Advances in Social Science, Education and Humanities Research, volume 495 Proceedings of the International Conference on

Social Science, Political Science, and Humanities (ICoSPOLHUM 2020)

The Impact of Covid-19 on Micro, Small, and Medium

Enterprises
Evidence of Early-State Losses From April to August 2020
Muhammad Zawil Kiram1,* Muhammad Ikhwan Saputra2 Fakhrurrazi3
1 Marmara University
2 Ar-Raniry State Islamic University
3 Malikussaleh University
*
Corresponding author. Email: [email protected]

ABSTRACT
The COVID-19 novelty has affected our lives in various aspects and it has spread with alarming speed,
infecting millions, and bringing economic activities to a near standstill. COVID-19 pandemic is not just a
health crisis, but it is also affecting societies and economies at their core. Small businesses tend to be
vulnerable during the economic crisis, in part because they have fewer resources with which to adapt to a
changing context. The aim of this research is to explore the impact of COVID-19 on the micro, small, and
medium enterprises (MSMEs) in Dewantara Aceh Indonesia, focusing on three questions. Firstly, how did
the coronavirus affect the activities of economic societies? Secondly, how did small businesses adjust to the
economic disruptions resulting from COVID-19? Thirdly, what were the estimated first-stage losses that
were caused by the COVID-19 pandemic? The data were collected in a time scale of five months from
April to August 2020. This research was conducted through a qualitative method with primary data
collection techniques including socio-economic surveys, participant observations, and interviews.
Meanwhile, the research data were completed with a comprehensive secondary literature review that has a
correlation to the research topic. The result of this study showed that the COVID-19 pandemic caused
income of MSMEs decreased due to lack of costumers and instability of economic activities. In order to
survive, the MSMEs entrepreneurs used online marketing strategies (Instagram and Facebook) and
provided free delivery system. For the last five months, the MSMEs did not experience any losses due to
COVID-19 because they adjusted the selling products based on market demands so that expenses can be
proportional to their income.

Keywords: Covid-19, Micro, Small, Medium, Enterprises, Aceh

1. INTRODUCTION reasons for this contraction are greater persistence in

social distancing activities, lower activity during
2020 is one of the years that will be recorded in lockdowns, a steeper decline in productivity amongst
history as a difficult time. The spread of the deadly virus firms that have opened up for business, and greater
from the city of Wuhan, China, to the rest of the world uncertainty (International Monetary Fund, 2020).
has made human life change drastically. The virus was Production has plummeted, investment plans are being
identified as a new Coronavirus (Severe Acute shelved, consumer spending has fallen sharply, and job
Respiratory Syndrome Coronavirus 2, or SARS-CoV-2), losses have surged. Financial market sentiment has
and later named as Coronavirus Disease-19 or COVID- deteriorated, foreign direct investment inflows are
19 (Qiu et al., 2020). The coronavirus has not only dropping, and emerging market countries are
affected social life, politics, education, health, but also experiencing large capital outflows (Biswajit, 2020)
hit economy badly. According to the International
Monetary Fund, the global economy contracted about Although some high-income countries are also
having difficulty coping with the effects of COVID-19
4.9 percent in June 2020. The report mentioned that the
pandemic, it is worse for low- and middle-income

Copyright © 2021 The Authors. Published by Atlantis Press SARL.

This is an open access article distributed under the CC BY-NC 4.0 license -http://creativecommons.org/licenses/by-nc/4.0/. 99
 Advances in Social Science, Education and Humanities Research, volume 495

