Protecting children from the economic impact of COVID-19 on small businesses

Creating strong social protection systems

Bernadette Gutmann
A family posing for a portrait in their home
10 June 2021

Businesses play a crucial but often overlooked role in shaping the world in which children live – through their actions, influence and command of resources.

Businesses produce and deliver many vital products and services for child development, sometimes alongside government, as in the case of education and health care. They also impact the economic and social lives of families since they employ children’s caregivers, and, in several sectors in South and East Asia, they employ youth and even children.

However, children’s needs rarely drive business decisions, nor do they significantly register in policymakers’ approaches towards policies and practices that govern businesses. Children who are connected to MSME’s and particularly the informal sector suffer even greater vulnerabilities, as their caregivers lack employment rights and access to structured government aid and safety nets. While such children are already among the most disadvantaged populations, the COVID-19 pandemic has made glaringly obvious the urgency of a multi-actor response (see the graphic below) to create strong social protection systems during economic shocks, with a focus on the unique circumstances of small businesses.

Graphic - systems based approach and multi-stakeholder responses

COVID-19 made obvious the need to connect small business practices and policy to child rights.

In autumn 2020, UNICEF Regional Offices in South Asia and East Asia and Pacific, with the support of Dalberg, set out to understand how the pandemic is affecting businesses across both regions and the resulting increased vulnerabilities for children, young people and their families.

The report highlights the unique situation of MSMEs, which bore the brunt of the crisis. Analysis conducted in the early days of the pandemic (April 2020) found that over 50% of surveyed MSMEs expected profits to be reduced by more than half, while just 26% of large businesses expected such losses. As MSMEs have been hardest hit by the pandemic, the threat to their survival was passed on to the families connected with them.

As small businesses flounder, children are exposed to both short- and long-term challenges.

Small businesses are the main source of income for most households and children in a majority of countries across the regions. Although closures of these businesses severely disrupted the supply of certain goods in the short term, the more concerning long-term impacts on child rights can be linked to layoffs and wage cuts driven by pandemic-induced financial pressures.

The ILO estimated that 115 million jobs in South Asia and 31 million jobs in South-East Asia and the Pacific were lost during the third quarter of 2020. Tourism, garment manufacturing, wholesale and retail trade, and construction were the hardest-hit and face longer-term recoveries. Many of these sectors, which are key contributors across the region, lost 20%–50% of expected 2020 revenues (e.g., garment manufacturing in Bangladesh, the Philippines, Sri Lanka and Viet Nam; tourism in Maldives and Thailand; construction in Nepal and Pakistan).

As a result, children’s access to nutrition, education, child protection and health care has been affected.

At the time of the study, evidence of the economic impact on nutrition was strongest. An estimated 49 million additional people in South Asia and 18 million in East Asia were projected to have been pushed into food insecurity by the end of 2020. Furthermore, an additional 3.9 million children in South Asia were expected to suffer from wasting due to the pandemic’s economic repercussions.

While the data on education- and health-related impacts were still emerging, lockdowns are expected to have exacerbated existing inequalities in access, especially where the private sector plays a strong role in delivery (e.g., health care in many South Asian countries). Experts and initial surveys also point to an increased risk of mental health disorders among children and increased reports of domestic violence due to economic stress and family members being home from work.

A concerted effort is required to help MSMEs in South and East Asia, and the families who depend on them, thrive.

Over a year since the pandemic began, Asia is hit with a devastating second wave of infections. Deaths in South Asia have reached unprecedented levels, hospitals are overwhelmed, and some health systems are on the brink of collapse. This makes the need to further examine business-related impacts and translate our knowledge into relevant policy action even more crucial.

Business actions alone – especially in the case of MSMEs – cannot mitigate the far-reaching impact of the economic crisis. MSMEs are often less resilient to economic shocks due to their relatively lower liquidity and flexibility in adapting to changing business environments. Many MSMEs are also embedded in global supply chains and, as larger firms protected themselves from the impacts of the COVID-19, the risk was shifted towards these smaller actors with less control. These smaller players now require additional support to respect and support child rights. Solutions aimed to secure the well-being of children and families employed or served by MSMEs must address both business practices and government policy and support.


About the author:

Bernadette Gutmann is the Regional lead, Private Sector Engagement at UNICEF ROSA | Ida Hyllested is the Regional lead, Child Rights and Business at UNICEF EAPRO | Layusa Isa-Odidi, is an Associate Partner from Dalberg Advisors

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