Refugee businesses navigate Turkey’s COVID-19 recovery
COVID-19 has had a significant impact on small and medium-sized enterprises (SMEs) around the world, including SMEs in Turkey owned by and employing refugees. Over the past two years, they have faced government-imposed mobility restrictions and closures, supply chain disruptions and depression of demand. As Turkey enters a recovery phase, restrictions have been lifted and the number of COVID-19 cases has decreased, businesses continue to feel the impact of the pandemic and must adapt to a new way of life with and beyond COVID-19.
For much of this period, Turkey also faced pervasive economic challenges. The country is grappling with rising unemployment and high youth unemployment, high cost of living, declining value of the Turkish currency and rising inflation. As the country faces challenges in managing the ongoing pandemic recovery and unstable economic situation, small businesses, which account for more than 70% of employment in Turkey and contribute about 50% to GDPare an essential component of Turkey’s economic recovery, generating jobs, stability and self-sustaining growth.
Syrians have brought their entrepreneurial skills and capital to Turkey, including the 2,800 companies in the Building Markets network which employ an average of seven people, highlighting the importance of resilience and recovery for Syrian refugee-owned businesses. In 2020, Building Markets conducted a random survey of SMEs in its business network in Turkey to better understand the impact of the pandemic on Syrian entrepreneurs, finding that most businesses reported significant declines in revenue and that many were in dire need of capital and other forms of support (see: The impact of COVID-19 on Syrian businesses in Turkey). In early 2022, Building Markets surveyed the same companies to understand how they are navigating the current economic situation and identify strategies to help them recover and strengthen their contributions to the Turkish economy (see: The Impact of COVID-19 on Syrian Businesses in Turkey: Navigating to Recovery).
The results indicated that while SMEs in the Building Markets network report a more positive outlook as they navigate the COVID-19 recovery than at the start of the pandemic, they face new challenges given the the economic crisis in Turkey. SMEs suffer from the impact of inflation on rising prices, increased cost of inputs and difficulties in importing and exporting. They point to several needs, including access to training and digital tools, increased sourcing capacity, improved sales and marketing, and access to finance and business loans.
The biggest hurdle for SMEs today is the falling value of the Turkish Lira. While this research aimed to understand the challenges arising from COVID-19 and what SMEs face as they navigate the pandemic recovery, 65% of businesses responded that in the past 30 days the currency crisis has had a greater negative impact than the pandemic.
SMEs have a more positive business outlook in 2022. Overall, companies had a more positive outlook for 2022 than for 2021, with almost 60% of SMEs expecting higher profits and 55% anticipating increased sales. hiring over the next six months. More than 70% of companies expect business investment to increase this year compared to last year.
Access to immediate and flexible financing is a priority for SMEs. Despite their optimistic outlook, SMEs are running out of cash due to the current economic crisis in Turkey and the effects of the pandemic. At the same time, operational costs are rising for SMEs, due to rising energy prices and hyperinflation. When asked to identify the policy most needed to support their business during the COVID-19 crisis, more than 30% of SMEs said they needed business loans. Despite significant government and international funding to support SMEs affected by the pandemic, most SMEs reported that they did not know how to access support.
Business imports and exports are negatively affected by the current economic situation. While the majority of SMEs surveyed do not import or export directly, of the more than 10% that import goods, the majority said imports were negatively affected due to increased shipping costs and of the value of the Turkish lira. Almost 40% of the SMEs surveyed export products, and the majority of these companies said that their exports were negatively affected by the current economic situation.
Many SMEs have increased their digital capabilities during the pandemic, but further digitization is needed. Most SMEs regularly access the Internet and digital tools to conduct business operations and use social media for digital marketing. Nearly 15% of businesses surveyed use an e-commerce platform, with more than 20% adopting e-commerce during the pandemic. More than 60% of companies using e-commerce have seen their sales increase since the start of the pandemic. About 10% of SMBs are accepting digital payments, and 13% of those businesses have added the ability to respond to customer demands during COVID-19. Stakeholders interviewed for this research highlighted the current difficulty in pricing products for e-commerce purposes given currency fluctuations, and explained that SMEs lack flexibility in pricing compared to large companies. businesses. They also shared a need for capacity building and training so that employers and staff understand how to operate and market their goods and services through digital channels.
While Syrian SMEs face several unique challenges, they are also demonstrating their resilience, including their continued ability to overcome adversity, their enduring economic participation, and the extraordinary contributions they can continue to make to the Turkish economy.
Building Markets gratefully acknowledges the donation from the United States government that made this research possible.