countries which do not have the institutional capacity from April to August 2020 because this will provide
and or the contingency mechanisms and funds to researchers with an understanding of how the spread of
stimulate their economic and protect the livelihoods of Covid-19 affects economic activities during those five
the most vulnerable people during the global crisis. months. Furthermore, this five-month calculation will
Low- and middle-income countries are also losing trade provide an overview of the magnitude of losses suffered
and suffering from significant capital outflows, as by entrepreneurs.
investors look for safer havens. Remittances are
decreasing and tourism revenue is collapsing. 2. METHOD
Covid-19 pandemic has had an impact on changes in Methodology of this research was based upon
the social order of life and decreased economic qualitative descriptive research method. The primary
performance in most countries in the world, including data was collected through socio-economic survey,
Indonesia. Indonesia confirmed the first case of the participant observation, and key informant interview.
coronavirus infection in early March 2020. Since then, The informants were chosen purposively based on
various countermeasures have been carried out by the considerations such as the size of the business and the
government to reduce the impact of the Covid-19 length of time the business has been carried out by the
pandemic in various sectors which have affected almost entrepreneurs. In interview, researchers used an
all sectors, not only health, economic sector has also unstructured interview method in which there was in-
suffered from serious impacts due to the corona virus depth interview technique which allows informants to
outbreak. Restrictions on community activities give an provide in-depth information. Meanwhile, secondary
effect on business activities which in turn have an data obtained through library research with a
impact on the economy. comprehensive secondary source review that related to
The Indonesian Central Bureau of Statistics (BPS) the study.
stated that Indonesia's economic growth in the second
quarter of 2020 was minus 5.32 percent. The economic 3. DISCUSSION
turmoil caused by the Covid-19 pandemic hit Indonesia,
which had at least three major impacts on the economy. 3.1. Characteristics of Micro, Small, and
Firstly, household consumption or purchasing power, Medium Enterprises in Dewantara North Aceh
which is a 60 percent support for the economy, falls
quite deep. BPS recorded that household consumption In the Republic of Indonesia Law No. 20 of 2008
shrank from 5.02 percent in the first quarter of 2019 to concerning micro, small and medium enterprises, it is
2.84 percent in the first quarter of this year (BPS, 2020). stated that micro enterprises are productive businesses
owned by individuals and/or individual business
Secondly, the Covid-19 pandemic has caused
entities. Small Business is a productive economic
prolonged uncertainty so that investment will also
business that stands alone, which is carried out by an
weaken and have implications for the cessation of
individual or a business entity that is not a subsidiary or
business. Lastly, the whole world is experiencing a
branch of a company that is owned, controlled, or is part
weakening economy, causing commodity prices to fall,
of either directly or indirectly from a Medium or Large
and Indonesian exports to several countries to stop
Business.
(BPS, 2020). In Indonesia, the impact of COVID-19 is
not only felt by large businesses but also has a Medium Enterprises are productive economic
remarkable impact on micro, small, and medium enterprises that are independent, carried out by
enterprises (MSMEs). individuals or business entities that are not subsidiaries
or branch companies. Meanwhile, large enterprises are
On a national scale, around 37,000 micro, small and productive economic enterprises carried out by business
medium enterprises have reported that they have been
entities with a higher net worth or annual sales proceeds
very seriously affected by this pandemic which includes than Medium Enterprises, which include state-owned or
around 56% having reported a decrease in sales, 22%
private national businesses, joint ventures, and foreign
reported problems with the aspects of financing, 15% businesses carrying out economic activities in
reported problems related to the distribution of goods
Indonesia.
and 4 % report difficulties in meeting raw materials
(Rahman, 2020). These problems is experienced by A business is included in the criteria of a micro
many micro, small, and medium enterprises around business if the business entity has a turnover or net
Indonesia including in Dewantara, Aceh Province. worth of IDR 50,000,000, excluding buildings and land.
In addition, the proceeds from the sale of the micro-
In order to find out how COVID-19 affect micro,
business must reach a minimum of IDR. 300,000,000, -
small, and medium enterprises in Dewantara District,
within one year. Small business if the business has a net
North Aceh, researchers conducted surveys on 220
worth of IDR 50,000,000 with maximum use of IDR
enterprises. The data collected is a five-month scale
500,000,000. The sales results obtained for one year are

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at least IDR 300,000,000 and a maximum of IDR Total 220

