this coping mechanism is an increase in the gender gap among these SMEs by 30 per cent. The first round of data collection took place from 22 June to 7 July 2020 and focused on. Two more survey rounds with the same 893 businesses will take place in September and December 2020 to continue analyzing the impact of COVID-19 crisis on production, labor, revenues and access to inputs.

Factsheets
All Sectors
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Food and Agriculture
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Panel Study II:
IMPACT OF COVID-19 ON SMALL- AND
MEDIUM-SIZED ENTERPRISES IN IRAQ

Movement restrictions and curfews to curb the spread of the COVID-19 virus initially had a severe impact on small- and medium-sized enterprises (SMEs) in Iraq. Despite the lessening of lockdowns across the country, SMEs continued to be affected negatively. To measure the losses and investigate how SMEs are coping with the economic impact as the pandemic continues, the International Organization for Migration (IOM) in Iraq, the Food and Agriculture Organization (FAO), and the International Trade Center (ITC) launched a panel study following 893 enterprises representing 16 different sectors across 15 governorates of Iraq.

Findings show that between February and September SMEs have experienced reductions in production of 53 per cent and employment of 27 per cent, on average.

Between June and September, just over one quarter of businesses had difficulties accessing their most important inputs and half of SME owners faced lower domestic consumer sales. Thirty-eight per cent of SMEs interviewed reported that they were at risk of permanently shutting down in September. The SMEs in the study also experienced on average an increase in the gender gap from 1 woman per 13 men in February to 1 per 18 by the end of August.

Between June and September, the most common approach to cope with financial challenges was to requested leniency in paying financial responsibilities, a deviation from June when the plurality SMEs resorted to laying off employees to stay afloat. Findings show some recovery in the labor market, possibly due to the pivot of SMEs’ strategies away from firing employees to save money. Findings also found increased revenue across all sectors between June and September, possibly due to rejuvenated economic activity and selling products at higher prices.

The first round of data collection took place from 22 June to 7 July 2020 and the second round from 9 to 18 September. A third round will take place in November and December 2020 to continue analyzing the impact of COVID-19 crisis on production, labor, revenues and access to inputs.

Factsheets
All Sectors
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Food and Agriculture
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Panel Study III:
IMPACT OF COVID-19 ON SMALL- AND
MEDIUM-SIZED ENTERPRISES IN IRAQ

To measure the losses and investigate how small- and medium-sized enterprises (SMEs) are coping with the economic impact of COVID-19, the International Organization for Migration (IOM) in Iraq, the Food and Agriculture Organization (FAO), and the International Trade Center (ITC) launched a panel study surveying 893 enterprises across 15 governorates of Iraq.
Panel Study III: Impact of COVID-19 on Small- and Medium-Sized Enterprises in Iraq presents the findings of the third round of data collection, analyzing the changes in trends occurring between August and December 2020.
The initial movement restrictions and curfews that the government of Iraq implemented to curb the spread of COVID-19—including lockdowns or curfews, school closures, and restrictions on travel into and within the country—have been relaxed in certain locations, producing some level of economic recovery. SMEs witnessed a partial recovery in employment and reported revenues since the beginning of the pandemic. However, production continued to be affected negatively. On average, half of SME owners saw a decline in production when comparing February to both September and December.
To cope with the financial stresses of the pandemic, SMEs reported attempting to increase marketing efforts and request leniency in paying off financial commitments. This is a pivot from the strategy of laying off employees, which was more prevalent in the beginning of the pandemic.

Factsheets
All Sectors
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Food and Agriculture
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Main Findings (2020):


Panel Study: Impact of COVID-19 on Small- and Medium-Sized Enterprises in Iraq details the main findings of a joint International Organization for Migration (IOM) in Iraq, Food and Agriculture Organization (FAO), and International Trade Center (ITC) panel study. The study followed 893 small- and medium-sized enterprises (SMEs) throughout 2020 to measure the losses and investigate how firms are coping with the economic impact of COVID-19.
Overall, all the sectors in the study reported a decline in production or sales between February, the pre-COVID-19 period, and December, the end of the study period. Over the year, more firms incurred new debt due to the pandemic, the majority of which were through informal means.
The proportion of SMEs reporting risk of permanent closure of their business halved between June and December. After big losses of employees at the beginning of the pandemic, employment began to recover between June and November but did not reach pre-pandemic levels by the end of the year.
Over the course of the study period, the mechanisms SMEs adopted to cope with the financial difficulties of the pandemic changed. Initially, SMEs laid off employees. Later, requesting leniency in repaying financial responsibilities and increasing marketing efforts emerged as the dominant strategies. The same 893 SMEs were surveyed three times in 2020: 22 June to 7 July, 9 to 18 September, and 29 November to 15 December. The firms represent 16 different sectors across 15 governorates of Iraq.