During the Covid-19 pandemic, governments and development agencies across the world took steps to keep businesses afloat, including in the food sector. However, often inadvertently (and sometimes intentionally), this support was only accessible to some; notably the better connected, and formally registered businesses.
Such support is likely to be regressive; exacerbating food system divides. In addition, Covid-19 support measures primarily targeted short-term enterprise recovery, but often missed opportunities to strengthen future resilience capacity. While a crisis does require a rapid response, our food systems are being rocked by persistent and significant crises, including weather extremes, conflict, trade disruptions and price volatility. Support needs to contribute to longer-term resilience while addressing pressing needs, aligning business support with food security and nutrition goals.
The Covid-19 pandemic highlighted the importance of resilience of smaller-sized food businesses in developing countries. These firms play a vital role for the food and nutrition security of large parts of the population. As the effects of the pandemic spread, food business owners responded by changing marketing channels, cutting production, shifting to cheaper food alternatives, and reducing staff. These changes had complex knock-on effects on the availability, affordability, and quality of food for those on low incomes.
As a response to the pandemic, national governments and international agencies quickly implemented business support measures that would have been unimaginable in normal times. A recently published policy brief by IDS assesses these support measures for smaller-sized businesses in the food sector. It is based on two complementary studies: firstly, of business support measures by governments in nine developing countries, and secondly, of a specific food business support programme named Keep Food Markets Working (KFMW), funded and implemented by the Global Alliance for Improved Nutrition (GAIN) in Africa and South Asia.
Government policies prioritised short-term finances of formal businesses
The first study mapped and assessed 163 business support measures taken by national governments between March 2020 and March 2021, considering their relevance for food system enterprises. It shows that national governments’ initial responses to the pandemic failed to adequately reach the most vulnerable micro- and small-sized enterprises. Few policies were found that specifically target women-led enterprises, or sectors like trading and retail where women tend to dominate. However, good practice was identified too. For example, India offered a credit facility for informal street food vendors. Both Ethiopia and India introduced collateral free loans or loans that accepted movable assets as collateral. These alternative credit arrangements could benefit female entrepreneurs, especially where restrictive property rights mean they struggle with conventional collateral requirements.
Where financial support is accessible to smaller-sized firms and used as working capital (to remain in business), its short-term relevance is particularly high. However, inappropriate terms and conditions, such as short payback periods or debt moratoria that exclude microfinance, undermine the potential for support to benefit small enterprises. Similarly, wage support measures are crucial for many businesses, but generally those that benefit are only those in the formal sector with the capacity to apply successfully to such schemes.
Resilience increases when longer-term loans are offered in place of short-term repayment arrangements. However, most of the financial support measures we mapped had only short to medium term duration. Furthermore, non-financial measures, such as providing technical assistance and training (with or without financial support) that would have balanced short-term ‘relief’ with longer-term resilience-enhancing changes were less common.
Emergency grants for food enterprises
The second study assessed 15 businesses that received an emergency grant through the KFMW programme in Ethiopia, Kenya, Mozambique, Nigeria and Tanzania. It finds that the KFMW grant was the only support most businesses received, as they either did not know about government support or applied unsuccessfully. By targeting these mostly micro and small businesses, KFMW created vital breathing space. It helped them smooth their cash flow, enabling them to restore salaries and pay for costs such as rent, electricity, and protective equipment. Grants were also used to secure access to raw materials, strengthen supply relationships, introduce new delivery mechanisms, or adopt new marketing approaches to help sales recover.
The findings also point to aspects of programme design that need more attention in future. First, the channels used to publicise the support and the complexity of application procedures affected the accessibility and timeliness of the grants for some applicants, or potential applicants. In addition, in cases where technical assistance was offered alongside grants, a more intensive and slower application and selection process was required, in order to identify businesses with innovation potential. This creates a trade-off which needs to be balanced: between speed, important for emergency support, and an effective selection process, important to raise the potential for longer-term impact.
Lessons for policy
Covid-19 and the measures to control it unleashed an unprecedented global crisis with major implications for food systems. Policy responses were equally exceptional. However, in light of ongoing and severe disruptions, and ever more constrained public resources, it is important to learn from these experiences.
- Application and selection processes can be better aligned with the local context and programme goals. For example, rapid selection and grant payments (i.e., within weeks not months) may be most appropriate where speed is crucial for MSME survival (e.g., in the aftermath of a natural disaster). In addition, these measures can be better designed to to ensure accessibility and relevance (e.g. to female entrepreneurs).
- Given the ongoing nature of volatility and disruption, crisis support will also need to be aligned with longer-term resilience outcomes, including through technical assistance. This could imply a rapid emergency grant, followed later by medium-term technical assistance, perhaps for a sub-set of selected firms.
- It is important to recognise that support for smaller-sized food businesses does not automatically translate to availability of (more) nutritional products as these may have higher costs or be perishable and thus more vulnerable to disruption. Therefore, the broader goal requires supporting businesses to produce food that is both nutritious and affordable during a crisis.
- Finally, given the resource stretch, it will be important to better align measures taken by international agencies, development finance institutions and governments, to avoid replication and aim for more transformational change. As well as directly providing support to more vulnerable businesses, international agencies can help these businesses access government support, while also increasing governments’ understanding of the essential role and needs of small food businesses.