2,500,000,000. Many define medium-sized businesses
Source; Research Survey, 2020
as big businesses for some people because the wealth of
medium-sized businesses reaches IDR 500,000,000 to
IDR 10,000,000,000, excluding land and buildings. 3.2. Impact of COVID-19 on Economic
With the result of annual sales, it must reach IDR Activities and Small Businesses Strategies in
2,500,000,000 to IDR 50,000,000,000. (DPR, 2008). Facing the Pandemic
The characteristics and criteria of micro, small, and To overcome the COVID-19 pandemic, the
medium enterprises (MSMEs) in Dewantara North Aceh Indonesian government issued Government Regulation
can be categorized as follows. No. 21 of 2020 concerning Large-Scale Social Barriers
1. Human Resources (HR) in the business are not with the aim of reducing the spread of the corona virus.
yet qualified and education level is relatively low. The COVID-19’s effect on economic activities of
MSMEs can be found in many various ways. Such as
2. The business does not yet have a business disrupting the operation of MSMEs and reducing
license and taxpayer identification number (Nomor consumers (Hardilawati, 2020). In the aspect of public
Pokok Wajib Pajak, NPWP). consumption and purchasing power, this pandemic has
caused a large number of workers to decrease or even
3. Businesses do not yet have a complete
lose their income. Therefore, it has a remarkable impact
administrative system, and finances have not
on the level of consumption and purchasing power of
differentiated which ones are private and which are
the community, especially those in the category of
business.
informal workers and daily workers.
4. The location of the business is still in the home
area and not strategic enough. Furthermore, COVID-19 has also caused MSMEs
income to decrease even in some cases, they have to be
5. Management is still carried out in a simple closed during the pandemic such as small shop workers,
manner, and there are still a few employees who work hawkers, traders in the market, and other workers who
around 5 to 10 people (usually family member). depend on their daily income, including in shopping
centres. Many micro-businesses receive financial
6. The business is still small in scope, and the
support from financial service institutions or banks, and
proceeds from sales are re-used as business capital.
only around fewer than 70 percent are able to pay their
7. Most micro, small, and medium enterprises credit instalments because their businesses are affected
still depend on sales proceeds (benefits) to support these by Covid-19.
business activities.
During this pandemic, MSMEs are required to be
In North Aceh, there are 3,660 micro, small and able to adapt to changes in order to continue to carry out
medium enterprises consisting of various businesses. activities. In North Aceh, most MSMEs have come with
Meanwhile, in the Dewantara sub-district, there are some strategies and innovative ideas to survive from
approximately 450 MSMEs with more than 30 types of COVID-19. In order to understand how micro, small,
businesses (Aceh, 2017). However, in this research, we and medium businesses adjust to disrupting caused by
only took 220 businesses as the research object, which the coronavirus, we have interviewed the businesses
are the most frequent businesses that carry out by people owner. The survey question that we asked the owners,
in Dewantara North Aceh, as presented below. "is this business currently operates and what are the
strategies that have been used to overcome this
Table I
pandemic?"
Types of Micro, Small, and Medium Enterprises
(MSMEs) in Dewantara When the survey was conducted, across the sample,
No Types of Businesses Frequency 95% of brick maker businesses around Dewantara
District were still operational and only 5% of them were
1 Brick Maker Businesses 70
in temporary closed because of the lack of raw material.
2 Grocery Businesses 40 The brick entrepreneur acknowledged that the number
of brick production has remained stable since the spread
3 Coffee Shops 45 of the coronavirus began. Under normal circumstances
4 Restaurants 15 the number of bricks produced in a month can reach to
50,000 bricks. With the Coronavirus, there has been no
5 Street Vendors 50 significant reduction and they can still produce more
than 40,000 bricks per month.
These activities can run smoothly because brick
making is done in a separate place away from the crowd

