Promises Of Support Fail To Keep Smes Afloat

When the pandemic struck in early 2020, and the authorities responded by prompt closedowns and curfews that have continued in various phases and forms since then, most salaried workers, especially those employed by public-sector entities, managed to sail over the crisis. While remaining cocooned in the safety of their homes, government employees have continued to draw their full monthly salaries from a benevolent state.

In the meantime, people who were self-employed or were entrepreneurs running their own business, in particular those operating small and medium enterprises (SMEs), had only their investments and borrowings to rely on. With little or no government dole outs to fall back upon, many SMEs found themselves hounded on all sides by demands for money when the crisis struck. Landlords demanded rents, vendors called for payments, employees asked for salaries, and, amidst all this, there remained the overarching threat of bank foreclosures due to unpaid loan installments.

In all fairness, the government did respond to the business crisis by initiating several measures, including delaying loan repayments for a limited period, and making available additional loan funding for those affected by the economic downturn. But these steps aimed at ameliorating the situation for businesses either came too late or were inadequate to sustain many SMEs. Hundreds of business owners are reported to have closed down their operations or wound up their business due to the exigencies brought on by the COVID-19 pandemic, as well as the government’s often drastic response to the crisis.

No wonder then that there have been strident calls from SME owners for more assistance from the government, and demands to rationalize restriction rules, expedite the reopening of businesses that had been shuttered as part of the recent partial ban that has been in place in various forms since early February of this year.

During a recent press conference, SMEs claimed that around 15,000 business owners were about to wind up their business, putting at risk the employment of over 56,000 people associated with these businesses.

They pointed out owners of hundreds of businesses had already closed their operations and that many more had expressed their desire to wind up their business and waive the license issued to them by the government.

Accusing the government of being unable to manage the crisis for over a year, the meeting charged that the authorities had failed to provide adequate and timely economic stimulus packages, or lend support and assistance to SME to help them tide over the crisis. They demanded, among other things, that the government immediately postpone all loan repayments by SMEs, pay the salaries of Kuwaiti employers whose businesses are closed, provide exemption from paying rents during the close-down period, and urgently provide financial assistance to SMEs affected by the closure of their operations.

As with everything else in Kuwait, the political element is playing to the hilt over the plight of SMEs, and there has been no lack of vocal support for SME owners from all quarters. The government, the opposition and even the National Assembly speaker have voiced their desire to help business owners overcome their difficulties.

In mid-February of this year, Parliament Speaker Marzouq Al-Ghanim and a group of deputies presented a compensation bill for Small and Medium Enterprises (SMEs) that had suffered losses due to the ongoing coronavirus crisis. According to the proposal, the compensation amount would be deposited in the bank accounts of the owners and it would cover salaries, rents, vendors’ expenses, maintenance expenses, and contributions of Kuwaiti workers to the Public Institution for Social Security.

In a statement made a day ahead of the Speaker’s proposal, the then Minister of Commerce and Industry and Minister of State for Economic Affairs Faisal Al-Medlej affirmed that small and medium enterprise owners are one of the main and important cornerstones of commercial sustainability and development in Kuwait, and that everything would be done to support these businesses. He pointed out that Prime Minister Sheikh Sabah Khaled Al-Hamad Al-Sabah had instructed the National Fund for Small and Medium Enterprises Development to form a committee to look into the plight of SMEs and help solve any existing problems that they faced.

In an earlier intervention on behalf of SMEs, the government had also in September 2020 sent a bill for approval to the National Assembly. The bill detailed five articles that would permit local banks to grant loans up to KD250,000 to SMEs taking into consideration their financial commitments. But the bill also stated that banks have the discretion to determine the loan amount taking into account the credit status and potential risks of the business.

The loan amount was repayable within five years, with a grace period of two to three years set for the start of installment repayments. However, as a prior condition to obtaining the loans, owners of SMEs were not allowed to terminate any of their Kuwaiti workforce and they were also obligated to recruit citizens at a specified percentage.

