Improving MSME resilience and agility

Most small businesses, whether formal or informal, operating in developed or developing countries, tend to rely on personal savings and networks to cope with disasters. In the case of developed countries where special recovery funds and insurance are widely available and accessed, MSMEs lean toward prioritizing or complementing formal coping mechanisms with individual informal ones.308 In developing countries, informal coping strategies are often not chosen but imposed by the absence and/or insufficiency of formal mechanisms that guarantee business owners' own survival, as well as that of their business.

Noting the above, policy makers in the Asia-Pacific region where nearly 70 per cent of disruptive natural disasters take place need to identify policies in different stages of disaster management, from prevention, during disaster, recovery and re-construction for MSMEs to mitigate, respond and recover from natural disasters. For disaster prevention, while most countries in the region have programmes in the form of training, workshop, and consultancy services to provide guidance for MSMEs, only few economies mention regulation and laws for disaster management. Further on prevention, almost ESCAP countries have corresponding funding or subsidizing policies across stages from disaster prevention to disaster recovery, while other policies in the category of infrastructure, facilities, and human resources are left blank. Looking into funding policies, the most common approaches are low interest loans and credit guarantees under different scale; grants are provided to repair or purchase machineries/ equipment but not for loss compensation. Few countries have provided income subsidies for effected enterprises to pay salaries with New Zealand and Thailand having offered tax assistance for the effected businesses. Also, public-private collaboration is clearly stated by Australia though many countries in the region may have cooperation with private organizations. Japan provides Business Continuity Planning (BCP) for MSMEs post-disaster.

BCP is critical to ensuring that MSMEs contribute to economic recovery by providing continuity in income generation and employment. Disaster recovery is a subset of BCP. Disaster recovery plans involve restoring vital support systems. Those systems are mostly communications, hardware, and ICT assets. Disaster recovery aims to minimize business downtime and focuses on getting technical operations back to normal in the shortest time possible. BCP is a component of building business resilience in normal times and is especially critical in cases of large disasters. For businesses to survive, especially MSMEs, they must be able to adapt their operations to the new environment. UNDRR’s Regional Office for Asia and the Pacific has developed a toolkit on the subject to support MSMEs.

Enterprise recovery programmes that act in response to various needs of different industries, through cash in-kind and technical support, can help reverse the 'inherent' vulnerability of MSMEs to disasters by maximizing the flexibility that fewer assets and employees give to MSMEs compared to larger firms.309 For example, the Government of Japan provided a capital subsidy known as the Group Subsidy to help MSMEs recover from the damage caused by the Tohoku Earthquake in 2011.310 Also, Sri Lanka established relief assistance to MSMEs that felt the immediate and longer term damaging impacts from the 2004 tsunami.311 In tourism reliant communities such as Tohoku, Japan, policy makers made a concerted effort to push for long term recovery of the region by promoting both domestic and international tourism to revitalize the economy. The tourism strategy also brought about benefits to battered MSMEs allowing the local economy to both recover and gain long term stability. Box 20 below shares Tohoku’s strategy.

Box 29. Tohoku’s tourism development strategy following the 2011 earthquake and tsunami

The 2011 Tohoku earthquake and tsunami in Japan had a profound impact on tourism in Tohoku prefecture, affecting both domestic and international travelers. Though the number of customers at accommodation facilities in Tohoku were gradually increasing, many of them were related to recovery initiatives and were not tourists. Foreign travelers decreased by 50–70 per cent immediately after the disaster, leaving hotels and inns bankrupt in the affected area.

Within three weeks of the disaster, local divisions of the Ministry of Land, Infrastructure, Transport and Tourism and local public and private stakeholders had established a working group to share information and discuss recovery strategies for the tourism industry. Initiatives include branding Tohoku as a resilient community (their logo is 'Together, let's try hard, Tohoku!' which has become the symbol of Tohoku's recovery and attracted further support) and national and international advertising campaigns using traditional symbols of Tohoku's tourism (such as female owners of inns known as 'Okami-san') as well as efforts to highlighting the safety of the destination.

These local efforts converged at the 'Destination TOHOKU Campaign', actively supported by central government. The main goal was to create a strengthened tourism industry around a new model of interactive tourism where tourists can communicate more with local people and feel the daily lives of the region – as opposed to the distant, model where tourists go from one touristic spot to the next- thus preserving the local culture and maximizing the benefits for the local community. In the first seven months since the start of the Destination TOHOKU Campaign, the number of travelers into the Tohoku region reached about 31 million, 27 million of which stayed at accommodation facilities. With the strong focus on revitalizing local communities, the Campaign benefitted a wide range of local MSMEs, from traditional inns and hotels, retail shops, restaurants, transportation companies and other relevant businesses. In 2021, the campaign continues to mark 10 years of recovery since the 2011 disaster.

Source: Tohoku Destination Campaign


308 German Technical Cooperation (GIZ) (2006). 'Formalization of Informal Enterprises: Economic Growth and Poverty', Sector Project: Innovative Tools for Private Sector Development, Eschborn.

309 UNDP (2013). Small Businesses: Impact of Disasters and Building Resilience. May. New York.

310 ADB (2019). Post-disaster Subsidies for Small and Medium Firms: Insights for Effective Targeting
Asian Development Bank Economics Working Paper Series No. 597

311 Cooray, S. (2005). “Donor Support, Pledges, Commitments and Expenditure”, Sri Lanka Development Forum: Background Papers.