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and does not require many employees. The only MSMEs. 70% of restaurants entrepreneurs said that
obstacle faced by bricklayers is the lack of raw materials digital marketing will become the main communication
and it does not have a direct impact on the spread of platform in marketing, and offline stores will be
COVID-19. In addition, the selling price of the bricks complementary, due to the ease and ability of digital
has not changed. In fact, there has been an increase in marketing to reach more consumers (Hendrawan, A.,
prices over the last few months from IDR. 200 to IDR Sucahyowati, H., Cahyandi, K., Indriyani, & Rayendra,
250-270 per brick. Therefore, we found that there is no 2019).
significant effect of COVID-19 on brick maker
The forms of digital marketing that were done by
businesses in Dewantara.
MSMEs to promote their products consisted of; 1)
Meanwhile, the majority of grocery businesses, Intensive promotion of product videos and photos on
restaurants, and coffee shops were facing different social media. The usage of social media is also adjusted
situation. The COVID-19 pandemic has made MSMEs to the product segment they have. 2) Using Facebook
entrepreneurs such as grocery stores and food stalls one ads and Instagram ads, which can be easily accessed and
of the sectors affected. Grocery stores that sell daily can reach consumers with the criteria they have
necessities, such as rice, cooking oil, flour, sugar and previously determined. 3) Involve consumers in product
several similar products, complain that they have selection, conduct education and introduction to product
experienced a very significant decrease from their usual quality intensively. In addition, restaurant entrepreneurs
sales revenue. and street vendors also provide free delivery service to
customers who are in close proximity to the business
From the survey, we found out that 65% of grocery
location, so that they can attract consumers. At the same
businesses, coffee shops and restaurants were affected
time, they also open the business and sell their products
by COVID-19. It is simply because the number of
at home and their store.
customers was decreasing and it affected their income
as well. From April to August, most of grocery Meanwhile, Coffee and grocery shop entrepreneurs
businesses, coffee shops and restaurants in Dewantara have adapted by opening their shops at certain times and
lost their customers. People were afraid to go and implementing health protocols in their daily activities.
having meal at restaurants or hang out at coffee shops. Most of the coffee shops in Dewantara, for the past five
As the consequences the profit dropped to almost 75% months, also do not allow consumers to sit together in
then usual profit. the crowd in the shop and still pay attention to social
distancing and this is also has done by grocery store
The Covid-19 pandemic has left many traders losing
owners.
their livelihoods. The closure of selling locations or the
lack of buyers is the reason many traders are forced to
quit their business. In Dewantara, the impact of the 3.3. Estimate Losses from April to August 2020
spread of the coronavirus has had a major impact on
Small companies tend to be vulnerable during an
street vendors. April, May and June were the most
economic crisis, in part because they have fewer
difficult times for them because in the early days of the
resources which to adapt to a changing context
spread of COVID-19, many government policies such
(International Monetary Fund, 2020). At national level,
as lockdowns and self-isolation caused instability in
based on the results of a survey by the Central Statistics
their economic activities.
Agency (BPS) of 34,599 business actors who were
Thirty street vendors admitted that during the last affected by the corona virus pandemic in July 2020,
three months (April, May, June) their sales activities more than 80% of respondents admitted that they
had been disrupted and sometimes they did not open at experienced a decrease in income due to the covid-19
all. This is because their activities are in the crowded pandemic.
areas such as the Krueng Geukuh market. Meanwhile,
Business actors surveyed consisted of Large,
those who live in rural areas did not face a significant
Medium Enterprises, Small, Medium Enterprises, and
impact. To overcome and survive during the pandemic,
Agriculture. The results showed that 84% of micro,
small businesses (especially restaurants owners, and
small businesses and 82% of medium, big businesses
street vendors) in Dewantara have implemented some
have tended to experience a decline in earning since the
strategies namely digital marketing, home delivery
pandemic has occurred. In Dewantara, 85% of MSME
service, and selling at home. Digital marketing is a
entrepreneurs admitted that from April to August, their
promotional activity and digital media marketplace, by
income decreased due to unstable economic activities.
utilizing various applications such as social networks
However, they also stated that they did not suffer any
(Purwana, D., Rahmi, R., & Aditya, 2017). The digital
losses during the pandemic. This is because UMKM
marketing method is often used by entrepreneurs at
entrepreneurs in Dewantara do not invest large capital in
Dewantara by using social media such as Instagram and
their business. In fact, most of them use the income and
Facebook. Digital marketing has a positive and
profits they get as capital to buy merchandise.
significant effect in increasing the sales performance of

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A business is categorized as experiencing a loss if provided the goods to sell based on markets demand.
the amount of expenses is greater than the income Therefore, their expenses can be proportional to their
received. This loss can be caused by damage to income and avoid losses during the pandemic.
materials, goods, the inability to use business property,
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