Most recently, last week, the Cabinet in its regular meeting approved a draft law on supporting and guaranteeing loans by local banks to clients who were affected by the coronavirus measures. The cabinet also tasked minister of commerce and industry to coordinate with the ministry of finance, the Kuwait Investment Authority, the Central Bank of Kuwait, the National Fund for the Supporting Small and Medium Enterprises, the Kuwait Economic Society and other relevant bodies to propose a slew of bills and executive measures to back small and medium-sized enterprises and mitigate the impact of the pandemic on them.
Not to be outdone, opposition parliamentarians have also demanded support for SMEs. A parliamentary panel had last year submitted a motion calling for non-refundable grants of KD10,000 dinars for each SME business impacted by the crisis. Lawmakers also proposed that the state guarantee to pay rents of six months and 80 percent of salaries of SMEs, as well as facilitate the extension of loan repayment periods.

As was expected, while there was support for the unfeasible proposal by parliamentarians, there were few takers from among the SMEs for the earlier conditional offer from the government. Patience is also said to be running thin and frustration mounting among many business owners over the numerous bills and proposals, as well as committees, formed to study and find solutions to their problem.

What is probably being left unsaid and unresolved in many of the discussions and proposals to support SMEs is that many business owners do not want any further loan deferrals, or even new loan funding; what they are seeking is a complete, or at least partial, write-off of all their loans. Loan write-offs by the government is nothing new in Kuwait, it could even be considered the norm.

Interestingly, despite the widely publicized woes and struggles of SMEs to stay afloat during these tumultuous times, nearly two-third (65%) of working people in Kuwait participating in a recent survey said that if given a choice they would prefer to be self-employed or start their own business. In a country where the working-age group makes up the largest cohort of the population, the entrepreneurial spirit reflected in the survey should warm the cockles of policymakers’ hearts, and be a cause for celebration on its own.

For years, the authorities have been trying in vain to trim a bloated public-sector that is gasping as it continues to absorb more young nationals each year. Also, repeated ‘carrot and stick’ attempts by the government to get a reluctant private sector to take in more citizens have fallen short of expectations. Private businesses still find it more cost effective and efficient to hire expatriates than employ nationals.

The same above-mentioned survey, conducted by leading regional job site, Bayt.com, and the market research agency, YouGov, also found that the top reasons for workers in Kuwait preferring to be self-employed were, freedom to choose work-life balance (54%), personal fulfillment (48%), leaving a legacy for their children (48%) and higher monetary gains (41%). The reasons given by the potential entrepreneurs are laudatory and seemingly worth considering any time over the boring 9 to 5 grind of normal work in an office.

However, providing a better perspective of the situation and underlining the shattered dreams and plight of many among those who had chosen the entrepreneurial path in Kuwait, was a corollary question. When the same YouGov survey asked people who had already started their business their reasoning for striking out on the entrepreneurial path, the answers were revealing.
While over half of potential entrepreneurs in the survey had said they hoped to achieve better work-life balance, only less than a quarter of the self-employed respondents still admitted that work-life balance had been a priority for them.

The enthusiastic response to achieving work-life balance expressed by the ‘yet-to-start’ entrepreneurs was evidently not shared by those who had already dipped their toes in self-employment. The realization that reality bites can often be painful.
Moreover, despite the desire expressed by many to choose an entrepreneurial path for themselves, the rush for public-sector jobs by fresh entrants to the work pool each year has continued unabated. Obviously, the safety of a steady government job, with all its accompanying perks and privileges, is too attractive an option for even the most enthusiastic wanna-be entrepreneur.

But dreaming of one-day becoming an entrepreneur is a popular trend in Kuwait, especially amongst those who are already gainfully employed. The survey showed that when it comes to those who are currently employed, 62 percent said that they are thinking of starting their own business; 23 percent had tried their hand at starting their own business in the past.
But when the same survey asked those who were already self-employed for their response, 66 percent said that their business still remained in the startup stage, or was established but not performing well. The fact that two-thirds of entrepreneurs admitted their business was struggling to find a footing demonstrates the many challenges of setting up one’s own business in Kuwait. And, if a further eye-opener on the pitfalls of becoming an entrepreneur in Kuwait was needed, this was provided in spades by the unexpected arrival of coronavirus to the country last year.

 

SOURCE  TIMESKUWAIT

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