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SERVE Program: Supporting MSMEs to overcome the Covid-19 Pandemic

Strengthening the Economic Resilience of Vulnerable Enterprises (SERVE) Programme – Providing Support to MSMEs to overcome the Covid 19 Pandemic

Micro, Small and Medium Enterprises Developments (MSMEs) are the largest employers in any given private-sector economy and represent more than 90% of registered businesses in the world, 50% of employment and up to 40% of national income (GDP) in emerging economies. MSMEs are the building blocks of economies and are critical vehicle for achieving the 2030 Sustainable Development Goals (SDGs) agenda. However, the development and contribution of MSMEs has recently dropped/fallen short as it faces illiquid markets and difficulty in accessing sustainable finance. This is mainly attributed to the recent outbreak.

The program response is in line with protecting and creating jobs provided by MSMEs, the backbone of all economies, especially the developing economies of IsDB Member Countries. The average number of MSMEs per 1000 people in OIC MCs, i.e. 53.2, represents, that is more than double of the world average of 25.2 percent indicating the substantial footprint of this sector in MCs economies. Lockdowns that are taking place globally are putting an enormous strain on MSMEs. MSMEs in various sectors are forced to close their businesses during this period. Despite having no revenue, they still incur operating costs including rentals for their premises and salaries of their staff. The program will help provide MSMEs in IsDB Member Countries the much-needed liquidity to survive this difficult period.

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The Program is part of the IsDB’s Strategic Preparedness and Response Package (SPRP) approved in March 2020. It is consistent with the “Restore” track ( medium term action through financing for trade and MSMEs to sustain activity in core strategic value chains, and to ensure continuity of the necessary supplies mainly to the health and food sectors, and for other essential commodities) of the program and is one of the efficient and easy-to-process proposals for IsDB’s immediate response to COVID-19 outbreak in IsDB Member Countries.

The main goal of this program is to design a Restore Support Package targeting the MSMEs in IsDB’s priority MCs based on global benchmarks and best practices in order to support the Governments’ efforts in curbing the Covid-19 impact on their economies. The program objective is to build the resilience of affected MSMEs to overcome the pandemic crisis by providing the needed liquidity for business continuity and job preservation.

The Program will contribute to the Government’s efforts in achieving key results, which are in line with the SDG 8: “Decent Work and Economic Growth.” It also contributes to SDG 1: “No poverty”, SDG 10: “Reduced Inequalities”, SDG 5: “Gender Equality” and SDG 2: “Zero hunger”. Some of the expected results are as follows:

  • 3,480 small and medium enterprises covered by financial or non-financial assistance (50% youth-owned, 40% women-owned, 30% farmers or cooperatives); 
  • 150,000 micro-enterprises or households with access to microfinance

(50% youth-owned, 40% women-owned, 30% farmers or cooperatives)

  • 314,000 People employed (240,000 Male/160,000 Female);

The SERVE Program is in line with ISFD’s mandate of poverty alleviation. MCs, specially LDMCs, less impacted by COVID-19 will benefit from other Economic Empowerment initiatives of IsDB. The IsDB/ISFD support to provide the much-needed liquidity to Financial Institution Partners will strengthen their resilience and the resilience of their MSME beneficiaries whom are vulnerable and at risk during this pandemic. The SERVE program is a means to support MSMEs at the IsDB Group level. The financing may be used to support the financial partners of IsDB Group entities, equity investees of IsDB and its entities and also be used to leverage partners and donors.

ISFD has allocated about US$60 million of concessional financing which is expected to be matched with IsDB and counterpart financing. The concessional financing provided by ISFD will reduce the cost of financing for Islamic microfinance institutions. It is estimated that through leveraging with the MFIs, the cost per job created through microfinance institutions is about US$300 per job while the cost per job created through Islamic Banks is about US$4166 per job. In total, the cost per job of the program averages about US$471 per job.

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